Blues fined for marketing violationsInsurance Commissioner Adam Hamm fined Blue Cross and Blue Shield of North Dakota $30,000 for understating its administrative costs and neglecting to provide the agency with a copy of the insurer’s provider contract with doctors.
By: By Dale Wetzel, The Associated Press , The Jamestown Sun
BISMARCK — Insurance Commissioner Adam Hamm fined Blue Cross and Blue Shield of North Dakota $30,000 for understating its administrative costs and neglecting to provide the agency with a copy of the insurer’s provider contract with doctors.
The Fargo company, which is North Dakota’s dominant health insurance provider, said it would not contest the fine or the conclusions in an Insurance Department consent order describing the case.
Blue Cross Blue Shield was fined $10,000, the maximum allowed by state law, for each of three separate violations. The insurer paid the penalty last week.
“All three (violations), in and of themselves, are serious,” Hamm said Thursday. “Taken together, it evidenced a pattern of violating North Dakota laws with respect to these sorts of issues.”
In a statement, Blue Cross Blue Shield implied the mistakes were minor. In one example, Hamm’s order will result in the insurer changing its description of the percentage of premium income that it pays out in medical claims from an average of 93 percent to 92.8 percent, the company said.
A company spokeswoman declined to elaborate on the statement.
Hamm said it was important for Blue Cross Blue Shield, and insurance companies generally, to be precise in describing what share of a policyholder’s premium dollar is used to pay medical benefits, and what percentage goes for administrative expenses.
Even differences of 1 to 1.5 percentage points are significant when applied to the more than $1 billion in health insurance premiums paid annually to Blue Cross Blue Shield, Hamm said.
“If a company is going to be out there making statements to the public, to their competitors, as to what their administrative costs are, they need to be extremely careful that they are 100 percent accurate, and that in no way are the statements misleading,” Hamm said.
Blue Cross sells health insurance policies to individuals and businesses, and manages health plans for companies that act as their own insurers.
The company has counted money it receives for managing companies’ self-insurance plans as premium income, which is a term reserved to describe payments for insurance coverage provided by Blue Cross itself, Hamm said.
Blue Cross also excluded a state tax on health insurance premiums from its revenues when advertising the share of its premium income that is used to pay medical claims.
Both practices had the result of overstating the share of policyholders’ money that was used for medical claims, and understating the share that went to administrative costs, the insurance commissioner said.
Blue Cross Blue Shield also was fined for neglecting to file a copy of its “preferred provider” contract with North Dakota physicians, and omitting some provisions that state law required to be included in the agreement, the Insurance Department’s order says.
For example, the contract should have included procedures for controlling the use of health care services and determining whether a service is necessary, the order says.
Blue Cross Blue Shield provides health insurance coverage and related benefits to more than 400,000 North Dakota residents. Last year, the company accounted for almost 90 percent of the premium payments made by North Dakotans for major medical insurance coverage, the Insurance Department says.
Hamm said the investigation and fine was separate from a recent Insurance Department audit, made public earlier this month, that questioned millions of dollars’ worth of spending by the insurer on employee bonuses, trips and other perks.