Update: Capital Blue Cross fined $85,000 for claims violations

The story has been updated with a comment from Capital Blue Cross on the violations.

Harrisburg-based Capital Blue Cross has been ordered to pay an $85,000 penalty by the Pennsylvania Insurance Department (PID) after an Affordable Care Act market conduct examination found claims violations. 

 Acting Insurance Commissioner Michael Humphreys recently announced the results from an examination of Capital Blue Cross’s Capital Advantage Assurance Company, Capital Advantage Insurance Company, and Keystone Health Plan Central, Inc. covering practices from Jan. 1, 2017 to March 31, 2018. 

The department ordered Capital Blue Cross to take corrective action to address the violations. Claims that were incorrectly processed must be reprocessed and accurately paid with applicable interest, including claims that were denied based on non-compliant session limits. 

 The company must also adjust internal controls to address accuracy and clarity in its communications with members, specifically regarding its explanation of benefits, certificate of coverage, and schedule of benefits.  

“Market conduct examinations are a way for the department to ensure that consumers are being afforded the rights and protections guaranteed to them by Pennsylvania law,” said Humphreys. “Our top priority will always be protecting consumers, and we aim to hold businesses to the high standards that their customers deserve. The results of this exam will see consumers receiving restitution for claims that were incorrectly processed, as well as applicable interest.” 

 Humphreys said Blue Cross has been cooperative in its response to the exam and expects to see continued improvement when re-examinations occur. 

 Capital Blue Cross, in a statement to Lehigh Valley Business said, “Capital Blue Cross is pleased that the Pennsylvania Insurance Department’s recent comprehensive Affordable Care Act market conduct examination identified no violations in most areas reviewed and imposed the lowest penalty reported to date of any insurer undergoing such an examination.” 

 “Capital continually evaluates its operations and procedures to ensure it is meeting the needs of our members, and we appreciate the department’s thorough and thoughtful review of our efforts. Capital already has taken action to address the issues noted in this exam, which covered a 15-month period in 2017 and 2018.” 

 The company went on to say, “It is important to our leaders and employees – and vital to our mission – that Capital act with integrity and in compliance with all regulatory requirements, while continually improving our members’ access to high-quality, affordable healthcare.” 

The Insurance Department is charged with upholding fair business practice standards for consumers, companies, and insurance professionals. This work involves researching and resolving complaints from consumers, investigating allegations of misconduct by insurance companies, agents, brokers, and others, and ensuring that practicing professionals are properly licensed. 

 “It is important to our leaders and employees – and vital to our mission – that Capital act with integrity and in compliance with all regulatory requirements, while continually improving our members’ access to high-quality, affordable healthcare,” Capital Blue Cross said. 

 The Capital Blue Cross examination identified concerns with claims processing, including claims being denied for lack of prior authorization when prior authorization had already been obtained, and a coordination of benefits issue that has since been updated.  

The examination also reported additional Unfair Insurance Practices Act violations relating to unclear communications with members.  

The exam also found mental health parity violations, as Quantitative Treatment Limitations (QTLs) were not applied correctly in some plans. 

PID said licensed insurers are required to provide mental health and substance use disorder (MH/SUD) benefits equal to medical/surgical benefits. For quantitative treatment limitations, this means that a licensed insurer may not apply any financial requirement or quantitative treatment limitation (QTL) to MH/SUD benefits in any classification that is more restrictive than the predominant financial requirement or treatment limitation of that type applied to substantially all medical/surgical benefits in the same classification. 

 The report said examiners requested proof of compliance for each plan type affected, for each classification of benefits, and for each type of FR/QTL separately. The company imposed QTLs with respect to mental health benefits not equal to medical/surgical benefits.  

Specifically, the company provided data that failed the substantially all or predominant level tests within certain specified classifications of benefits such that cost sharing was charged to consumers when it should not have been, the level of cost sharing charged was too high, or session limits restricted access to benefits.  

Where these limitations were carried out in practice, the companies will be expected to provide remediation through restitution during the post-exam reporting period, the report said. 

“We acknowledge the department’s findings and are committed to implementing the recommendations set forth in the report,” Patricia Higgins, senior vice president, risk management, and chief compliance officer for Capital Blue Cross wrote in to the PID in response to the findings. “Capital is pleased to note that the department identified no violations in most areas under review. We would also like to emphasize that we value the department’s partnership as we continue our efforts to provide high quality and affordable coverage consistent with all relevant laws and regulations.” 

 To date, approximately 60,000 Pennsylvanian consumers have received $5.87 million in restitution as a result of the department’s ACA market conduct examinations of other major health insurers. 

The Insurance Department will continue to monitor and verify that Capital Blue Cross’s corrective actions have taken place, including through quarterly reporting, as well as through a reexamination process in the future.