Blue Cross to refund $156 million in N.C.

USA Today

Health insurance regulators in North Carolina have identified nearly $156 million in refunds owed to Blue Cross policyholders because of changes coming under the nation's new health law.

Consumers with policies at other companies across the nation also may deserve refunds, says North Carolina Insurance Commissioner Wayne Goodwin. He plans to urge other states to probe potential overcharging for a type of reserve fund.

The health care law will dramatically change how health policies are sold in 2014, and many plans in effect now will cease to exist that year in their current form. Yet state regulators who scrutinized a recent rate increase request by Blue Cross and Blue Shield of North Carolina say they discovered the insurer was collecting reserves to pay claims beyond 2014.

Discovering this took "heavy lifting" by financial experts at the department, Goodwin said, adding: "Since the passage of the federal health reform law we've ramped up our interactions with the insurance companies we regulate."

The result: Blue Cross has agreed by year's end to send refunds to more than 215,000 North Carolina policyholders with individual plans in force on March 23 — the date the new health law was enacted. The refunds announced Monday will vary depending on premiums paid, but will be worth about a month and a half's premiums. For an average policy holder, that's $690, said Brad Wilson, the insurer's president and CEO.

Wilson said the reserves being refunded are portions of consumers' premiums that the insurer set aside in the early years of a policy to keep monthly payments more stable over the life of the policy, as the person's medical expenses increased. "Blue Cross maintained this money on behalf of our customers and now it is time to release it," he said.

Blue Cross' group policies didn't use this kind of reserve, company spokesman Lew Borman said.

It's unclear what percentage of health policies nationwide use similar "active life reserves" formulas in setting rates and whether policyholders in other states also deserve refunds. Several industry groups and insurers contacted by USA TODAY, including America's Health Insurance Plans, either didn't know or didn't respond to interview requests. Brett Lieberman, spokesman for the Blue Cross and Blue Shield Association, which represents 39 independent companies, said: "We're not aware of this being a broader issue."

Steve Larsen, who heads insurance oversight at the U.S. Department of Health and Human Services, said there may be others. "I really do think there may be a bigger issue at work here," he said.

BCBS Tests Outsourcing to India

News and Observer

 

Blue Cross and Blue Shield of North Carolina is testing a plan that would outsource some information technology work to India.

The state's largest health insurer is looking for ways to reduce costs as the recession has slowed membership growth and health reform looms. This week, Blue Cross started a "small pilot project" with Keane, a Boston-based information technology firm, to extract and analyze data from the insurer's massive electronic repository. Some of the work will likely be handled at a Keane facility in India, said Blue Cross spokesman Lew Borman.

"It does not affect any current jobs, but I can't speak to down the road," Borman said. "We're looking at a variety of ways to operate more efficiently and keep premiums affordable. It's about costs and cost savings for North Carolinians."

But the prospect that Blue Cross, which started in North Carolina in the 1930s and now has 3.7 million members across the state, might farm out tech projects could worry employees and rile customers.

Blue Cross routinely hires outside contractors for various work, such as security at its Chapel Hill headquarters. The Keane contract is the first time Blue Cross has outsourced work overseas.

Outsourcing or offshoring has been a trend in corporate America for years, but has come under fire from lawmakers and other critics as unemployment remains stubbornly high. When any company does it for the first time, there's the potential for a backlash from consumers and others, said Jim Johnson, a professor of strategy and entrepreneurship at UNC's Kenan-Flagler Business School.

'Political hot potato'

"The whole notion of sending jobs offshore is a political hot potato," Johnson said. "Most companies try to keep it under the radar."

The move could provide new ammunition for the nonprofit insurer's critics, who attack Blue Cross for its rising premiums, dominant market position and administration of the state employees' health plan.

But health reform is forcing many medical companies to find ways to cut costs, Johnson said. Reform will also bring a host of data-management challenges. Last year's federal stimulus bill included billions of dollars to entice physicians, hospitals and others to adopt electronic medical records, which can improve efficiency and reduce errors.

As some companies hire outside firms to handle that work, they have to look to global information technology providers with operations in cheaper countries. "The cost differential is just too wide," Johnson said.

Wide salary gap

He pointed to reports that the average information technology salary is about $20,000 a year in India, compared with $80,000 a year in the United States.

Still, Blue Cross should be ashamed if it allows any jobs to be sent overseas in this economy, said Dana Cope, executive director of the State Employees Association of North Carolina. Cope has criticized how much Blue Cross makes adminstering the state employees' health plan and has said the company controls too much of the market for individual health coverage and assisted living in North Carolina.

Cope said the company is supported partly by taxpayers and public workers in administering the state health plan, and shouldn't be allowed to outsource jobs.

"It's shocking they would export jobs when the Research Triangle area has all the manpower and expertise to accomplish the task," he added. "Blue Cross is sitting on billions in reserves and paying millions to its top executives. I would prefer that they use some of that money to hire some IT workers in North Carolina."

As Brad Wilson prepared to take over as Blue Cross CEO on Feb. 1, he said one of his priorities would be to update the insurer's core information system, which is more than 10 years old. That overhaul would be part of a broader effort to reduce administrative costs, he said.

Layoffs not ruled out

Wilson said his cost-cutting efforts could include eliminating jobs through attrition, but he wouldn't rule out layoffs if necessary. Blue Cross employs about 4,600 people, mostly in the Triangle.

"We don't want to do anything that causes them [employees] to be nervous about the future," Wilson said at the time. "But I'm real honest with them. I don't think anyone can guarantee full employment for everyone forever. That's not a circumstance anyone can promise."

Company officials plan to review the Keane project this summer before deciding whether to extend it, Borman said.

Keane spokeswoman Tara Jantzen declined to comment. The private tech company has offices in Durham.

Borman declined to discuss financial terms of the contract or what kind of "dataautomation" work Keane will perform. He did emphasize that all customer data will be kept secure.

The deal will allow Blue Cross's IT employees to focus on other tasks, he said.

"It's a department that has a lot of work to do," he said. "This piece of data work wasn't being attended to."

Medicaid Fraud, Waste Prevention Efforts Begin in North Carolina

Business Week

Gov. Beverly Perdue said Wednesday that North Carolina can recover tens of millions dollars annually by shifting more Medicaid investigations from file cabinets to computer files that can be flagged for potential abuse and fraud in the state's $10 billion system.

Perdue rolled out the state's latest effort to target patients or physicians who are gaming the system.

The program will run Medicaid claims through a contractor's software program, crunching raw electronic billing and other data to identify suspicious trends among the nearly 2 million Medicaid patients and 60,000 Medicaid providers in the state. Medicaid investigations have historically relied on paper documents and workers had trouble analyzing such data, according to the Department of Health and Human Services.

Other anti-fraud efforts, some using another computer program, have shown some success.

The pressure to locate additional dollars in Medicaid insurance is growing as state revenues stagnate and the state's portion of the program is on track to cost $250 million more than budgeted this year. Medicaid is the federal-state government insurance program for low-income families and senior citizens, as well as people with disabilities.

"There are better ways to do it in 2010," Perdue said in a news conference held in a catherization lab at Rex Hospital in Raleigh real estate. "This system has the capacity to identify potential fraud, waste and abuse and we're doing it with the speed and efficiency that we never thought was possible before."

Perdue also wants to double the size of Attorney General Roy Cooper's anti-fraud unit, so it can prosecute more lawbreakers, and she wants tougher laws to discourage fraud among health care providers.

The initial effort won't require a large state investment. The state didn't pay IBM Corp. for the software program, Health and Human Services Secretary Lanier Cansler said. Instead, the company will get an amount equal to 10 percent of the money that the department determines should be recouped because services were fraudulent or unnecessary, with IBM's total capped at $5.4 million annually.

"It's like fishing," Cansler said. "You fish to find the people who break the rules. We've been fishing with a cane pole. The governor's pushed us to get depth finders, where we can not only locate the school of fish we can also locate the big fish."

The anti-fraud initiative, which should be fully running by early summer, already has found some unusual cases that required further inspection.

Perdue said a program demonstration using 2007 Medicaid documents uncovered one provider that billed the system $45,000 in "miscellaneous" prosthetic limbs. It's also not unusual for some Medicaid patients to go from doctor to doctor to receive services so they can get access to controlled substances, the governor said.

The most extreme cases of potential fraud will be sent to a newly created Medicaid "SWAT" team that will investigate providers or consumers. Cooper's office also could be called in to pursue criminal charges.

"Medicaid fraud hurts our state's most vulnerable residents and robs taxpayers," Cooper said in Perdue's news release. Cooper's Medicaid fraud unit, comprising 19 investigators and State Bureau of Investigations agents, helped recover $52 million last year.

Perdue said she also wants lawmakers to toughen rules to stop kickbacks to health care providers who refer patients to certain Medicaid services and to end the solicitation of patients to obtain unnecessary services. The governor also announced a publicity effort to blow the whistle on potential Medicaid fraud or waste.