Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, August 1, 1994 TAG: 9408010064
SECTION: VIRGINIA PAGE: C1 EDITION: METRO
SOURCE: Associated Press
DATELINE: RICHMOND LENGTH: Medium
Trigon formerly made millions of dollars through what it called a ``network access fee.'' The fee was payment to itself for orchestrating the complex flow of funds involving Trigon, hospitals, the employers who bought group health insurance policies and the workers those policies cover.
It's also money that represents the excess sums that covered employees formerly paid as their share of their hospital bills.
Trigon passed on the benefits of the discounts it negotiated, after taking its fee, to the groups it insured instead of to individuals making their copayments.
Now, though, Trigon officials believe that approach was wrong.
``When we stood outside the box and looked at it through somebody else's eyes, we could see how big the problem was,'' said Trigon President Phyllis Cothran.
The $11 million to $12 million represents only a small piece of Trigon's total premium revenue, which exceeded $2.2 billion last year. But the company still hopes to recoup the money through premium increases.
The Richmond Times-Dispatch reported last year that customers of Trigon, then called Blue Cross/Blue Shield of Virginia, were paying far larger shares of their hospital bills than the stated copayment of 20 percent. The state Bureau of Insurance launched an investigation into Trigon's practices.
This year, the General Assembly banned the method Trigon had been using to calculate copayments.
Typically, Trigon group policies say the individuals covered must pay 20 percent of their bills, up to a ceiling of $1,000 to $2,000 including deductibles.
Calculating 20 percent is no problem.
But the issue is the base on which the copayment was calculated. It was only this year that Trigon started basing that calculation on the discounted charges it negotiates with hospitals, instead of on the prediscounted charge.
Until the early 1980s, when Blue Cross followed the lead of commercial insurers with policies requiring employee copayments of hospital bills, the discounts were a very real benefit flowing to the people who ultimately bore the cost of medical care - the premium payers.
But copayment clauses introduced a new financial flow into the system - money moving out of employees' pockets to the hospitals, sums that came in addition to the share of premiums they were paying, a share that was steadily rising.
The problem, in Cothran's view, was pretty simple: The insurer almost forgot it has two sets of customers. In addition to the employers to whom Trigon sells policies, Trigon's customers also include the employees who benefit from those policies - and who pay a healthy chunk of the premium bill.
The draft report of the state Bureau of Insurance's investigation concluded that Trigon misled its customers about the copayment practices.
``It sounds like a shell game to me,'' said Kathleen O'Reilly, director of the National Insurance Consumers Organization.
``If they were truthful, if they said, `You're going to pay 35 percent of the real bill and we're going to take X percent as our fee,' that's one thing. But to tell you one thing and do something else, that's deceptive,'' said Jean Ann Fox, president of the Virginia Citizens Consumer Council.
by CNB