Fueled by hundreds of complaints by doctors and consumers, state regulators are taking a hard look at Blue Cross of California’s business practices after its $16.5 billion acquisition by a giant Midwest health insurer three years ago.
The 1,600 complaints lodged since 2004 are raising questions about whether California’s largest health insurer is meeting promises made to state regulators to win approval of a merger between Blue Cross‘ parent company, WellPoint Health Networks Inc., and Indiana-based Anthem Inc. Those state mandates expire in November.
To win state approval for the merger, WellPoint agreed to a series of requirements, including a pledge to maintain adequate coverage for consumers and to not use premium increases to finance the merger. The insurer also agreed to spend $265 million for medical education and health programs for the poor.
“We have increased concerns about those commitments that were made,” said Lynne Randolph, spokeswoman for the Department of Managed Health Care, the state’s health plan regulator. “We have been hearing from a lot of different groups. We’re not sure that this merger has been better financially for California.”
As a result, the department will discuss post-merger issues during an Aug. 7 public hearing in Los Angeles.
Regulators originally scheduled the session for Thursday, but delayed it to give Blue Cross officials more time to prepare.
Blue Cross spokesman Nick Garcia said the health plan has complied with the state’s terms.
“We take the commitments… very seriously and have an extensive internal process to ensure compliance,” Garcia said in a statement.
Since the deal, Blue Cross has come under criticism over its claims handling, rising premiums and doctor reimbursements.
In March, the state fined Blue Cross $1 million for improperly dropping customers to avoid paying health claims.
Regulators also are reviewing a $950 million revenue payment — or dividend — by Blue Cross to its corporate parent in Indiana this year.
State officials believe the payout may be excessive.
“Blue Cross has been treating California like an ATM machine. The regulators need to step in and get the money back,” said Jerry Flanagan, spokesman for the Santa Monica-based Foundation for Taxpayer and Consumer Rights.
Physicians, too, have questioned Blue Cross‘ practices.
This spring, they flooded regulators with telephone calls and e-mails complaining about the insurer’s delay in detailing a new reduction in fee payments.
Garcia countered that criticism, stating that 45 percent of Blue Cross‘ 19,000 PPO physician practices may see an increase in fee payments due to a revised fee schedule.