Hartford Business Journal

20 Hartford Business Journal • June 20, 2016 www.HartfordBusiness.com EDITORIAL Conflicts of interest cloud industry oversight T he scrutiny over Insurance Commissioner Katharine Wade's oversight of insur- ance industry mega mergers is reaching a tipping point. Consumer advocates as well as lawmakers from both sides of the aisle are calling for her recusal and/or even resignation. We've said in the past, Wade, a former Cigna lobbyist whose husband still works at the Bloomfield global insurer as an associate counsel, should recuse herself from overseeing Anthem's $54 billion takeover bid of her former employer. We haven't changed our opinion. That's not to say her views shouldn't be heard on the deal, she just shouldn't be the final arbiter. We aren't questioning Wade's integrity, but the appearance of a conflict of interest does matter, especially in a merger that could have a wide-ranging impact on the cost and affordability of health insurance, both to businesses and individuals. Wade's close ties to the industry — she also was previously head of the Connecticut Association of Health Plans — should be enough for Gov. Dannel P. Malloy to force Wade to recuse herself from the Cigna merger. There are many issues at play here. One, of course, is politics. Republicans and Democrats would be smart to side with consumer advocates, because their fight isn't simply against Wade. They're also taking on Malloy, a sometimes headstrong Democrat who chose Wade as his commissioner and whose popularity in the state is at a record low (only 24 percent of voters approve of the job he is doing, according to the latest Quinnipiac Poll). Showing strength against or opposition to an unpopular governor could score candidates political points in an election year. Recent scrutiny from the national press on the merger oversight has also ramped up the pressure on Connecticut politicians and regulators. The larger issue, however, is how Connecticut — and the country — regulates industry, not just insurance, but other major sectors of the U.S. economy like banking and finance. Government regulatory bodies often employ individuals who have past industry ties. It makes sense in a lot of ways because you want regulators who understand an industry before they make important decisions regarding its financial safety and soundness. That revolving-door mentality, however, often makes regulatory agencies vulnerable to accusations of bias. The Connecticut Insurance Department has often been a consumer-advocate target. The agency has come under fire in the past for being a rubber stamp for health insurers, particularly in approving annual rate increases. In more recent years, the insurance department has been more aggressive in pruning insurers' proposed rate hikes, establishing itself — at least in the eyes of some — as a tougher overseer. The same challenges are felt on the federal level, with the constant criticisms and concerns raised over the revolving door between Wall Street and Washington D.C., particularly in the wake of the 2008 financial crisis, when lax banking-sector oversight was partly blamed for the collapse. The goal should always be to choose competent regulators who are tough but fair to both sides, protecting the interest of consumers, while also allowing the private sector to adapt to the changing realities of the time. Finding that middle ground, however, isn't always easy. In Connecticut's case, Wade should recuse herself from the Anthem-Cigna merger to give the public piece of mind. n RULE OF LAW Hartford should consider bankruptcy By John Horak T here are four words that come to mind when I think about Hartford: sadness, disorder, bankruptcy and leadership. Let me take them one at a time. First, the sadness is a product of loss — the loss of what we once were. Connecti- cut historian Bill Hos- ley put it to me this way recently (these are his words). He said Greater Hartford was the Silicon Valley of its day, the base of the so-called second industrial revolution. It was a revolution based in precision manufacturing, which produced things — like guns, typewriters, machine tools and eventu- ally automobiles — that were complex and involved assembling multiple minutely-gauged metal parts. For over 100 years, this activity made this region pros- perous, welcoming to immigrants lured by work and opportu- nity, and earning us the brand of a place renowned for techno- logical innovation. Today we can't get a minor league base- ball stadium built; and we look over our shoulders with trepidation as major corporations that were birthed here eye greener pastures elsewhere. Second, the disor- der (in finances and management) is what we see unfolding before our eyes, brought on by failures of the political system — city (and state) government have proven to be incompetent. It is that simple. Some political scientists posit that over time decline into financial disorder is inevitable in democracies because of the natural accretion of ever larger numbers of "special interest groups," which vote and lobby government to increase their share of the economic pie at the expense of the whole. Eventually, the pie is too small to feed everyone who expects to be fed. While this theory seems spot on when it comes to Hartford and the interest groups circling within its financial orbit (residents, businesses, employees, creditors, unions and others), I do not believe decline is inevitable. Moreover, I know there are corrective mecha- nisms available to the city, which brings me to my third word, bankruptcy. Bankruptcy is as robust a corrective mech- anism as it is radioactive to the interest groups and the politicians. This is because their influ- ence over the Capital City's affairs would be diminished if the city filed, and because the filing could be viewed (at least if not properly planned) as an admission of failure that fur- ther damages our already tattered reputation. I am not a bankruptcy lawyer by training, but I have worked closely enough with two of the best in the state to have learned that a filing is not an invitation to a funeral, but more like hitting the pause button on your remote control, in that it would compel the interests competing for the city's resources to stand down and bring their claims to the bankruptcy court — where they will be sorted out under well-defined rules and the judge's supervision. Most significantly, the judge would not be an elected official whose job and decisions are subject to the pressures of the ballot box or lobbyists (the means by which the affected interest groups would oth- erwise use to get their way). Moreover, with enough advanced planning and negotiating, it is possible to go into a bank- ruptcy with many issues resolved, such that the court proceedings are less of a trial than a cleansing that rinses the financial disorder from the system and paves the way for rebirth if not a renaissance. Fourth, my final word is leadership, which I am using in a sense broad enough to include concepts such as courage, judgment and respect. In this sense, leadership would give no quar- ter to the denial that hangs over the city (things really are very bad and getting worse). Leaders have the courage to admit there are times when an outside intervener (such as a bankruptcy judge) is needed to make things right. My point: A well- honed turnaround plan in which bank- ruptcy is one element, and that includes a vig- orous exit plan (which could include financing commitments and char- ter amendments) may be the best way to restore Hartford's financial health, reputation and pride. We should embrace and fix our problems, not run from them or diminish ourselves by playing end- less rounds of the "blame game." Finally, while we have a mayor (Luke Bro- nin) with the necessary talent and energy, lead- ership must also come from our private-sector and nonprofit institutions, which have skin in the game and the brain power to provide the mayor and the city what is needed to turn things around. This would, of course, be an arduous task, but the talent and resources are already in place in organizations such as the MetroHart- ford Alliance and the Hartford Foundation for Public Giving, to name just two. Let me close with a reference to Hosley's pic- ture of Hartford's past. While nostalgia is not a business plan, it does serve as a marker or gauge for what we once were, and what we should strive to be again. A bankruptcy filing might actually be the best way to get us where we need to go. n John M. Horak has practiced law at Reid and Riege P.C. in Hartford since 1980. His opinions are his own. HARTFORDBUSINESS.COM POLL Should Commissioner Katharine Wade recuse herself from Cigna-Anthem merger. ● Yes ● No To vote, go online to HartfordBusiness.com. Last week's poll results: Is replacing Centerplan Cos. as builder of Dunkin' Donuts Park the right move? 50.4% Yes 49.6% No John Horak OPINION & COMMENTARY ▶ ▶ … Disorder (in finances and management) is what we see unfolding before our eyes, brought on by failures of the political system — city (and state) government have proven to be incompetent. It is that simple.

• Cover