State to pay Blue Cross $3.5 million to settle billing discrepancies

MONTPELIER — State officials have agreed to pay Blue Cross Blue Shield of Vermont $3.5 million to close out the insurer’s line of business through the state’s online insurance marketplace in 2015.

The additional payment to Blue Cross comes after a months-long reconciliation process that was required to help settle discrepancies within the billing and enrollment system of Vermont Health Connect, the state’s online health insurance exchange set up through the federal Affordable Care Act. The agreement between the state and Blue Cross was finalized late last year by the administration of former Democratic Gov. Peter Shumlin, who left office last week as Republican Gov. Phil Scott was sworn in.

Cory Gustafson, Scott’s Department of Vermont Health Access commissioner, confirmed the $3.5 million settlement Thursday. Gustafson worked as the director of government and public relations for Blue Cross at the time of the settlement before being tapped to served in Scott’s administration.

Cory Gustafson (Courtesy photo)

Cory Gustafson (Courtesy photo)

Gustafson said the $3.5 million payment is included in Scott’s mid-year budget adjustment plan, an annual bill that looks to shore up the state budget halfway through the fiscal year. The Shumlin administration approved the payment before leaving office, Gustafson said.

The billing discrepancies are the result of technological shortcomings with the exchange. In some cases, Blue Cross never received premium payments for customers who purchased health plans on the exchange. In other cases, Blue Cross unwittingly paid out claims for patients whose insurance had been terminated by the state. In both cases, interruption in the flow of data between the state, insurers and a third-party billing vendor are the likely cause.

BCBS sent a letter to state officials last August stating it believed it was owed $6.2 million by the state because of the discrepancies. The state and Blue Cross then began the reconciliation process in an attempt to determine exactly how much the state owed.

Working for Blue Cross last September, Gustafson said the company did not believe the state would be able to pare down the requested $6.2 million payment during the reconciliation process.

“There isn’t an expectation that there will be whittling down of this number on our side,” he said at the time. “We’re pretty confident in this calculation.”

It is the second year in a row that a reconciliation process has taken place. The state paid $1.6 million to close out its line of business with the exchange in 2014, an amount that was mitigated by money the Blue Cross owed the state as the former Catamount Health Plan program was dismantled.

Scott has been a vocal critic of Vermont Health Connect. He promised during the campaign to close it down and move the state to a federally run exchange, or perhaps into a partnership with other states. He is expected to provide his plan for the exchange in his budget address to lawmakers on Jan. 24.

The reconciliation payment, and the ongoing billing and enrollment issues, could serve as more fodder for the governor if he chooses to move the state away from its own exchange.

Don George, president and CEO of Blue Cross, is expecting a need to continue the reconciliation process later this year for the 2016 insurance plans it sold.

Don George (courtesy photo)

Don George (courtesy photo)

“The parties understand that, have agreed on a process by which it will be accomplished and really what we’re looking toward and hoping for is that 2017 will be significantly mitigated from the 2016 amount,” he said.

Publicly, Blue Cross expressed patience as the exchange’s technological problems lingered during Shumlin’s tenure. Shumlin spoke of significant improvements to the system in terms of enrollment in his farewell address, but George said enrollment and billing discrepancies continue to be an issue.

“I would have to say that we did not see an improvement in 2016 in this aspect of Vermont Health Connect,” he said.

George indicated the company’s patience may be waning, and with a new administration in place, might support a change in direction if Scott moves in that direction. George said Blue Cross officials will weigh in soon on an independent report that suggested sticking with Vermont Health Connect might be the best outcome for the state.

“We have been asked to testify next week before the House Health Care Committee regarding our reaction to the (Strategic Solutions Group) technology assessment report. We will make known at that time how we feel about the report,” George said. “I would only say at this time that I think given what’s going on in Washington, given the state of Vermont Health Connect, given the report signaling that there are still major improvements needed, I do think that the state should keep its options open.”

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