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Blue Cross Must Pay $1.8 Million Fine For Claims Underpayments

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RALEIGH, N.C. — Insurance Commissioner Jim Long on Thursday signed a consent order requiring Blue Cross and Blue Shield of North Carolina to pay a civil penalty of $1,825,000 for violating the state law that governs how health insurance companies handle emergency claims.

Long said he was prepared to hold a hearing starting Thursday until the company said it wanted to settle.

"By signing this order, Blue Cross has legally assured me and the citizens of North Carolina that all 146,000 claimants, whose claims were mishandled, have been repaid," he said. "This comes to $17 million in payments, including interest.

"This has been one of the most serious cases I've seen in my 19 years as insurance commissioner for North Carolina," Long said.

The following statement was issued Thursday by BCBSNC president and CEO Bob Greczyn:

"Blue Cross and Blue Shield of North Carolina has taken full responsibility for the emergency room claims issue. On our own initiative, we reported the problem to the Department of Insurance and we paid more than $17 million -- including interest -- to customers, physicians and hospitals that were underpaid as a result of our error.

"We took too long to discover and fix this problem. However, let me emphasize that we found the problem, we voluntarily reported it, and we fixed it. We have made appropriate systems and procedural changes to prevent a recurrence.

"We agreed to this settlement because we do not want an issue that we have fixed to distract us from our focus on our customers. The settlement amount will go to benefit North Carolina's public schools, and that is a good outcome from this situation.

"We will work hard to continue to do the right thing by our customers. That includes admitting our mistakes and correcting them."

The Department of Insurance (DOI) said BCBCNC did not process emergency claims correctly for a period of five years. Documents uncovered in the course of a DOI investigation reveal that the company knew or should have known of this problem and did not fix it.

The consent order was signed after months of negotiations with the company by DOI legal staff. It came only after Blue Cross officials assured the DOI that all mishandled claims -- some 146,000 in all -- were repaid in full.

"We are taking full responsibility for the error we made in processing a portion of ER claims. We've paid doctors, hospitals and customers with interest for the amount we underpaid because of our error," said Mark Stinneford of BCBSNC. "With regard to the settlement, we agreed to the settlement because we did not want the problem that we had fixed to distract us from our continued focus on our customers."

"This has already been a costly affair for Blue Cross, but I want to make sure they have learned their lesson," Long said. "We simply cannot have the state's largest health insurance company choosing not to follow our consumer protection laws."

Long said the fine is the largest his department has ever levied against an insurance company. The money paid comes from reserve funds and no rate increase is expected because of the settlement.

"The settlement amount is not the kind of thing we would make as part of our calculation for determining rates, so it won't affect premiums," Stinneford said.

As required by the North Carolina Constitution, all fines collected will be distributed to the state school system.

It is not the first time Blue Cross Blue Shield of North Carolina has been fined by the state. In 1998, the insurance company was ordered to pay $300,000 for not supplying documents for an audit. It was the second-highest fine the state Department of Insurance has ever collected.

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