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Lujan Grisham’s stake in Delta still a target

October 13, 2018 GMT

If opponents of Michelle Lujan Grisham have identified a potential weakness in the armor of the front-running Democratic gubernatorial candidate, consistently aiming email blasts and negative advertisements at a seemingly juicy target, it’s come in the form of three words: Delta Consulting Group.

That was true in May. It’s still true in October.

State Republicans and the campaign of Steve Pearce, the GOP candidate for governor, have sought to trim Pearce’s polling deficit by painting Lujan Grisham as corrupt for her role in owning a company that helps manage a health insurance program.

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Lujan Grisham has dismissed the allegations out of hand. Her campaign has vigorously disputed the characterization and suggested Pearce’s camp has grown desperate in the home stretch, inflating an argument that originated with her erstwhile rivals in the Democratic primary race.

But the line of attack, likely to make up a significant part of Pearce’s closing argument in the gubernatorial contest, puts one part of Lujan Grisham’s résumé under the general election microscope: Delta, a firm she co-founded in 2008 and left in mid-2017 six months after she launched her bid to succeed term-limited Gov. Susana Martinez.

Delta, beginning in 2009, has helped to run the New Mexico Medical Insurance Pool, which provides health insurance coverage to state residents who cannot buy insurance elsewhere.

Pearce and other critics have generally alleged Delta’s work with the pool stems from political influence — using florid language to paint the program as evidence of “corrupt business practices,” and Lujan Grisham as having employed “shady self-dealing” to make “millions of dollars overcharging sick New Mexicans.”

In turn, Lujan Grisham and others involved in the program have rebutted those claims as invented and grossly exaggerated, describing a much more prosaic situation in which Delta provides office management and leadership services to an insurance program that continues to fill a role for those whose needs are not addressed by the current health care framework.

In response to one particularly Delta-heavy attack, Lujan Grisham’s campaign manager, Dominic Gabello, called the claims “hateful, disgusting” and said it was “inexplicable [that the ad] be allowed to reach New Mexico voters with its lies about Michelle’s record of helping sick New Mexicans like cancer patients, hemophiliacs, AIDS patients and those with end-stage renal disease get access to health care.”

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Whether the negative claims will resonate with the electorate or wash away like so much campaign mud remains to be seen. In either case, the Delta beach ball likely will be batted back and forth over the final weeks as the gubernatorial hopefuls square off in two more televised debates and canvass the state hunting votes.

The high-risk pool first came under scrutiny — in an individual political context — in late May when the national outlet Politico published a story highlighting that Lujan Grisham had earned income from Delta’s role with the pool despite many other states closing down their pools with the advent of the Affordable Care Act, or Obamacare, which ensured coverage for patients with pre-existing conditions.

Lujan Grisham at the time was poised to win the Democratic gubernatorial primary race. Her rivals in that race, particularly businessman Jeff Apodaca, seized on the report as a political cudgel, arguing Lujan Grisham was at best guilty of conflicts of interest and should drop out of the race.

In response to the mounting attacks about her business practices, Lujan Grisham released five years of personal income tax returns and earned 66 percent of the primary vote, beating Apodaca by 44 points.

She had divested from Delta in the summer of 2017. According to her congressional financial disclosure forms, the amount of the divestiture was between $100,000 to $250,000. (Congressional disclosure forms require only a range rather than an exact amount.)

Still, her critics have sought to raise questions about the continued existence of the pool, and Delta’s role with it — plus the presence of state Rep. Debbie Armstrong, D-Albuquerque, the second Delta co-founder who served as Lujan Grisham’s campaign treasurer and is the executive director of the high-risk pool.

One Pearce television advertisement said Delta was “overcharging” and “fleecing” its ill customers, pointing out its premiums are 10 percent above the market rate. The same ad accused Lujan Grisham’s “top cronies” of seeking to “bury evidence” of what a recent email blast from Ryan Cangiolosi, chairman of the Republican Party of New Mexico, called her “shady business deal.”

Armstrong said there was no political pull exercised in Delta winning the contracts to provide services for the pool, as has been alleged by Pearce and other critics in the wake of the Politico story or in the existence of the pool even in the Obamacare era.

Through a spokeswoman, the state superintendent of insurance, John Franchini, who chairs the high-risk pool’s board, said this week there was nothing untoward about the competitive bidding processes.

John Arango, a member of the pool’s board since 1992, said the pool needs to remain in place to service groups of people who still cannot find insurance. He mentioned patients under age 65 who cannot buy supplemental Medicare insurance for specific procedures such as dialysis, and patients who miss the annual enrollment period or find themselves needing a policy between enrollment windows.

If current protections for pre-existing conditions are wiped out by a successful 20-state challenge to the Affordable Care Act, Arango added, the pool’s enrollment could quintuple.

“All along [the board has] said, ‘We need to stay in operation because of the turmoil in the market,’ ” he said. “One thing we can say to people in New Mexico is: If you need health insurance, and you can’t buy it anywhere else, we will sell you a policy. Our rates are high because you have an expensive medical condition, but depending on your income, we may be able to give you up to a 75 percent discount.”

The board of the high-risk pool, not Delta, determines the rates, according to state statute.

Arango said Lujan Grisham, while a co-owner until last summer, played no role in Delta operations since her election to Congress in 2012 and countered the Pearce claim that Delta had won a “government contract.”

The pool, per state statute, is a nonprofit entity and receives no state appropriations.

Lujan Grisham earned between $180,000 and $400,000 in income from Delta beginning in 2013 through last year, the annual financial disclosures show.

When Lujan Grisham released five years of tax returns earlier this year, reporters flagged that her 2013 return showed $138,000 in “passive income” from Delta. On that year’s congressional disclosure form, however, she reported only $50,000 to $100,000 in Delta income. A Lujan Grisham spokesman said at the time the understatement of income was an “honest mistake.”

Pearce, meanwhile, has said he will release his 2017 tax return but is being “held up” as several companies filed for extensions to Oct. 15. He has been reported to be one of the richest members of Congress.

Delta’s role

Rep. Debbie Armstrong said Delta Consulting Group operates the office of the high-risk pool and oversees its administrator, a company called Benefit Management, Inc.

“We’re the staff of the pool,” Armstrong said, referring to herself, as executive director, and one other full-time employee and a part-time employee who handles IT.

Increased compensation for Delta even as the pool’s membership has shrunk — a point of criticism from Michelle Lujan Grisham’s opponents — reflects a shift in what the board asked Armstrong to do, pool board member John Arango said.

“The job of the executive director increased because one of the tasks the board had given them was to actively contact policyholders who, in the opinion of the executive director, could move over to the [Affordable Care Act] and counsel them on the advantages of moving over,” he said. “The functions increased even though membership decreased.”

Armstrong and Lujan Grisham have said the pool still plays an important role. Asked whether it would always exist, Armstrong said not necessarily.

“I think the goal for the pool would be to be not needed,” she said. “If there was no need for a safety net, and all circumstances were taken care of, then they wouldn’t need to be there. And if everyone was electing to move out and could get other coverage, that would be fine. The pool doesn’t exist to just maintain itself.”