FARGO --; Blue Cross Blue Shield of North Dakota agreed Thursday to pay fines totaling $60,000 for "systemic" violations uncovered in an examination by insurance regulators.
The violations involved handling of claims, including health insurance coverage, mental health and substance abuse treatment, and an affiliated life insurance company's failure to pay advertised premium discounts.
Adam Hamm, the North Dakota insurance commissioner, said he and his examiners were surprised by the breadth and seriousness of the violations uncovered in the yearlong examination.
The lack of compliance involved areas at the core of providing insurance, he said, including claims handling, coordination of benefits, and making truthful representations to customers.
"They're all very serious," Hamm said. "My team and I were surprised during the course of the examination by the type of violations that were found and the number of violations that were found."
The fines were the maximum allowed by law, Hamm said. Stiffer fines would have been levied if Blue Cross Blue Shield of North Dakota were a for-profit insurance company. But fines come out of the surplus of North Dakota Blues, a nonprofit owned by policyholders.
"My department will be closely monitoring the company so changes are made quickly and consumers are treated fairly going forward," Hamm said.
The violations were documented in a market conduct examination for the period March 5, 2010, through May 31, 2013, a span that included the rollout of the Affordable Care Act, the federal health care reform law.
During that period, Paul von Ebers was the insurer's top executive. He was fired last May, when Blue Cross Blue Shield suffered significant losses for a variety of reasons, and was replaced by Tim Huckle.
"The audit time frame represents what has been a period of change and uncertainty for the health coverage industry," Andrea Dineen, a Blue Cross Blue Shield spokeswoman, said in a statement. "In the best interest of our members, BCBSND accepts the findings and will continue to move forward with corrective action plans addressing issues identified by the North Dakota Insurance Department, many of which are already under way."
As a result of the findings, state insurance regulators now will require quarterly monitoring reports from Blue Cross Blue Shield to ensure compliance and to flag any problems early, Hamm said.
The scope and severity of problems and lack of cooperation in providing some information sought by regulators reflect lapses within the company during the period of the examination, Hamm said.
"There was a breakdown within the company of how to make sure they were following the law on a day-to-day basis," he said.
Among the violations, Blue Cross Blue Shield of North Dakota:
-- Neglected to determine whether some members' dependents under the age of 26 could get better coverage under a parent's group insurance plan than their own coverage, as required by law.
-- Improperly denied coverage to dependents under the age of 19. Under the Affordable Care Act, health insurance could not be denied for pre-existing conditions. The denials were found in every one of 113 cases examined.
-- In marketing life insurance offered by another company, Blue Cross Blue Shield failed in 6 percent of cases examined to provide an advertised 10 percent premium discount for two years. The discounts not given ranged from $7.30 to $2,883 for 21 of 1,200 groups.
-- A sample of 82 cases examined to determine if authorization of mental health and substance abuse benefits found nine claims were wrongfully denied coverage, a failure rate of 11 percent.
The Blues have agreed to provide coverage on those claims, and to establish an internal auditing program to ensure future compliance in handling mental health and substance abuse claims.
-- In coordinating benefits involving health insurance claims that also involved auto insurance coverage, Blue Cross Blue Shield sometimes failed to provide appropriate credit for deductibles and coinsurance.
"That was a general business practice," Hamm said, and as a result auto insurance was improperly billed for some costs.
-- Examiners found 3 percent of written complaints, or one of 38 sampled, involving grievances over denied coverage lacked proper documentation, as required by law.
Customers examiners found were improperly denied coverage will receive the benefits they're due, Hamm said.
Also, Blue Cross Blue Shield is taking corrective steps directed by his department, including internal reviews of claims decisions involving behavioral health.
"Nobody should take from this that it is not a good company," Hamm said of the critical examination report, which was conducted from September 2013 to this October. "But what we found in this report was completely unacceptable and cannot occur again."