Foundation for Taxpayer & Consumer Rights Corporateering
  Home | Volunteer | Donate | Subscribe | FTCR Websites | Books | Site Map   
Main Page
Press Releases
In the Media
Factsheets
Reports
Medical Malpractice Stories
HMO Arbitration Abuse Report
Casualty of the Day
 
 OTHER TOPICS
 - Corporate Accountability
 - Insurance
 - Citizen Advocacy
 - The Justice System
 - Billing Errors
 - Energy
 - About FTCR


Read Making a Killing

home / healthcare / in the media

Stockton Record
Jul 06, 2005

by REED FUJII

Blue Cross fined for $12 million in overcharges

Blue Cross of California will pay a $150,000 fine over a software glitch and errors that slammed nearly 45,000 of the health insurer's customers with $12 million in overcharges to their bank and credit card accounts in early April.

Among those affected was Irene Arnold of Stockton, who found that the Blue Cross collections software had tapped her bank account not just once or twice but five times for her monthly premium, in all an overcharge of $888.

State officials said all Blue Cross members will be reimbursed for the excess charges as well as related interest charges and costs, such as time off work and insufficient-funds bank fees.

The punishment comes on the heels of a $200,000 fine levied on Kaiser Foundation Health Plan late last month for illegally exposing patient health information on an Internet site accessible to the public, the Department of Managed Health Care announced Tuesday in a news release.

"These substantial fines send a message to health plans that we require them to be constantly on guard to protect consumers from computer-related mistakes, such as those that impose unjustified charges or violate their rights to privacy," DMHC Director Cindy Ehnes said in the release.

A consumer advocate, however, countered that such fines are trivial to the giant health corporations involved.

"A $150,000 fine on a company that had a $300 million profit increase is barely a slap on the wrist and won't deter Blue Cross from making the same mistake again," said Jerry Flanagan of the Foundation for Taxpayer and Consumer Rights in Santa Monica. It certainly appears as if the Department of Managed Health Care is going easy on Blue Cross when they should be on the patient's side," he said.

Arnold agreed.

"It's just like no justice was done, because that's just a drop in the bucket to them," the part-time school employee said. "It's a slap on the hand."

It is a substantial fine, an agency spokeswoman said, especially considering that state consumer-protection laws don't specifically address the type of computer errors involved.

"We wanted to send a message to health plans that they need to get their computer households in order," Lynn Randolph said by telephone from Sacramento.

"It's the second-highest fine for a computer-related error that the state has ever imposed on a health plan," she said.

For its part, Blue Cross acknowledged its responsibility for the billing errors and acceptance of the DMHC fine.

"We have taken all appropriate measures to ensure this software malfunction does not occur in the future, and we have offered apologies directly to our members who were impacted," David Helwig, Blue Cross president and chief executive, said Tuesday in a news release.

Arnold, however, is fed up.

"I've been actively seeking another health insurer, because no matter how you play this game, they come out ahead," she said of Blue Cross, which still has not resolved all issues -- including the amount of premiums Arnold pays -- to her satisfaction.

The Thousand Oaks-based insurer, which has 7.6 million members in California, said multiple billings arose from software problems and human error and affected Blue Cross policyholders whose monthly premiums were paid by automatic debit or credit card transactions.

State officials said 43,092 credit card customers and 1,642 debit customers were affected and will be compensated with credits on their August statements.

Separately, the Department of Managed Health Care continues to examine whether recent premium increases imposed by Blue Cross include recent merger costs. Insurance company officials promised to exclude such costs in calculating premiums when seeking California approval of last year's $16.5 billion merger of Blue Cross parent WellPoint Health Networks and Athem Inc.

A hearing was held on the premium-increase issue in mid-May, and Randolph said the DMHC has since hired an actuarial consultant to review Blue Cross charges as well as evidence presented in the hearing.

"We expect that within the next few months, we should have some information back from that consultant," she said.

Although charged with helping consumers resolve problems with health-maintenance organizations and other managed health-care groups, the DMHC does not normally review insurance premium changes.


back to top

©2000-2004 FTCR. All Rights Reserved. Read our Terms of Use and Privacy Policy | Contact Us