Blue Shield of California is facing allegations that it failed to pay back
policy holders for excessive spending on administrative costs in 2014.
If the claims prove true, the insurer could be required to provide additional
rebates to its customers.
Blue Shield is the state's third-largest health insurer with 3.4 million
customers, 5,000 employees, and $13.6 billion in revenue in 2014. The
company’s cash reserves topped $4 million in 2012.
In 2015, Blue Shield was stripped of its tax-exempt status as a non-profit
entity. In its tax audit report, the California Franchise Tax Board cited
that the insurer had stockpiled "extraordinarily high surpluses”
and failed to advance social welfare.
The latest criticism involves accounting errors made by Blue Shield regarding
health insurance coverage provided through a marketplace created under
the Affordable Care Act (ACA). As
reported by the
Los Angeles Times, companies selling health plans via ACA marketplaces must spend at least
80 percent of its customers’ premiums on their medical care or issue
rebates to those customers.
Blue Shield failed to meet the spending threshold in 2014 and was forced
to refund more than $64 million to its customers. According to a new complaint
filed with the California Department of Managed Health Care, it may owe
customers additional rebates.
When Blue Shield calculated its ratio of medical spending to administrative
spending, which is known as the medical loss ratio (MLR), it neglected
to account for claims that were paid in error. As alleged by former Blue
Shield public policy director Michael Johnson, if the overpayments had
been included, Blue Shield would have fallen further below the 80 percent
“The purpose of the MLR reform is to make transparent and limit the
portion of premiums that insurers devote to profits and administration,”
Johnson wrote in his complaint. “By counting the costs of administrative
mistakes as medical spending, Blue Shield is making a mockery of the law.”
Johnson further argued: “If Blue Shield is allowed to get away with
that, not only will its customers be cheated ... the door will be left
open for other insurers to adopt Blue Shield’s dishonest accounting
approach, and a key consumer protection of the Affordable Care Act will
San Diego medical fraud lawyers, we will continue to monitor this issue. Please check back for updates.
If you or someone you love has fallen victim to medical fraud, don’t
hesitate to contact
a San Diego personal injury attorney at the Law Offices of Robert Vaage
for a free consultation.