- The Washington Times - Thursday, January 27, 2005

Maryland Democratic leaders yesterday blamed the Republican state insurance commissioner for health maintenance organizations increasing their premiums and not a new tax the Democratic-controlled legislature levied on HMOs this month.

But HMO officials said they are raising their rates to pass on to their customers the 2 percent tax enacted by the General Assembly two weeks ago.

Senate President Thomas V. Mike Miller Jr. and House Speaker Michael E. Busch yesterday called for the resignation of Insurance Commissioner Alfred W. Redmer Jr., saying his recent bulletin encouraged HMOs to raise their rates.

“What we need in that position is a watchdog and not a lapdog,” said Mr. Miller, a Prince George’s Democrat and trial lawyer.

“I call for the insurance commissioner to do his job,” said Mr. Busch, Anne Arundel Democrat. “And if he doesn’t do that, I think we have no other choice than to call for his resignation.”

Mr. Miller and Mr. Busch said Mr. Redmer was politically motivated in posting a bulletin that said HMOs could pass on to their customers a 2 percent tax on premiums if they notify the Maryland Insurance Administration in writing of the intentions.

The bulletin was posted on the independent agency’s Web site (www.mdinsurance.state.md.us) on Jan. 13, two days after Democratic lawmakers overrode Gov. Robert L. Ehrlich Jr.’s veto of a medical malpractice insurance reform bill that included the HMO tax.

Mr. Ehrlich, a Republican, had warned against levying the tax, saying HMOs would pass it on to “those who can least afford to pay it.”

Yesterday, Aetna Inc. of Hartford, Conn., said it was passing the 2 percent tax on to some of its HMO customers in Maryland because it had not planned for a tax when originally pricing its HMO premiums.

“The tax was not built into the premiums we developed,” Aetna spokesman Walter Cherniak said.

Aetna’s higher premiums — which will affect about 130,000 of the company’s 200,000 Maryland customers — will take effect March 1, as will those of Mid-Atlantic Medical Services LLC, the health care provider commonly known as MAMSI.

MAMSI spokeswoman Beth Sammis said the company will increase premium rates by 2 percent but declined to say how many customers would be affected.

Democratic leaders said yesterday that Mr. Redmer’s bulletin gave HMOs permission to raise rates and that he did not stand up for Maryland consumers.

However, a legal opinion from the state’s attorney general’s office found no wrongdoing in the Redmer bulletin.

The opinion suggests that the insurance administration’s “better legal course” would have been to implement a regulation allowing it to grant approvals by notification or else adhere to its standard process of assessing individual requests from insurance companies.

Still, Maryland Citizens’ Health Initiative, a consumer health care advocacy group, criticized the Redmer bulletin.

“We are absolutely astonished that the Maryland insurance commissioner would give [HMOs] permission to pass along the rates without a hearing,” Executive Director Glenn E. Schneider said yesterday. “At the very least, we should open up their books to see if this increase is necessary, and we call upon these groups to do this.”

In a conference call from Phoenix yesterday, Mr. Redmer defended his actions and said he has no intentions of resigning.

“I am surprised at the feedback from some of the members of the General Assembly,” said Mr. Redmer, a former Maryland House minority leader. “We do not set public policy, but we implement the policy and laws that are given to us, and the HMO tax is one of them.”

Mr. Redmer said his bulletin did not tell the HMOs to increase rates but answered an inquiry about the tax.

“Our bulletin was a formal communication on how we are going to answer those questions,” he said.

Mr. Ehrlich appointed Mr. Redmer — a licensed insurance and stock broker — to replace Steven Larsen as head of the insurance administration in June 2003.

“This is not about Al Redmer,” Mr. Ehrlich said yesterday. “It’s insulting. … There are repercussions in politics for divided government, and this [tax] is an adverse reaction from the people. … It’s a regressive tax to be paid by the people who can least afford it for no good reason.”

House Republican leaders said yesterday that they plan to introduce legislation that would repeal the HMO tax.

“The governor’s got money in the budget,” said House Minority Leader George C. Edwards, a Republican who represents Garrett and Allegany counties. “We are in the process of drafting the bill now.”

House Minority Whip Anthony J. O’Donnell, who represents Calvert and St. Mary’s counties, said the bill is the only thing that will stop the “unnecessary tax being passed on to the consumers of health care.”

In its medical malpractice reform bill, the General Assembly lifted a tax exemption on HMO premiums that had been in place to help the health insurers grow. Other types of insurers have had to pay the 2 percent levy on premiums.

The revenue from the HMO tax — about $64 million in three years — will be used to subsidize doctors’ malpractice insurance premiums, which have risen nearly 70 percent in the past two years.

Kaiser Foundation Health Plan of the Mid-Atlantic States Inc. said it will pass the tax on to some of its customers, spokeswoman Amy Goodwin said yesterday.

Kaiser had lobbied against the tax increase because its physicians cannot use the malpractice fund created by the legislation, she said.

“We’re self-insured,” Ms. Goodwin said. “Our physicians are unable to make use of the fund.”

• Andrew Johnson contributed to this report.

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