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Archived News Release — Caution: Information may be out of date. Archived News Release — Caution: Information may be out of date.
For more information call: (202) 219-8921.
Boston-based Blue Cross/Blue Shield of Massachusetts has
been sued by the U.S. Department of Labor to recover funds owed to 263 private-
sector health plans. While providing medical services to participants
throughout Massachusetts, Blue Cross received tens of millions of dollars in
refunds each year from hospitals.
"The department's action will ensure that businesses and
workers do not pay unnecessary health care costs," said Secretary of Labor
Robert B. Reich. "In a climate when many Americans lack health care coverage,
it is unconscionable that any health care provider would reap exorbitant
profits at the expense of workers."
The organization constitutes one of the 68 Blue Cross
affiliates of the trade association Blue Cross and Blue Shield of Chicago. Blue
Cross, in addition to insurance services, provides third-party administration
services to self-insured health plans for a fee. Such services were provided in
this case and included claims processing, cost containment, consulting work,
actuarial and statistical analyses and computerized management systems.
Under its fee arrangement, Blue Cross received fees based
on a percentage of the claims paid or was reimbursed for the estimated total
claims paid over a six-month period plus a set fee. Massachusetts law in effect
from 1985 to 1992 set maximum allowable charges hospitals could ask for
services. Blue Cross was required to conduct year-end reconciliations with the
hospitals.
For the period of 1985 through 1992, Blue Cross received
approximately $180 million in refunds from area hospitals on behalf of all its
customers. The department's suit asks for an accounting to determine what
portion of the $180 million should have been refunded to the health plans in
its lawsuit.
Blue Cross allegedly retained cost savings owed to plans
governed by the Employee Retirement Income Security Act (ERISA) which resulted
from reductions in the costs of hospital services for covered participants and
beneficiaries. According to the lawsuit, Blue Cross improperly:
- billed the plans more than the amount owed to hospitals for medical
services and retained the excess payments for itself;
- calculated fees on the unreduced charges rather than the lower amount
paid by hospitals in cases where plans were billed on a percentage of total
benefit payments;
- inflated co-payments paid by participants and beneficiaries by basing
the calculations on the unreduced charges for medical services.
- The Labor Department alleges that Blue Cross unduly benefitted by not
refunding the savings to the plans and failing to take steps to reduce the
copayments of participants and beneficiaries to reflect the reduced amounts.
The lawsuit asks the court to require that Blue Cross
reimburse the plans, participants and beneficiaries for amounts to be
determined by an independent accountant appointed at the company's expense. It
also seeks to require the company to cooperate with the audit and prohibit Blue
Cross from engaging in such improper actions in the future.
The case resulted from an investigation by the Boston
Regional Office of the Pension and Welfare Benefits Administration into alleged
violations of ERISA. The lawsuit was filed Nov. 20 in federal district court in
Boston.
Archived News Release — Caution: Information may be out of date.
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