N.C. DOI Fines Blue Cross $1.8 Million in Claims Case

December 30, 2003

North Carolina Insurance Commissioner Jim Long signed a consent order requiring Blue Cross Blue Shield of North Carolina to pay a civil penalty of $1,825,000 for reportedly violating the state law that governs how health insurance companies handle emergency claims.

Blue Cross agreed to the facts detailed in the order, which stated, in part, that the company “knew or should have known that its handling of emergency claims was not in compliance” with North Carolina General Statute 58-3-190, commonly known as the Prudent Layperson Law. This fine marks the largest in Department of Insurance (DOI) history.

“This has been one of the most serious cases I have seen in my 19 years as insurance commissioner,” Long said at a news conference announcing the agreement. “There is no way to know the full extent of the harm this has brought upon the citizens of this state.”

At issue was the fact that Blue Cross reportedly failed to take the proper steps to update its claims processing systems, as required by the Prudent Layperson Law. The Law, which went into effect Jan. 1, 1998, required health insurance companies to pay emergency claims based on the patient’s presenting symptoms instead of the final diagnosis. For example, if a man experienced chest pains and thought he was having a heat attack, and any other reasonable (or prudent) person would agree, his trip to the emergency room should be paid in full, even if the pains turned out to be heartburn.

Blue Cross reportedly did not process emergency claims correctly for a period of five years. Documents uncovered in the course of a DOI investigation reveal that the company knew or should have known of this problem and did not fix it.

The consent order was signed after months of negotiations with the company by DOI legal staff. It came only after Blue Cross officials assured the DOI that all mishandled claims – some 146,000 in all – were repaid in full. This amounted to an estimated $17 million, including interest.

As required by the North Carolina Constitution, all fines collected will be distributed to the state school system.

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