Health Insurer Under Fire From North Dakota Insurance Department

September 10, 2009

An audit by the North Dakota Department of Insurance found that Noridian Mutual Insurance Company, doing business as Blue Cross Blue Shield of North Dakota (BCBS), racked up tens of thousands of dollars in excessive expenses paid with policyholders premiums.

In a recently released Report of Target Financial Examination, the department noted that the main areas of excess include compensation, travel policies, investments and severance packages.

Premiums were used to cover $15 million in employee bonuses, a $35,000 retirement party, travel and other uses the department found questionable.

“The bottom line is that health care premiums are for health care, they are not for expensive retirement parties, corporate jets, risky hotel investments or a compensation structure that rewards senior management regardless of BCBS’s financial performance,” said state Insurance Commissioner Adam Hamm in an announcement released by the department.

Hamm ordered the company to immediately address the problem. In a letter to the company, Hamm said that as a nonprofit mutual insurance company, BCBS’s Board of Directors and management are obligated to act in the best interest of BCBS members in providing cost effective health care benefits to its members.

Hamm directed BCBS to file a written explanation within 30 days outlining the actions the company will take to adopt and implement changes.

The Insurance Department used a team of financial insurance examiners to conduct the exam. It covered a period from Jan. 1, 2004 through March 31, 2009 and took the department 14 weeks to complete.

According to an Associated Press report, company officials have indicated the company was in the midst of changing its practices when Hamm ordered the audit in March, following criticism of a sales managers’ trip to the Grand Cayman Islands that cost $238,000. The company’s chief executive at the time, Mike Unhjem, was fired later that month.

Board chairman Dennis Elbert told the AP that the company’s operations and spending would be more closely scrutinized by the board.

The company is the dominant health care insurance company in the state and provides health care coverage to more than 375,000 North Dakota residents and 75,000 nonresidents, the AP reported.

The full report is available on the North Dakota Department of Insurance Web site at:—noridian.pdf

Sources: North Dakota Department of Insurance, Associated Press

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