Blue Cross Blue Shield of North Dakota would like to be considered a co-op, part of Senator Kent Conrad’s solution to our health care woes. The non-profit organization, whose proper name is Noridian Mutual Insurance Company, would be a strange savior of our system, though. The scandal-plagued company could well grace a poster as the prime example of what’s wrong with the co-op idea. For example:
-- Noridian’s CEO was forced to resign last March for leading a $250,000 Caribbean junket for top salesmen and their guests. He walked out the door with a $2.2 million severance.
-- The company’s board of directors could provide the dictionary definition of politically-connected, including until a few months ago the former chief of staff for a certain US senator, you guessed it, Kent Conrad.
-- State insurance department examinations covering the past decade uncovered numerous examples of the kind of deceptive practices reform is meant to correct – despite existing regulations prohibiting them.
Details below the fold.
According to a recent article in the NY Times:
Mr. Conrad’s own state demonstrates the uncertainties surrounding cooperatives. Blue Cross Blue Shield of North Dakota dominates the state’s private insurance market, collecting nearly 90 percent of premiums. As a nonprofit owned by its members, the company would hope to qualify as a co-op under federal legislation, said Paul von Ebers, its incoming president and chief executive.
The Times quoted the incoming CEO because his predecessor, Mike Unhjem, was forced out in March for leading a junket to the Cayman Islands, as the Minot Daily News wrote, "at a time when the company was seeking rate increases." The paper went on:
He was given a $2.2 million lump-sum severance payment that the company said was part of an employment agreement reached in 2007, a year after Unhjem was arrested for drunken driving... In 2008, Unhjem was paid $1.08 million, the company said.
The contract that made those payments possible did not appear out of thin air. The board of directors approved it. Who are they? Well, one is Laura Diederich Carley of Industrial Builders Inc., a road and bridge builder. Her brother, Paul Diederich, also with the family business, appeared in a Kent Conrad television ad last election, thanking the senator for bringing home $1.5 billion in highway funds.
On the board of subsidiary Noridian Administrative services, which administers Medicare in 11 states and last January received a $1.4 billion Medicare contract, we find Nancy Jones-Schafer. She’s married to Ed Shafer, former North Dakota governor and former brother-in-law of a certain US senator, you guessed it, Kent Conrad.
Well, these connections between the senator and Noridian governance may seem a bit tenuous, one or two steps removed. But for about six years, until last February, Senator Conrad had a more direct line into the Noridian board: his former chief of staff, Mary Wakefield. She left the board only when President Obama appointed her head of the Health resources and Services Administration.
Besides doling out golden parachutes, this board has also overseen operations that took advantage of customers in numerous ways. In the 1990’s, Noridian managed the health care business for an affiliate company, Lincoln Mutual. A state insurance department report in 2000 found these practices:
-- The Company has been using unapproved amendatory riders in violation of (statutes)...A random check of files found dozens of the riders...customized to define, add or delete benefits, indicate rate changes, place conditions on coverage, or simply indicate housekeeping matters...There was no indication that the additional rider provisions agreed to by the employer and the insurer were being communicated to the individual certificate holders and, if not, these practices violate several statutes.
-- The exam also noted one incident in which the group representative, when informed by the Company that the employer needed to provide waiver cards to employees in order to fulfill the required 100% enrollment, simply filled out the cards herself and signed the employees’ names as affirmatively refusing coverage...The examiner found these easily so a quick review by the company should have detected them.
-- Mistakes were discovered on the applications...evidencing insufficient oversight by either the agents, group leaders, or the insurers...The mistakes included employees signing up for the wrong type of coverage, neglecting to sign up for dependent coverage, returning incomplete or unsigned applications...and general misunderstandings of what they were applying for or what type of coverage they were even eligible for...The frequency of these mistakes indicates that policyholders or prospective insureds are not being given adequate information...
A 2006 state report on Noridian noted these deficiencies:
-- The Company agreed to reprocess the complainant's 2004 diabetes supply claims purchased out of state at the in-network level because they were not available in-network... Although the Company reprocessed the diabetes supply claims for this insured, it made no attempt to identify and reprocess other diabetic supply claims, which were processed as out of network... It is recommended the Company implement procedures to ensure all insureds are treated consistently. Furthermore, when guidelines are changed, it is recommended the Company take the appropriate steps to ensure all insureds, not just those filing complaints or appeals, are treated equally...
-- In responding to an appeal of a denial of therapy and skilled nursing facility care, the Company used the term "significant progress" but did not define the term nor did the term appear in either the benefit plan or the summary description. That is, the Company did not disclose the limitation in this plan or in any other of its plans that benefits are not available for therapy and skilled nursing facility care when "significant progress" is not achieved...as determined by the Company...
-- The Company revised its guidelines regarding gastric bypass surgery effective November 2, 2004, but failed to communicate these guidelines to the providers until...December 8, 2004. The provider involved in these two cases was provided a copy of updated guidelines with the denials...Upon appeal, the Company agreed to reprocess these request...the Company did not reprocess all requests for prior approval that were adversely affected by this change in policy. The Company only reprocessed those prior approvals that were appealed.
-- The Insurance Department complaints and internal complaints were reviewed to determine whether the Company maintained adequate documentation to support the timely resolution of complaints...The Company did not date-stamp 19 of the 35 complaints reviewed...Because it failed to date stamp written communications...the Company cannot confirm the timely handling of complaints, appeals, and grievances.
-- The Company's responses to insured's complaints were reviewed to determine whether the response addressed the issues raised and whether the explanations were sufficient. The Examiner noted the Company included nonspecific explanations to insureds and providers...The practice of providing nonspecific, generic responses to complaints makes it difficult for the insureds and the providers to further respond to disputed claims and oftentimes causes multiple complaints or appeals...
These are just a sampling of the complaints and shortcomings identified in the reports. They make interesting reading for additional examples and details such as identification of the many statues that the company flouted.
Noridian is currently a non-profit but huge amounts of money flow into and out of it. Its monopolistic power in North Dakota is tremendous and would only grow if it became a co-op under the proposal of its good friend, Senator Conrad. It’s clear that its current governance has not operated the company for the benefit of policy holders. Bengoshi has diaried about how co-ops are prone to corruption. Kent’s co-op idea should be a non-starter.