THE VIRGINIAN-PILOT
Copyright (c) 1994, Landmark Communications, Inc.
DATE: Friday, September 23, 1994 TAG: 9409230593
SECTION: FRONT PAGE: A1 EDITION: FINAL
SOURCE: BY LON WAGNER, STAFF WRITER
DATELINE: RICHMOND LENGTH: Medium: 92 lines
Trigon Blue Cross Blue Shield has agreed to refund policyholders tens of millions of dollars and pay a $5 million fine as restitution for misleading and overbilling policyholders during a 10-year period.
The fine and pledge to refund policyholders resulted from the State Corporation Commission's investigation into Blue Cross's market conduct from 1984 through 1993. The $5 million fine, which will be paid to the state Literary Fund, is the largest ever levied by the SCC.
State Insurance Commissioner Steven T. Foster, whose office conducted the investigation, said Trigon's ``misleading and deceptive'' billing practices were extensive.
The SCC found more than 400,000 separate violations of state law during one four-year period, Foster said.
The SCC began investigating the state's largest insurer about a year ago when policyholders alleged that their 20 percent co-payments were misleading. Trigon had been negotiating discounts with hospitals; instead of passing the discounts along to policyholders, Trigon based their co-payments on the gross, or nondiscounted, charge.
Foster said he couldn't pinpoint the extent of Trigon's refund liability, other than to estimate it ``in the tens of millions.''
Sen. Clancy Holland, D-Virginia Beach, said state officials familiar with the settlement estimated the refunds at between $30 million and $50 million. Trigon changed its billing procedures earlier this year shortly before a bill Holland introduced made such practices illegal.
``I'm glad to see some type of compensation back to the citizens, but I'm not sure I'm completely enamored with the amount of punitive damages,'' Holland said. ``They're paying us back with money they took from us in the first place.''
Richmond-based Trigon posted a $641 million surplus at the end of June. But fining Trigon more than $5 million would have been counterproductive, Foster said, since the mutual insurance company is owned by its policyholders.
``To the extent you would have had a civil forfeiture above $5 million you're actually taking away money from the very policyholders you're trying to help,'' Foster said.
At a news conference at Trigon's Richmond headquarters, CEO Norwood H. Davis Jr. repeated the company's previous contentions that its troubles with the state resulted primarily from misleading marketing and informational materials.
``We made a mistake,'' Davis said. ``But we are going to correct that mistake the best we can. This is an issue we are embarrassed about.
``But to suggest this company has conducted itself in any way in an intentional way to misrepresent our customers is just wrong.''
The settlement also covers policyholders at self-insured companies whose insurance plans Trigon administers. State employees are the largest such group; Trigon administers the policies of 310,000 state workers. Overall, its policies insure 1.8 million Virginians.
Attorney General James S. Gilmore III has been conducting a separate investigation of Trigon, partly to ensure that the company would make amends to state employees who were overbilled. Officially, the SCC does not have the authority to crack down on Trigon for its dealings with self-insured companies.
Gilmore said the settlement between the SCC and Trigon was ``a positive step,'' but he said his office would follow through with its investigation.
``We believe it's important to monitor and to leave ourselves free to conduct any further investigation that we may feel is necessary,'' Gilmore said.
Foster said the agreement covered co-payments made from 1984 through 1993 because those were the years for which Blue Cross still had its records. But he said anyone who has records to prove overbilling before 1984 could also apply for a refund.
The refunds will be made with interest. The SCC and an independent accounting firm will oversee the refund program.
Meanwhile, Gerald Haeckel, the Scottsville resident who first reported Blue Cross's billing methods to Foster, said he would reserve judgment on the settlement until he saw its results. Haeckel said Blue Cross overbilled him and his wife by $350 to $400 on several hospital visits.
``I will be satisfied when I'm convinced that Blue Cross is doing it right,'' he said, ``and that remains to be seen.'' ILLUSTRATION: Graphic
WHO CAN APPLY FOR A REFUND?
Under the agreement, everyone who was overcharged for a co-insurance
payment for a medical procedure from 1984 through 1993 can apply to
Blue Cross for a refund.
WHOM TO CALL
Policyholders or former policyholders can call Trigon Blue Cross
Blue Shield at 1-800-422-4662 for a special proof of claim form. All
claims must be filed by Dec. 7.
by CNB