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California Fines Big Insurers For Underpayment Of Claims

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Woodland Hills, Calif. offices of Anthem Blue Cross. (David McNew/Getty Images)

Woodland Hills, Calif. offices of Anthem Blue Cross. (David McNew/Getty Images)

CBS SF Bay (con't)

Affordable Care Act Updates: CBSSanFrancisco.com/ACA

Health News & Information: CBSSanFrancisco.com/Health

SACRAMENTO (AP) — After a state audit, California’s seven largest health insurers face nearly $5 million in fines for wrongly refusing to pay claims to hospitals and physicians.

Improper claim payments are burdening health providers as they struggle to stay afloat in a bad economy, California Department of Managed Health Care Director Cindy Ehnes said Monday.

“If providers are not paid, patient care and access suffers,” Ehnes said. “The insurance companies in this state must pay their fair share of their claims promptly, fairly and on time.”

Audits ordered by Ehnes in 2008 found seven health plans weren’t meeting a legal threshold of paying 95 percent of claims correctly. On average, plans paid about 80 percent of claims correctly, Ehnes said.

Anthem Blue Cross and Blue Shield of California each have agreed to pay $900,000 fines. United/Pacificare is being fined $800,000; HealthNet and Kaiser Foundation Health Plan are being fined $750,000 each. Cigna is being fined $450,000; and Aetna is being fined $300,000.

Additionally, insurers will have to pay an uncapped amount of restitution to hospitals and health providers, which is expected to cost tens of millions of dollars, Ehnes said.

The fines and corrective actions have been negotiated and agreed upon with the insurers, officials said. Insurers also face a follow-up audit.

A lobbying group representing health insurers pledged to streamline the system to reduce costs, prevent errors and maintain a focus on patient care.

“Plans are committed to ensuring our members have access to the health care they need every day,” California Association of Health Plans President Patrick Johnston said in a statement.

The state audit relied on statistically significant samples of each insurer’s claims, so an exact number is unknown. But hundreds of thousands of claims might have been affected, Ehnes said.

She also criticized what she called the hollow provider dispute resolution process discovered at five of the seven plans — all but Anthem and Blue Shield.

Providers with a claim dispute would often end up contacting the same department that had initially denied their claim, which rarely took a “real renewed interest in the claim,” Ehnes said. Corrective plans are in place to prevent that in the future, she said.

(© 2010 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)

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