Illinois is conducting a broad review of how Blue Cross and Blue Shield of Illinois treats consumers — 27 years after regulators last examined the state’s dominant health insurer.
Blue Cross and Blue Shield of Illinois confirmed the review this week, in response to questions from the Tribune about why it had been nearly three decades since the state released a wide-ranging examination of the insurer’s compliance with laws and regulations meant to protect consumers.
Such reviews, conducted by states across the country, often look at how insurance companies advertise, enroll customers, pay medical claims and handle complaints. They’re separate from rate reviews.
Without market conduct exams, it can be difficult to tell how the the insurer’s 4.1 million members in Illinois are being treated.
“It is one of those arcane things no one knows about, but it is super important,” said Betsy Imholz, a special projects director with Consumers Union, the policy arm of Consumer Reports, and a consumer representative with the National Association of Insurance Commissioners, which sets standards and supports state insurance regulators.
Rivals have faced scrutiny
Though the state hasn’t completed a broad market conduct exam of Blue Cross’ parent company Health Care Service Corp. since 1990, the same cannot be said of its competitors, which have been subject to multiple exams, according to documents obtained by the Tribune through the Freedom of Information Act. The state Department of Insurance isn’t required to perform the exams with any particular regularity, but it has been doing so each year on some health, life, property and casualty insurers, sometimes fining offenders.
Since 1990, Illinois regulators have conducted at least three broad reviews of UnitedHealthCare of Illinois; at least four broad reviews of Cigna Healthcare of Illinois; at least two of Aetna Health of Illinois; and at least four of Humana Health Plan, the Tribune found. Additional reviews were conducted on companies related to those insurers.
The state also released a very narrow exam in 2011 of Health Care Service Corp.’s compliance with two laws concerning autism coverage and dependent coverage, as it did for a number of the state’s insurers. But that exam didn’t look at any broader practices.
“That’s just way too long,” said Timothy Jost, a consumer representative for the National Association of Insurance Commissioners, of the gap between broad reviews.
“It would be surprising if there were not issues that have come up that didn’t warrant there be some kind of a market conduct exam,|” said Jost, who is also a law professor at Washington and Lee University School of Law in Virginia.
Asked why the Illinois Department of Insurance didn’t perform a broad exam on the state’s largest insurer for so long, Michael Batkins, a department spokesman, said in an email, “This administration cannot speculate as to why previous administrations chose not to conduct an exam.” The department’s leadership has changed many times since 1990.
Batkins also said he couldn’t speculate as to why the Insurance Department chose to begin an exam on the insurer in recent years because “the employees involved no longer work for” the department.
The department confirmed the exam this week only after being told about the Tribune’s story, though it would not comment on ongoing exams in the fall when the Tribune first started asking questions.
Colleen Miller, a spokeswoman for Blue Cross and Blue Shield of Illinois, declined to comment on the gap between broad exams but said the insurer is “more than happy to cooperate” with the department on exams “to make sure we’re serving our members the best possible way.”
She said the insurer has been in frequent contact with the department over the years.
Thousands in campaign gifts
Health Care Service Corp. is a giant in Illinois. The Chicago-based company operates insurance plans in five states including Illinois. Its health plans in Illinois employ nearly 10,000 people.
In 2015 and 2016, the company made at least $254,000 in campaign contributions to state Democrats and Republicans, according to an analysis by Kent Redfield, an emeritus professor of political science at the University of Illinois at Springfield. That places it among the 50-or-so largest groups making contributions in the state, Redfield said.
“That’s a serious presence and what you’re doing with that money is basically you’re building access, making friends, communicating,” Redfield said.
Batkins, with the Insurance Department, said in an email: “This administration takes market conduct examinations very seriously. Size, clout and/or political contributions play no role in which companies are examined.”
Regardless of the reasons, a lack of oversight doesn’t help consumers, Redfield said.
“It’s not good regulation, and you’re increasing the chances of bad things happening to consumers because you don’t have effective oversight,” Redfield said.
Tracking consumer complaints
Most consumers who feel frustration with a health insurer don’t file a formal complaint — but some do.
In Illinois last year, the company had 228 complaints that resulted in the insurer taking action, according to the National Association of Insurance Commissioners. A competitor, UnitedHealthCare Insurance Company of Illinois had 52. Health Care Service Corp. had nearly 63 percent market share in Illinois last year, while UnitedHealth Group had just under 10 percent, according to Mark Farrah Associates, a health industry data aggregator and web publisher.
Exams performed on other Illinois insurers have turned up issues such as insurers underpaying claims and not notifying consumers when a provider was no longer covered. Some exams have scolded insurers for failing to confirm or deny coverage within a reasonable time frame and not adequately explaining claim denials.
When issues are found, state regulators can work with insurers on formal agreements in which insurers to agree to fix the problems and sometimes pay a penalty. The fines have often been in the tens of thousands of dollars for insurers, though the state imposed a civil penalty of $325,000 on UnitedHealthCare of Illinois after a 1998 market conduct exam turned up problems including underpaying claims and having too many “meritorious” complaints against it filed with the Insurance Department.
But even $325,000 is pocket change for many insurers, which often have annual revenue in the billions of dollars.
Still, it’s a consequence, said Birny Birnbaum, a consumer representative for the National Association of Insurance Commissioners and executive director of the Center for Economic Justice, which represents the interests of low-income and minority consumers.
“The law requires you to treat consumers in a certain way,” Birnbaum said. “If you fail to treat consumers in a certain way, if you violate the law, there’s a penalty for that.”
Insurance Department spokesman Batkins said in an email that the department “works to ensure consumers are made whole and practices are corrected rather than collect punitive forfeitures.”
Some states levy penalties in the millions of dollars against insurers who do wrong by consumers.
Last fall, Blue Cross and Blue Shield of North Carolina agreed to pay a penalty of $3.6 million imposed by the North Carolina Department of Insurance — the largest penalty the department had ever levied against a health insurer.
That fine followed complaints from consumers that they couldn’t get through to the insurer’s customer service department, that they didn’t get ID cards or proof of coverage, that they weren’t properly billed for premiums and received incorrect policy cancellation notices, according to the settlement agreement.
Blue Cross and Blue Shield of North Carolina denied violating any laws or regulations as part of the settlement agreement. It blamed “technology failures” for some of the problems, saying it had since corrected them and paid restitution to policyholders.
Blue Cross and Blue Shield of Illinois is not part of the same parent company as North Carolina’s Blue Cross.
Checks in other states
Health Care Service Corp., the parent of Illinois’ Blue Cross, has been subject to mixed scrutiny across the four other states where it sells health insurance.
Oklahoma released its first market conduct report on Health Care Service Corp.’s Blue Cross and Blue Shield of Oklahoma last year, finding a “number of compliance failures primarily resulting from information technology infrastructure and data quality issues.” The Oklahoma insurance commissioner ordered the insurer to be fined $3 million unless it successfully completed a remediation plan within a year.
Montana has performed two market conduct exams on Blue Cross and Blue Shield of Montana since 2006 — but both of those exams were before Health Care Service Corp. bought the insurer in 2013.
The New Mexico Office of Superintendent of Insurance has not performed a market conduct exam of Blue Cross and Blue Shield of New Mexico since Health Care Service Corp. bought it in 2001. A spokesperson for the Texas Department of Insurance declined to say whether the state had performed an exam on the company, saying its exam reports are not public information.
It’s not uncommon for state reviews, across the country, to be somewhat spotty, experts say, though some acknowledge that 27 years is a long time to go without the results of an exam being released.
Some states perform reviews regularly while others only do them when they see a need, such as after a pattern of complaints, said Sabrina Corlette, a research professor at Georgetown University‘s Center on Health Insurance Reforms.
In Illinois, regulators weigh factors such as how long it’s been since the last exam, complaints and other states’ regulatory actions, but there are no specific triggers in state law for conducting an exam.
Market exams can also take a lot of work, man-hours and expertise. Examiners often visit an insurer’s offices as part of an exam, going through documents.
“It’s resource-intensive, and they don’t always have enough resources, frankly,” said Consumers Union’s Imholz.
But a lack of resources, or at least a lack of funding, doesn’t appear to be the reason behind the 27-year gap in exams on Blue Cross’ parent in Illinois.
“Insurance companies pay for market conduct exams, therefore state funding has no impact in this area,” Batkins said in an email.
Experts, however, say other factors can also complicate states’ oversight of insurers’ market conduct.
Exams take years
Insurers can sometimes make it difficult for states to conduct the exams, Birnbaum said. Sometimes, years elapse between the beginning of an investigation and an actual settlement, he said.
“The market conduct examination has become such a formalized process that insurers have the ability to obstruct regulators every step of the way,” Birnbaum said.
Illinois first notified Health Care Service Corp. of its latest market conduct exam about four years ago, Batkins said. He said in an email, “Health exams are the most complex type of exams and can take multiple years.”
Different political administrations might also have differing ideas about how to handle exams.
In Illinois, a deputy director and assistant deputy director at the Insurance Department decide when to start market conduct exams on insurers, Batkins said.
But the head of the department — appointed by the governor — has the ultimate authority to decide whether to carry out a market conduct exam. The department has had 17 directors or acting directors since the last time a comprehensive market conduct exam was conducted on Health Care Service Corp. in 1990.
A spokeswoman for Gov. Bruce Rauner’s office declined to comment on the gap between exams of Health Care Service Corp. and the possible reasons for that gap, referring questions to the Insurance Department.
Some are trying to improve regulation of health insurers’ market conduct across the country, in hopes of making it easier for states to regulate insurers’ behavior.
Starting in fall 2018, most states will start requiring health insurers to submit market conduct data to them each year, through an effort organized and facilitated by the National Association of Insurance Commissioners. The hope is that state regulators will be able to analyze the data regularly and spot problems more easily, Birnbaum said.
But for now, market conduct exams remain a key way for the state to hold insurers accountable for following certain laws.
Batkins said the Insurance Department expects to finish its examination of Health Care Service Corp. in the next three to six months.
“Three decades is a really long time and the idea that there might not be any problems whatsoever seems very unlikely,” said Imholz with Consumers Union.