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Legislators Call for Insurance Commissioner's Ouster Over HMO Tax

By Ryan Basen
Capital News Service
Wednesday, Jan. 26, 2005

ANNAPOLIS - Democratic leaders called for Maryland Insurance Commissioner Alfred Redmer's resignation Wednesday, saying he hastened rate increases by HMOs for political gain.

Senate President Thomas V. Mike Miller Jr., D-Calvert, House Speaker Michael E. Busch, D-Anne Arundel, and other key legislators charged that Redmer acted to benefit Gov. Robert Ehrlich's administration and insurance companies instead of consumers by encouraging HMOs to pass a 2 percent tax increase onto consumers.

Miller said Redmer's action follows a pattern of siding with big business instead of Maryland citizens.

"He's a lapdog of the insurance companies," Miller said. "What we need is a watchdog, not a lapdog. He's done a great disservice to the people of Maryland."

Calling Redmer a "tool of the administration," Miller said he acted to make a law sponsored by Democratic legislators -- but opposed by Ehrlich -- harm the public.

Miller said that if you believe Ehrlich's administration did not influence Redmer, "than you believe in the tooth fairy."

Redmer, speaking after a National Insurance Commissioners' meeting in Phoenix, said he would not resign and that he acted in accordance with the law -- not the governor.

After the General Assembly passed the law imposing the tax earlier this month, Redmer said, HMOs immediately asked the commission about the process for applying for rate increases in order to transfer the tax expense onto consumers.

"I don't believe there was ever a question that HMOs could, and that most HMOs would, pass it along to ultimately the consumer," he said.

During a special session in December, the General Assembly created the 2 percent HMO tax as part of a bill designed to help keep doctors' malpractice rates down. Ehrlich vetoed that measure but the Assembly passed it over his veto on Jan. 13.

The next day, MAMSI, one of the state's largest health care providers, drafted a letter to its customers saying, in response to the new law, "the total cost of your HMO policy...will increase by 2 percent."

Insurance companies must have the insurance commissioner's approval of any rate increases, so the letter indicated that MAMSI's increases had already been approved.

MAMSI and Aetna, another large HMO, said they would institute the change March 1.

Walt Cherniak, Mid-Atlantic spokesman for Aetna, said the company adjusted its rates as a matter of "prudent business."

"It was not suggested to us by the commissioner," Cherniak said. "The rates were not originally set with the expectations that we would have to pay a 2 percent tax."

Ehrlich said during a news conference later Wednesday that he vetoed the bill anticipating that HMO response -- despite reassurances from sponsors that a corporate tax break created by the bill would prevent HMOs from increasing their rates.

"They negotiated upon it without entertaining the alternatives," Ehrlich said. "Now they will live with it."

Redmer issued a bulletin on the commission's Web site explaining that HMOs had to notify the commission of their intentions to raise rates. He promised to approve all of their requests on an individual basis.

The commission also faxed copies of the bulletin to all insurance carriers in Maryland, which infuriated top Democratic legislators. They charged that Redmer invited HMOs to increase their rates by promptly faxing the bulletins.

House Health and Government Operations Committee chairman John Adams Hurson, D-Montgomery, said he thinks the Ehrlich administration knew how HMOs would react to the bulletins and encouraged Redmer to send them out.

Senate Finance Committee chairman Thomas Middleton, D-Charles, noted that Redmer "has to walk a very careful tightrope" between consumers and insurance companies.

"It seems very clear to me," Middleton said, "that the insurance commissioner has fallen off the tightrope and into the arms of insurance companies."



Copyright 2005 University of Maryland Philip Merrill College of Journalism

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