Media attention about fines for business practices is one of the last things an insurer wants during open enrollment, but one state Blues is now faced with the task of damage control.
Noridian Mutual Insurance Company, which does business as Blue Cross Blue Shield of North Dakota, is being fined $60,000 by the state insurance commissioner for six violations of insurance law, including underwriting dependents under the age of 26, misleading advertising of life insurance policies, and improper denials of mental health and substance abuse services.
"As the largest health insurer in North Dakota, BCBSND has an obligation to meet the highest standards," said North Dakota Insurance Commissioner Adam Hamm, whose office conducted an investigation after a string of consumer complaints. "The market conduct examination found several deficiencies at BCBSND that need immediate attention. My Department will be closely monitoring the company so changes are made quickly and consumers are treated fairly going forward."
Between March 2010 and May 2013, BCBSND, an insurer for 500,000 people, violated six different areas of state and federal insurance law, including new provisions of the Affordable Care Act, Hamm's office found.
After the ACA took effect, the company seemed to be removing dependents from group health plans if they were eligible for other health insurance, according to the Insurance Department's investigation.
It was BCBSND's "general business practice to remove dependents under the age of 26 from a parent's group health plan, if the dependents had their own employer-sponsored health coverage available, without considering whether these dependents would still be eligible for coverage under their parent's," state regulators wrote.
Elsewhere in employer-sponsored insurance, BCBSND was accused of misrepresenting and failing to provide advertised discounts in life and disability policies. The company signed a contract with life and disability carrier Lincoln Mutual Life to market their products and guarantee employers a 10 percent discount on existing group life, short-term disability and long-term disability plans for two years, but those discounts weren't delivered.
The North Dakota Insurance Department discovered that "neither the advertised 10 percent discount nor the period of the discounted premiums advertised were guaranteed to employer groups," with 21 employers ultimately failing to get the discount, in what regulators deemed to be false advertising and misrepresentation.
In individual health plans, the company allegedly used the type of medical underwriting banned by the ACA when enrolling certain dependents and only offered them guaranteed issue during a one-month enrollment period. Even then a few dependents were denied coverage based on pre-existing conditions, the investigation found.
In a review of these cases, regulators found that BCBSND "denied coverage for all 113 dependents under the age of 19 due to health status," a violation of the ACA's ban on medical underwriting that was adopted in North Dakota in 2011.
State regulators also examined 167 denied preauthorization of mental health and substance abuse services, and found 63 cases in which a claim was denied or not paid in accordance with internal guidelines, medical necessity guidelines and state law.
Another area BCBSND needs to improve its service is coordination of health benefit claims with automobile insurance in cases of no-fault claims, according to state regulators. In three instances from a sample, the company failed to apply appropriate credit for deductibles and coinsurance stemming from automobile accidents.
"We've been assured by the company they will address these issues and cooperate fully with the Insurance Department," Hamm said.
Blue Cross and Blue Shield of North Dakota has been struggling somewhat since the advent of health reform, and is now on its second CEO in five years.
In 2009, Mike Unhjem, the CEO of 18 years, left the company amid a public uproar over a Cayman Islands trip for top employees at the same time that policyholders were seeing premium increases. A year later Unhjem was found dead in his Fargo home of apparent carbon monoxide poisoning, at the age of 57.
His replacement, Paul von Ebers, was hired from outside the company, after four years at Excellus Blue Cross in New York, but was voted out by the BCBSND board last May, as the company posted a nearly $80 million loss.
Most of that was from a technology subsidiary whose 2012 contract to build Maryland's health insurance exchange was severed after widespread technology problems; about $25 million was an underwriting loss, the first since 2008.
Under the new CEO, Tim Huckle, a 29-year company veteran, Blue Cross Blue Shield of North Dakota has been trying to turn itself around, and posted an operating gain for the last quarter of the fiscal year and an increase in capital and surplus.
Challenges remain for the BCBSND, though, including potential clawbacks of contract funding for the failed the Maryland exchange, weakened public confidence in the wake of the state insurance department's report, and a lawsuit by a former medical director, who alleges he was wrongfully terminated in retaliation for raising concerns about overpayments to providers that were then used to justify premium hikes on self-insured group plans.