State insurance regulators announced yesterday a $125,000 fine against CareFirst BlueCross BlueShield, the state's largest health insurer, for not following state laws and regulations in its denial of claims.
While some cases involved failure to pay for legitimate claims, the largest number of errors found were in claims that were denied properly, but not within the 30-day limit set by state law.
"The timeliness is the thing that gives us concern," said P. Todd Cioni, associate insurance commissioner for compliance and enforcement. Cioni said there was no evidence that CareFirst was denying claims with intent to evade the law. "They just have some holes in the way they do things," he said.
While the fine is large, it is hardly unprecedented. Former Insurance Commissioner Steven B. Larsen levied more than $3 million in penalties against health insurers in a four-year period beginning in 1999, including the largest ever, a $600,000 fine against Aetna Inc. in 2001 for late and incorrect payments to physical therapists.
Among other penalties handed out by Larsen were $400,000 against CareFirst in 2003 for late payments and improper denials; $250,000 against Aetna in 2001 for paying podiatrists incorrect rates; and $300,000 against UnitedHealthcare and $150,000 against Magellan Behavioral Health, both in 2001, for late payments. Larsen's term expired in May 2003.
In naming Ralph S. Tyler as his new insurance commissioner earlier this month, Gov. Martin O'Malley promised aggressive action against "powerful special interests" in the insurance industry.
While the latest CareFirst fine was set and announced under Tyler, the Maryland Insurance Administration's "market conduct examination" of CareFirst began a year earlier under Commissioner R. Steven Orr, who was appointed by O'Malley's predecessor, Robert L. Ehrlich Jr.
CareFirst agreed not to challenge the fine or the findings of the review. It also promised to correct its claims-processing procedures - it must report on the fixes to the Maryland Insurance Administration within 90 days - and to pay all claims it had denied improperly. Although the cases examined were from 2004, CareFirst also agreed to audit its cases since then and make necessary corrections.
"We continue to review our processes to more effectively handle claims," said Jeffery W. Valentine, a spokesman for the insurer, in a written statement.
"CareFirst had already taken corrective action in a number of cases reviewed," Valentine said.
"Efficient claims processing is a core service that we provide to our members and customers, and we are dedicated to doing it well," Valentine said.
Valentine said that CareFirst, which has more than 2 million members, processes 30 million claims a year and that 99 percent are processed within 30 days. He declined to answer questions beyond the written statement.
Cioni said more than 17 percent of the 1,737 claim denials examined in the study were late. While insurers who pay claims late must pay hefty interest, there's no regular penalty for a late denial, he said - a reason regulators are looking to monitor that part of the claims process.
Cioni said he was not sure how much money was involved in the incorrectly denied claims, or whether most of that would be owed to care providers, such as doctors and hospitals, or to individual patients. Once CareFirst completes its audit, he said, it will report the amounts paid to the insurance administration. HMO members in Maryland cannot be billed by providers when an insurer denies claims, according to Cioni, but consumers covered by other types of insurance plans can be billed.
Paul Sokolowski, senior vice president for finance at the Maryland Hospital Association, said the examination showed "the complexities that have been created in health care billing and insurance payment procedures. These types of studies point out that health care has a long way to go in streamlining processes through electronic transactions."
Cioni said the insurance administration decided to do the market conduct examination after receiving complaints from care providers.
The study involved several reviewers spending weeks at CareFirst looking through a random sample of denied claims from 2004, then discussing questionable denials with the insurer.
Cioni said regulators will review claims processing by other insurers as well, but he did not know now whether CareFirst had a higher or lower percentage of errors than its competitors.