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CA Slaps Health Plans for Delaying Payments

Cheryl Clark, for HealthLeaders Media, November 30, 2010

California regulators on Monday fined the state's seven largest health plans $4.85 million after finding widespread patterns of unfairly processing, delaying, and denying physician and hospital reimbursement claims for patient care.

As a result of the penalties, health plans throughout the state will soon be repaying "tens of millions" of dollars more to providers they owe—about 70% to hospitals and 30% to doctors—as health plans make restitution for their bad practices, said California Department of Managed Health Care Director Cindy Ehnes.

"As one hospital provider said to me: I regard a claim with a health plan as a ticket to chase my dollars, not as a guarantee of payment; that's unacceptable to this department," Ehnes said in a news briefing announcing the fines.

All seven plans failed to pay 95% of their claims correctly, the minimum legal threshold, she said.

The seven fines were as follows: Anthem Blue Cross, $900,000; Blue Shield of California, $900,000; United/PacificCare, $800,000; HealthNet, $750,000; Kaiser Foundation Health Plan, $750,000; Cigna, $450,000 and Aetna, $300,000.  The fines were assessed in part based on the health plan's size. But mostly, the fine was based on "the willfulness of what we see as a violation; that's the biggest factor," Ehnes said.

The 18-month investigation, which Ehnes said was the only one like it in the nation, began after her agency received persistent complaints from providers who, despite filing legitimate claims, said payment was either held up or denied. They alleged that the provider complaint process, designed to appeal a denied claim, was deeply flawed.

In fact, the agency found that it was, she said.

One "common error" was that in five of the seven plans, claims processors or units that reviewed physician and hospital appeals were "the exact same person or unit that denied it in the first place, with no real reconsideration of the claim. That was the most notable error we saw."

Another common problem was the failure of the health plan to pay interest and penalties when paying claims beyond the amount of time required.

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