When I worked as public policy director for Blue Shield of California, I saw Senator Ed Hernandez do favors for the company, a major contributor to his campaigns. Hernandez is the powerful chairman of the California Senate Health Committee and a candidate for lieutenant governor. While I never saw evidence of favors being explicitly exchanged for contributions, I have little doubt that the favors would not have been done absent the campaign funding.
As most political insiders will tell you, what I witnessed isn’t rare. But that hardly makes it defensible. When legislators use their offices to assist big campaign donors, and hide the activity, they abuse the public trust. Even if what they do doesn’t amount to bribery, it’s sleazy and it undermines faith in government. We should to do more to try and stop it.
One way to attack the problem would be to shine a light onto the relationship between lawmakers and their big donors by passing a law requiring public disclosure of the communications between them. The California Legislature has exempted itself from the Public Records Act, so virtually all of the work its members do, other than what happens in committee hearings or floor sessions, is done in secret. Given the high potential for corruption, legislators’ dealings with major contributors, at the very least, ought to be as transparent as the rest of state government.
Hernandez should set an example for that kind of openness by releasing his and his staff’s texts and emails with Blue Shield. The company, since 2009, has given more to his campaigns than any other corporate, individual or labor union donor, and its contributions have included over one hundred thousand dollars directed into a loose type of campaign account that political reform group Common Cause has described as a “slush fund.” In one sign of how close the relationship between Hernandez and Blue Shield has grown, his former chief of staff now lobbies for the company. As a public representative, Hernandez shouldn’t be conducting a relationship like that with a corporation with such a big stake in his official actions, behind closed doors.
THE FAVORS I KNOW ABOUT
The favors I saw done behind those doors are likely just a sampling of the total. My responsibility at Blue Shield was for policy rather than politics, which put me on the periphery of dealings with Hernandez and his staff, and I left the company in 2015. But this is what I know, based on personal involvement, he did for Blue Shield:
Scuttled legislative examination of a massive rate increase Blue Shield had announced in 2011. In response to public outcry and questioning from the press about the increase, which was up to 59% for some policyholders, Assembly Speaker John Perez promised that the Assembly and Senate Health Committees would hold a hearing on it. But after private entreaties from Blue Shield, Hernandez and his Assembly counterpart held a hearing that instead addressed only system-wide healthcare costs, and thus allowed Blue Shield to escape public accountability. To show for the record that he’d scrutinized the rate hike, as Perez had promised that the health committees would do, Hernandez sent Blue Shield a letter with detailed questions about it, but which Blue Shield had written and provided to him. I know because I drafted the letter.
Carried two bills to enactment that were proposed and written by Blue Shield. I drafted these, as well. While legislators often carry legislation that originates with an outside group, they typically identify the group as the sponsor. Hernandez has done so with bills he has partnered on with labor and consumer groups. But he didn’t disclose Blue Shield’s sponsorship of SB 1196, in 2012, or SB 1340, in 2014 (both of which were measures intended to give insurers greater access to hospital pricing data).
AND A BIG ONE I KNOW SOMETHING ABOUT
I also had some exposure to a far more consequential favor Hernandez appears to have done for Blue Shield after I left the company. When news that the state had revoked Blue Shield’s nonprofit tax exemption broke in 2015 and caused a flurry of media attention, Hernandez told the Los Angeles Times: "Blue Shield enrollees and the public at large are entitled to a reasonable return on the investment the state has made by granting Blue Shield tax-exempt status. I'm looking forward to finding out what exactly the public got for our money."
Having resigned from Blue Shield over the very issue of the nonprofit’s dereliction of its public benefit duty (more on that here), I was encouraged by what Hernandez had said. I knew that legislation would ultimately be needed to remedy the problem, and that it would have to go through his committee. But knowing his relationship with Blue Shield, I also took the comments with a big grain of salt.
A meeting a few days later with members of his staff, however, gave me hope. They raised the possibility of a Senate Health Committee hearing examining Blue Shield’s nonprofit obligations and performance. But a month later, the staff had me meet with Hernandez, and he told me he saw no particular problem with Blue Shield or reason to single it out for scrutiny.
The last I heard from his office was an email informing me that Hernandez is “open to having a hearing, but he doesn’t want to focus on just BSC. He’d rather do it on non-profits in the health care system.” This time, Hernandez didn’t even bother to follow through on the deflection strategy; no hearing of any kind was held. And if Hernandez has learned in some other way what the public got for its money from Blue Shield, he hasn’t shared it publicly.
IF THERE’S NOTHING TO HIDE, SENATOR, DON’T HIDE ANYTHING
At a recent debate before the Sacrament Press Club, candidates for lieutenant governor were asked about the potentially corrupting influence of corporate campaign contributions. Hernandez, in concluding his response, said, “All of the decisions that I’ve made are based on what I think are absolutely the right decisions for the people of California and in my district.” If that’s true, he should have no problem bringing his dealings with Blue Shield out into the open.
Update: On June 1, just before the legislative committee Hernandez chairs was scheduled to vote on a bill that Blue Shield opposes (AB 2499), the company gave $250K to the campaign to elect Hernandez Lt. Governor. One week later, the bill was gutted, which will likely save Blue Shield (and cost consumers) hundreds of millions of dollars. More in this Tweet thread.