Step aside

Linda Ruthardt's role as receiver for Harvard Pilgrim Health Care, Inc. conflicts with her post as state insurance commissioner

Insurance commissioner Linda Ruthardt is wearing two hats these days: one as receiver for the financially troubled Harvard Pilgrim Health Care, Inc., and the other as the top insurance-industry watchdog for Massachusetts citizens. Conflicts of interest don't get any worse than this.

As court-appointed receiver for the state's largest HMO, Ruthardt is essentially acting as Harvard Pilgrim's chief executive officer. Yet as insurance commissioner, Ruthardt is charged with protecting Harvard Pilgrim's customers (nearly a million of whom live in Massachusetts) and defending residents of the Commonwealth, who may get socked with the costs of a state bailout of the HMO. Unfortunately, what's in the best interests of Harvard Pilgrim -- rate increases, decreases in service, liquidation of the HMO -- may not be in the best interests of its subscribers or of Massachusetts residents. The state needs an independent, outside receiver to bring Harvard Pilgrim back to health. Ruthardt should step aside in favor of such a receiver and focus all her energies on watching out for the interests of Bay State citizens.

The immediate conflict of interest is not the only troubling aspect of Ruthardt's appointment as Harvard Pilgrim's receiver. For one thing, Harvard Pilgrim's CEO is Charles D. Baker, who worked as a high-level aide to Governor Paul Cellucci and former governor William Weld for seven years before he took the top post at the HMO. And Baker used to be Ruthardt's boss. These connections reek of cronyism; if they do not amount to a conflict of interest per se, they at least create the appearance of a conflict. It's certainly hard to ignore the connections when Cellucci remarks, as he did January 4, that money from the state's $8 billion tobacco settlement could be used to help Harvard Pilgrim. Why wasn't the state willing to use that money to foot health-care costs for the thousands of Bay State citizens living without health insurance in the first place? Why is it okay to spend it on insuring people only in response to the Harvard Pilgrim meltdown?

Ruthardt's record of putting private interests ahead of the public good is even more cause for alarm. Two years ago, the Phoenix called for Ruthardt's dismissal as insurance commissioner because of this very history (see "Fire Linda Ruthardt," News, February 29, 1998). Take the case of the Electric Mutual Liability Insurance Company (Emlico). In 1995, Ruthardt approved the relocation of the insurance company from Massachusetts to Bermuda after a 37-minute hearing attended by Emlico executives and their supporters. At the time, Emlico was facing an estimated $2 billion in liabilities related to environmental clean-up costs generated by its sole client, General Electric. Critics of the move suspected that the beleaguered insurance company would file for bankruptcy once it was out of reach of US bankruptcy courts. And that's exactly what it did. The Massachusetts Supreme Judicial Court (SJC) eventually found that the company's move out of the country was illegal.

Then there's Ruthardt's management of the reorganization of the state's largest insurer, Blue Cross and Blue Shield of Massachusetts. Consumer-advocacy groups charged that the public was shut out of discussions about the reorganization. Ruthardt allowed just 10 days of public comment: four of them were weekend days and one of them was Christmas.

In 1996, the Phoenix reported that Ruthardt had aggressively helped the Worcester-based State Mutual Life Assurance Company become a public company, which shorted policyholders of approximately $105 million. During the only hearing held before the conversion was approved, Ruthardt barred one of the most vocal critics of the move, the Cambridge-based Center for Insurance Research, from participating in the hearing. When the consumer-advocacy group asked for public documents related to the case, Ruthardt refused to hand them over until the SJC ordered her to do so. Then-attorney general Scott Harshbarger represented Ruthardt's office in the matter until Harshbarger pulled away from the case, citing "serious concern" with "ethical issues" raised by the insurance division's handling of the mutual company's conversion to public status.

And now Ruthardt is in charge of righting Harvard Pilgrim's finances. Given her questionable commitment to the public trust, everyone in the state should be alarmed -- not just those who use Harvard Pilgrim to provide health care. Many parties have interests at stake here: the HMO, its creditors (which include hospitals and hundreds of health-care workers), plan subscribers, and residents of the Commonwealth. Protecting all of these interests would challenge the most talented of public servants, and Ruthardt has shown that she is not among them. If she asks the court to appoint an impartial receiver and turns her attention to the well-being of Massachusetts citizens, however, she will at least show that she is capable of doing the right thing.

What do you think? Send an e-mail to letters[a]phx.com.