The N.C. Department of Insurance has levied a record $3.6 million fine against Blue Cross and Blue Shield of North Carolina for chronic malfunctions that have led to billing and enrollment errors for Blue Cross customers since January.
The Insurance Department and Blue Cross, the state’s largest health insurer, agreed to the fine amount Thursday, ending a six-month agency investigation in what has been the most challenging year in the insurance company’s history. The agency cited a spate of problems, including over-billing, double-billing, failing to confirm coverage, canceling coverage customers wanted, and signing customers up for policies they didn’t want.
Nearly 3,500 customers and medical providers lodged complaints with the agency through the end of August. Doctors and other providers said Blue Cross delayed insurance reimbursements by weeks and even months. The Insurance Department intervened on behalf of patients in immediate need of medical attention, and small medical practices that faced a cashflow crisis when Blue Cross stopped making payments.
“As your insurance commissioner and an advocate for consumers across North Carolina, Blue Cross and Blue Shield had to be held accountable,” Insurance Commissioner Wayne Goodwin said in a statement.
Blue Cross denied that it violated any state laws or regulations, and settled the investigation only “to avoid the uncertainty, distractions, and expense of litigation,” according to the settlement agreement.
“We’ve reviewed the Department of Insurance’s Voluntary Settlement Agreement and have paid the amount for our technological problems,” Blue Cross said in a statement. “We have been actively addressing these issues, and expect to be stronger as a result of this process.
“We remain committed to our customers and the communities of North Carolina, and are deeply sorry for the challenges that this created for our customers and providers.”
According to the voluntary settlement agreement, Blue Cross said it has fixed its technology problems, although the Insurance Department recently said technology-related complaints were still trickling in in August. Blue Cross next must decide whether it will participate in 2017 open enrollment under the Affordable Care Act in all 100 North Carolina counties, as it has done the past three years.
If it commits to the ACA, Blue Cross would not only have to absorb reenrollments of its own ACA customers, which exceed 300,000, but also several hundred thousand customers who will be dropped by Aetna and UnitedHealthcare at the end of this year when those insurers withdraw from the federal exchange.
The combined cost of the investigation, and underlying errors, far exceeds the $3.6 million of the fine. According to the 4-page voluntary settlement agreement, Blue Cross has paid at least $11.3 million in restitution to customers to date, and has also paid at least $8.3 million in interest resulting from late reimbursements to doctors and other providers.
Insurance Department investigations are confidential under state law, but both sides have said publicly that Blue Cross disputed the agency’s allegations, a point reiterated in the settlement agreement. It will never be known to the extent to which Thursday’s compromise scales back DOI’s initial findings and preliminary fine amount proposed in late May.
Still, the settlement amount is twice as much as the Insurance Department’s previous record fine, which had also been levied against Blue Cross in 2003, for failing to provide coverage for emergency care.
The funds will be drawn from Blue Cross’s surplus, which totaled $2.1 billion at the end of last year, and will not affect customers rates, according to the Department of Insurance. The fine proceeds will be spent “for the benefit of the public schools,” as required by the state Constitution.
Blue Cross began experiencing problems in early January while enrolling customers through the Affordable Care Act and other individual policies. The company blamed its technology platform, Topaz, and a software program, Facets, for crashing and preventing the transfer of some 400,000 customer accounts from a legacy technology platform.
Durham-based Blue Cross had been experiencing problems with Topaz in late 2015 but company officials confidently opted to go ahead with enrollment in 2016 on the assumption that the situation would be promptly fixed. Instead, the problems persisted and Blue Cross was slammed with nearly half-a-million customer calls in the first week of enrollment.
Some customers reported spending more than 20 hours on hold as they tried to get problems resolved.
According to the voluntary settlement agreement, Blue Cross admitted to some of the complaints: that it failed to provide identification cards in a timely manner, that it experienced problems in billing and invoices, and that it failed to respond promptly to DOI in early 2016, delays that Blue Cross blamed on technology failures.
At least two Blue Cross executives resigned from their jobs as a result of the problems, which continued well into the summer as Blue Cross scrambled for months to resolve the technology fiasco.