State fines Blue Cross $150,000;

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Error caused multiple charges for premiums

San Diego Union Tribune

State regulators have fined Blue Cross of California for an error in April that caused 45,000 customers to be overcharged $12 million for their health insurance premiums.

Blue Cross said a combination of software and human error prompted a malfunction in an automated payment system. As a result, some members who paid premiums automatically from credit or debit cards were charged multiple times for a single payment. The company said all members have been repaid the amount overcharged.

The company is still processing overdraft and related fees for consumers.

The California Department of Managed Health Care fined the company $150,000 yesterday for the problem. The department said Blue Cross failed to prevent the error, inform customers quickly, alert regulators in a timely manner and provide access to the state’s grievance system.

“These substantial fines send a message to health plans that we require them to be constantly on guard to protect consumers from computer-related mistakes,” said Cindy Ehnes, director of the state regulatory department.

The state did not find out about the error until eight days after it occurred, and it found out through media reports rather than from the company. Blue Cross said it was assessing the scope of the error before it reported it.

Jerry Flanagan, a spokesman for the Foundation for Taxpayer & Consumer Rights, said the fine is a “slap on the wrist” for Blue Cross. He added that the state’s slow response was “a dangerous shift in priorities at what is supposed to be the nation’s premier HMO watchdog”.

This is the second time in the past few weeks that the state has fined an insurer for computer-related errors. In late June, Kaiser Foundation Health Plans was fined $200,000 for the disclosure of patient information that the company allowed through a test web site that was accessible to the public.

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