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NC insurance commissioner: Blue Cross likely to be fined ‘millions’ for IT woes

North Carolina’s insurance commissioner expects to issue a fine against Blue Cross and Blue Shield “in the millions of dollars” for ongoing technology problems that have botched coverage, billing and payments for thousands of customers and doctors in the past four months.
North Carolina’s insurance commissioner expects to issue a fine against Blue Cross and Blue Shield “in the millions of dollars” for ongoing technology problems that have botched coverage, billing and payments for thousands of customers and doctors in the past four months. hlynch@newsobserver.com

N.C. Insurance Commissioner Wayne Goodwin said Wednesday he expects to issue a fine against Blue Cross and Blue Shield “in the millions of dollars” for ongoing technology problems that have botched coverage, billing and payments for thousands of customers and doctors in the past four months.

The unprecedented fine would culminate a trail of mishaps that resulted in the resignations of two Blue Cross executives so far in one of the most challenging periods in the Chapel Hill insurer’s history. Goodwin noted that the nationwide computer failure that prevented enrollments in the Affordable Care Act was repaired in about two months, while Blue Cross’ technology problems in North Carolina have dragged on twice as long.

Goodwin, a Democrat up for reelection in November, provided an update on the N.C. Department of Insurance investigation of the state’s largest health insurance company to a group of News & Observer editors and reporters.

He said his office expects to conclude its investigation of Blue Cross on May 27, giving the insurer 30 days to respond to the agency's findings, conclusions and recommendations. In late June the Department of Insurance expects to issue the findings of its investigation.

“We’re still seeing many of the same problems,” Goodwin said of Blue Cross’s struggle to fix its broken software for insurance billing and administration. “I’m furious about it.”

Blue Cross challenged Goodwin’s characterization.

Blue Cross spokesman Lew Borman, in an email, said “the vast majority of customer enrollment issues have been resolved.” Borman also said that “call volumes to customer service are down considerably from January.”

Goodwin provided data Wednesday showing that for the past seven weeks, the Insurance Department has received between 588 and 677 calls per week; calls in March and April are down by about a fourth from average call levels earlier this year.

Borman said that most Blue Cross customers – those who obtain health insurance through employers, the State Health Plan or Medicare – are not affected by problems. Only about 15 percent of Blue Cross’s 3.9 million customers have been caught up in the technology problems he said.

“A majority of claims are being paid normally, and most of our customers are not impacted,” Borman said. “The amount of delayed claims will shrink over the next few weeks as we continue to process additional waves.”

Performance ‘unacceptable’

The problems exploded in January after Blue Cross migrated more than 400,000 customers from a legacy software system to a new software system called Facets. The affected customers are on individual health insurance policies, most of them purchased through the federal exchange as part of the Affordable Care Act.

To date, the state insurance department has received 13,596 calls about Blue Cross problems from customers, resulting in 2,708 written complaints, typically from customers who have been double-billed, unable to make payments, dropped from coverage or unable to verify they are insured.

The number of complaints against Blue Cross in the first four months of 2016 is close to the 2,790 total complaints in 2015 against all life and health insurers in the state, Blue Cross included.

Goodwin said Blue Cross’s performance has been “unacceptable,” with improvement in some areas, no improvement in other areas, and some cases having to be reopened after his office thought they were resolved.

Goodwin expects to receive a draft investigation report from his staff May 26 and plans to submit the report to Blue Cross the next day. If Blue Cross accepts the findings, the report’s findings will become public, said insurance department spokesman Colin Day.

If Blue Cross challenges the report’s findings, however, the matter would go to an administrative hearing at the Department of Insurance. Under state law, the administrative hearing would not be public, Day said.

If Blue Cross were to prevail in its challenge in the administrative hearing, the portions of the initial report that Blue Cross found objectionable would be excised and not publicly disclosed.

Outstanding claims

Goodwin said he is leaving the investigation to his staff and isn’t familiar with the details of the findings thus far. For example, Goodwin still doesn’t know why the Facets software crashed and the full extent of customers affected, but he said the complaints represent only a portion of customers affected because some aren’t aware they can file complaints.

He said his preliminary estimate for the amount that Blue Cross could be fined is based on the sheer volume of complaints. State law allows the Department of Insurance to fine Blue Cross up to $1,000 per violation per day, and the violations are accumulating daily.

“This is literally off the charts,” he said. “I expect to be infuriated by what I find.”

More than 150 medical practices and other providers complained in March and April about Blue Cross not paying claims in months. The Raleigh Neurological Clinic, for example, filed a complaint saying Blue Cross owes the practice $785,000 for medical services rendered to Blue Cross customers.

“We have close to $785,000 in outstanding claims with BCBS with $376,000 being over 60 days old,” the medical practice said in its April 27 complaint. “We also have been performing emergency surgeries on BCBS patients and are unable to obtain authorizations. [BCBS] reps no longer return our calls or emails and our employees are spending hours on hold to check on claims or to attempt to obtain authorizations.”

Blue Cross is manually verifying claims payments to prevent payment errors, and has notified doctors to expect delays between 60 and 120 days.

Blue Cross recently promised to expedite payments to doctors who are experiencing financial hardship because of the delays, Goodwin said. Because of the Blue Cross fiasco, some doctors are “suffering undue financial hardship or are on the brink of financial failure.”

John Murawski: 919-829-8932, @johnmurawski

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