Blue Cross fined $250K for pre-merger ‘market conduct’ violations

State Auditor Monica Lindeen announced Thursday that her office levied a $250,000 fine on the “old” pre-merger Blue Cross and Blue Shield of Montana, for market-conduct violations from 2006-2010.

Lindeen’s office said the fine, paid last week, was the largest of its type ever levied against a Montana insurer.

Jesse Laslovich, chief legal counsel for Lindeen, said the most serious violations involved:

– Blue Cross collecting payments in excess of medical premiums, as part of billing and health-benefit management services it provided for a business association.

– Blue Cross paying commissions to the association to ensure its continued business.

– Blue Cross treating emergency room services as “out of network,” when the law requires all emergency room services to be covered at in-network levels.

Laslovich said the office felt a fine was needed to emphasize that penalties will occur if companies violate the law.

“There needs to be a hammer there, to incentivize insurance companies to follow the law, and if they don’t follow the law, there’s going to be a fine, and a big one,” he said.

Blue Cross spokesman John Doran said the violations occurred long before the company’s current owner, Health Care Service Corp., took over last August, and that the fine is the responsibility of Caring for Montanans Inc., a foundation taking care of pre-2013 assets and liabilities.

HCSC, based in Chicago, bought Blue Cross and Blue Shield of Montana last summer. However, the transaction also created Caring for Montanans Inc., a foundation that will sell old Blue Cross assets that weren’t part of the merger, including some buildings and other property.

At the same time, liabilities of the old Blue Cross are the responsibility of the foundation, which paid the $250,000 fine.

Doran said the new Blue Cross wasn’t involved with the market-conduct exam or its findings. Laslovich, however, said current Blue Cross executives had some input into the final outcome of the case.

Lindeen’s office hired a St. Louis consulting firm in 2011 to examine the market conduct of Blue Cross from July 2006-December 2010. Blue Cross is the largest private health insurer in the state.

Such exams are required by law and regularly conducted by Lindeen’s office, which regulates the insurance industry in Montana.

The exam measures company performance against standards in state law and rule.

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