Blue Cross & Blue Shield of Rhode Island took a step in the right direction last week in announcing a series of reforms, including eliminating for the time being both the annual $12,500 payment to members of its board of directors and the promise of lucrative payouts to President Ronald A. Battista and others should the company be sold.
That the reforms presented by the state’s largest insurer – with nearly 70 percent of the market – did not completely appease Gov. Don Carcieri and some leaders of the General Assembly comes as no surprise.
This Blue Cross saga is now, by Rhode Island standards, a highly politically charged event.
We hope the fact that it has become such a volatile issue does not mean it cannot be resolved in such a way that benefits Blue Cross shareholders and the company itself. And we hope that steps to rectify the situation will ultimately strengthen the economic climate for health insurance in Rhode Island.
General Assembly leaders have promised in the wake of the insurer’s announced reforms that they plan to continue to pursue their own legislative reforms. That is clearly the prudent thing to do.
The Rhode Island Health Care Reform Act of 2004 is expected to be introduced in the Senate and the House this week. The measures contained within it are a result of a series of hearings conducted by the Joint Committee on Health Care Oversight. They specifically target Blue Cross in attempting to rein in the questionable practices and spending for which the insurer has earned its share of negative publicity.
The first section on the proposed legislation essentially makes the insurer more responsive to the public and would require the insurer to provide a comprehensive range of affordable and accessible insurance options and initiatives to assist those without insurance. It would also prohibit members of a nonprofit insurer’s board of directors from being compensated beyond regulated necessary minor expenses and would institute a full and open process for appointing the board of directors.
In addition, it would prohibit executives of a nonprofit insurer from arranging deals that would result in personal benefit should the insurer be sold, a step that has already been proposed by Blue Cross.
The second section of the legislation strengthens the Department of Business Regulation’s role in regulating insurers and creates a new position of Health Insurance Commissioner, who would regularly review and regulate an insurer’s administrative spending, its reserve pool and provider reimbursements.
The final section is designed to reform the insurance market in Rhode Island by attempting to curb the growth of insurers’ administrative costs, group premiums and the number of uninsured Rhode Islanders. As a way of promoting insurance competition here, it would require insurers to report to employers with 50 or more covered employees the actual expenses incurred by the group, so they can make informed decisions about benefits and preventative programs.
“The committee’s legislative package will require Blue Cross to re-focus on its original mission,” said Sen. Elizabeth Roberts, a Cranston Democrat and member of the joint commission.
It seems to us that the majority of the reforms suggested by the Legislature may in fact make sense. But we urge our lawmakers to dispense with the political volatility of the moment and act in a prudent manner.
Over-regulating Blue Cross, for example, would be a shortsighted approach that would only cost us all in years to come.
Blue Cross should have come up with its reform package long before the public outcry and embarrassing revelations of the past few months. But that is not the critical issue here.
What is important is that the company’s board of directors is taking action. For example, the board has suggested hiring an independent consultant to review what is – and what is not – working under the current structure. With Blue Cross & Blue Shield operating in markets throughout the country, certainly there are solutions to problems being examined here.
The reforms suggested by Blue Cross should mark the beginning of a process designed to make the insurer more accountable to its shareholders.
The General Assembly and governor are right to keep the pressure on Blue Cross. We just hope the Rhode Island Health Care Reform Act of 2004 focuses on what makes the most sense for the long-term health of the health insurance sector here in Rhode Island.
