DCBS Media Release

December 19, 1996
For more information:
Steve Corson, 503-947-7868
Joel Ario, 503-947-7984

Blue Cross / Blue Shield to pay up to $4.4 million in refunds

(Salem) Blue Cross and Blue Shield of Oregon has agreed to refund up to $4.4 million to its customers and to pay the State of Oregon a $100,000 civil fine for failing to pass negotiated health care discounts along to policyholders. Approximately 190,000 BCBSO policyholders may be eligible for refunds. In addition, the non-profit insurer has agreed to provide free health care coverage for 3,000 low-income Oregon children for a year through its Oregon YouthCare program, and to contribute up to $150,000 to the state for insurance consumer education, research, and advocacy. The agreement is subject to court approval.

This settlement, announced today by Oregon Insurance Commissioner Kerry Barnett, follows an investigation begun last fall by the Insurance Division of the Department of Consumer & Business Services (DCBS). DCBS sought information on whether Oregon health insurance companies were passing along discounts negotiated with health care providers when they calculated policyholder co-insurance payments for specific services. (Under co-insurance plans, policyholders pay a portion of the total cost of the services they receive.) BCBSO acknowledged that it did not base certain of its policyholders' co-insurance payments for hospital and pharmacy benefits on the actual price the company paid for the services.

"Consumers have a right to full information and the full benefit of their contract with their insurer," Insurance Commissioner and DCBS Director Barnett said. "We think it's unfair to negotiate discounts without reducing consumers co-insurance payments proportionally, and we will not tolerate such practices in the insurance marketplace."

"We do not believe that BCBSO did anything unlawful or improper," BCBSO President Donald Sacco said. "Money saved by the prior method of co-insurance calculation was used to reduce premium costs for our subscriber groups. In a time of hyper-inflation of health care costs, any savings limited the rapid cost increases in our traditional and pharmacy products."

After DCBS began enforcement activities against BCBSO, a class-action lawsuit was filed against the company in the Douglas County Circuit Court alleging fraud, negligence, violations of the Oregon Insurance Code, and violations of the Oregon Unlawful Trade Practices Act.

At the insurer's request, DCBS and lawyers for the plaintiffs in the class-action suit agreed to participate in mediation with BCBSO to resolve both the state's potential administrative action and the civil lawsuit. The settlement announced today is the result of that mediation. The settlement will now undergo judicial review as part of the class action process to confirm that it is fair to affected policyholders. If the court rejects the settlement, DCBS will retain the authority to pursue an independent administrative action to address BCBSO's past practices.

"This settlement took months of negotiation and cooperation," Barnett said. "Our concern is that Oregon's health care consumers receive the benefit of all negotiated health care discounts. We are satisfied that BCBSO is committed to resolving this situation fairly for its policyholders."

The following categories of BCBSO policyholders, Capitol Health Care subscribers, and HMO Oregon subscribers, excluding subscribers in the Federal Employees Health Benefits Program, may be eligible for refunds. The class includes policyholders or subscribers who sustained an actual monetary loss and:

• Who made hospital charge co-insurance payments based on billed amounts rather than discounted amounts for the period from July 1989 through June 1994;
• Who made prescription drug co-insurance payments based on billed amounts rather than discounted amounts for the period from January 1990 through June 1995;
• Who were identified by BCBSO's post-payment audits of hospital bills from July 1989 through June 1995;
• For whom liens or claims involving Medicare/Medicaid "carve-outs" were miscalculated; or,
• For whom calculation of lifetime maximums and deductibles were based on billed amounts rather than discounted amounts, between July 1989 and June 1995.

The Douglas County Circuit Court has approved a written notice describing potentially affected policyholders' rights, including the right to object to the settlement or to request exclusion from the class. BCBSO will now begin sending the notice to potential members of the class, who should receive it by January 30, 1997. If the court adopts the proposed settlement, BCBSO will then mail claim forms to policyholders and will make payments on approved claims.

Any inquiries about the lawsuit or policyholders' rights under this settlement should be made in writing to the attorney for class plaintiffs, Dan W. Clark, at Dole, Coalwell & Clark, P.C., 810 SE Douglas, Post Office Box 1168, Roseburg, Oregon 97470. Copies of the settlement agreement and other court filings are on file with the Douglas County Circuit Court. Policyholders who do not receive a copy of the notice, and believe that they may be entitled to compensation under the settlement, may also obtain a recorded update and information about how to obtain a copy of the notice by calling, toll-free, 1-888-207-4211.

Consumers who have complaints about any insurance company operating in Oregon, and who are unable to satisfactorily resolve those complaints by working directly with the company, may call the DCBS Insurance Division for help, at 503-947-7984.

Additional information on the Blue Cross/Blue Shield settlement.