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Originally published Thursday, May 22, 2014 at 4:58 PM

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Editorial: Allegations of misconduct in Office of the Insurance Commissioner demand reform

Insurance Commissioner Mike Kreidler might be progressive on health-care reform, but an allegation of staff pressure on a hearings judge is anything but that.

Seattle Times Editorial

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NO one should threaten a judge — especially not an employer who is responsible for the judge’s paycheck. A hearings judge in the state Office of the Insurance Commissioner alleges that is exactly what happened to her as she considered cases related to Washington’s implementation of the Affordable Care Act.

Her sobering complaint suggests a need for major reforms in that agency, and maybe throughout state government as well. Lawmakers should pay attention.

As a hearings judge considering appeals of commissioner decisions, Patricia Petersen sometimes has to tell Insurance Commissioner Mike Kreidler he is wrong. A judge for 19 years, she has ruled against the agency in a number of high-profile cases affecting health reform implementation, a major task for Kreidler.

As a result, Petersen claims she faced intimidation from a superior, Deputy Commissioner James Odiorne. According to a whistle-blower complaint she filed with the state Auditor’s Office, it started last fall when she ruled against Kreidler in a case regarding the adequacy of insurance-company provider networks and went on for months, and she resisted.

Odiorne called her into his office and informed her there would be a new way of doing business, her complaint says. Before issuing rulings, she needed to ask Kreidler how he wanted her to rule. Decide things the wrong way, and she could expect a bad job evaluation. Odiorne had trouble “keeping his volume and tone at a conversational level,” Petersen wrote.

This month, Odiorne delivered an “interim job evaluation” that faulted Petersen for rulings against the commissioner. She saw it as a message about an upcoming ruling in a high-profile appeal from Seattle Children’s Hospital, and she took the unusual step of filing a public notice of out-of-court communication in the case.

Petersen alleges retaliation because she refused to violate laws barring such “ex parte” communications, not to mention standards of judicial integrity. But the auditor refused to extend whistle-blower protection for procedural reasons. She could go to the attorney general’s office or file a suit of her own.

Meanwhile, Petersen has been placed on paid administrative leave while Odiorne remains on the job. The agency says it is hiring an outside review to determine whether Petersen improperly leaked a copy of her whistle-blower complaint.

The story reveals major systemic problems. If the commissioner’s view should prevail in all cases, why go through the motions of a hearings process?

Better question: Why does the insurance commissioner’s office oversee its own appeals in the first place?

Different state agencies handle appeals in different ways. Independent boards handle appeals of environmental land-use decisions, workers’ compensation claims and tax matters. Some agencies handle appeals entirely in-house. But an independent agency already is set up and suited for the purpose: the Office of Administrative Hearings. Some 26 agencies allow appeals to be heard there, though most limit its authority to decide cases. Kreidler’s office is among them. Any decision reached by the Administrative Hearings Office must be reviewed and affirmed by Kreidler’s hearings judge, so few insurance cases go there — appellants use the commissioner’s hearing process instead.

Lawmakers ought to consider placing all authority for insurance appeals with the Office of Administrative Hearings. And for good measure, they ought to think about a more sweeping grant of authority — why should any state agency control the judges who decide whether its rules are proper?

The Petersen case offers a clear demonstration of the potential for abuse.

Editorial board members are editorial page editor Kate Riley, Frank A. Blethen, Ryan Blethen, Sharon Pian Chan, Lance Dickie, Jonathan Martin, Erik Smith, Thanh Tan, William K. Blethen (emeritus) and Robert C. Blethen (emeritus).

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