Blue Cross of California Hit by Criticism at State Hearing
The Department of Managed Health Care on Tuesday held a public hearing to determine whether Blue Cross of California has violated terms of a 2004 agreement that the insurer and its parent company, WellPoint, made with the state, the Los Angeles Times reports (Girion, Los Angeles Times, 8/8).
The agreement laid out conditions of the state's approval of WellPoint's merger with Anthem, an Indianapolis-based insurer.
DMHC officials have received more than 1,600 complaints against Blue Cross since 2004. The complaints address issues including premium increases and canceled policies.
State officials also seek to investigate 1,200 complaints from physicians, mostly regarding payment and contract disputes (California Healthline, 8/7).
In response to the complaints, Blue Cross delayed pending cuts in physician reimbursement rates by three weeks to Aug. 30 and dropped its plan to cut reimbursements for several procedures.
Brian Sassi, president of Blue Cross, said only 30% of physicians will be affected by the reduced rates.
More than 300 physicians have notified Blue Cross that they may withdraw from the insurer's network (Chan, Sacramento Bee, 8/8).
Jeff Kamil, Blue Cross' medical director, said, "If physicians complain, we will look at" the fees. He added, "It's not like we're deaf-eared to what physicians think" (Los Angeles Times, 8/8).
During the first six months of 2007, the department received 85% more termination requests from Blue Cross providers than in all of 2005 (Hoops, Ventura County Star, 8/8).
Along with complaints from physicians, the hearing also addressed a $950 million dividend that Blue Cross sent to WellPoint, its parent company, earlier this year. The payment was almost twice the amount sent to WellPoint in each of the previous two years, according to DMHC officials.
Cindy Ehnes, DMHC director, said, "The dividend is significant because [Blue Cross] is extracting large amounts of money at the same time it is saying the increasing costs of health care require premium increases and benefit reductions."
Sassi said the dividend was consistent with the merger agreement. He said the payment was the result of earnings accumulated over several years and was in line with dividend payments by other insurers.
However, the Foundation for Taxpayer and Consumer Rights challenged that assertion, calling on regulators to investigate $6.5 billion in transfers from Blue Cross to WellPoint and other out-of-state affiliates. An FTCR analysis of such payments concluded that the $950 million dividend is indicative of larger problems.
WellPoint spokesperson Shannon Troughton declined to comment on the findings of the analysis but said she believed it was inaccurate (Los Angeles Times, 8/8).
Not-for-profit community groups, as well as some business groups, appeared at the meeting to support Blue Cross.
The groups praised Blue Cross for offering plans in underserved communities and providing scholarships for minority students (Sacramento Bee, 8/8). The groups also commended the insurer for offering innovative health plan options (Ventura County Star, 8/8).
Ehnes said a decision on whether DMHC would take action should be made within three months. However, she declined to specify what action the state would consider (Los Angeles Times, 8/8).
Lynne Randolph, DMHC spokesperson, said the most severe consequence to Blue Cross would be an extension of its current merger agreement with the state governing operations at the health plan (Ventura County Star, 8/8).