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The Bottom Line: Lawmakers pack on pressure, unearth new details in year-long insurance dispute

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SPRINGFIELD, Ill. (WCIA) — Executives representing the largest insurance company in the state were brought to the table Tuesday night to answer to state lawmakers after our reporting revealed widespread consumer protection concerns and state law violations.

Members of the House State Government Administration Committee questioned Blue Cross Blue Shield of Illinois, Springfield Clinic doctors and the state Department of Insurance in a nearly three-hour hearing that had already been delayed four hours and canceled the week prior.

Representatives from Health Care Service Corpration (HCSC) — BCBS’s parent company — made two remarkable revelations late into the hearing. Chief administrative officer Jill Wolowitz confirmed the company that operates on a “not-for-profit basis” has stockpiled billions in profits, and divisional senior vice president of health care delivery Krishna Ramachandran admitted that Springfield Clinic has been somewhat flexible in rate negotiations.

The dispute that ultimately broke up a more than 30-year relationship between the clinic and Blue Cross Blue Shield of Illinois hinges on the rate the insurer is willing to pay the company’s 450 doctors and 200 advanced practice nurses.

In press releases, Blue Cross representatives continue to say Springfield Clinic is requesting an “unheard of” 75% rate increase. In the hearing, new details emerged.

“I think we’ve gone back and forth, I think I would say they have moved from 75%,” Ramachandran responded, adding “It’s still very high” and that it would “apply to any future expansions that the clinic might have.”

Dr. Kenneth Sagins, one of two doctors who testified on Springfield Clinic’s behalf, said while the clinic “always likes to look at growing…unequivocally, we have no plans at this point.”

Neither side has shared documentation of these rate requests. Dr. Sagins reiterated what the clinic has been telling our reporters for weeks, “The only thing we’ve asked for really is to get BlueCross BlueShield to be at a competitive market rate.”

BCBSIL was involved in thousands of negotitations beyond the one ongoing for nearly a year with Springfield Clinc. Roughly 3,500 negotiations involving 100,000 providers last year, according to Ramachandran. He and Wolowitz have both been sitting at the table for negotiations with Springfield Clinic.

The senior VP told lawmakers he doesn’t believe the company has had a “major termination” with a healthcare entity like this one in at least a decade.

“It’s probably been like, over 10 years for us. So maybe 13 years, I think, is where we landed. So really rare,” he said, adding it’s “remarkably rare” for this negotiation to be happening now in front of the public.

“I think the commercial contracts are vital for us,” Dr. Sagins said. “We, unfortunately, don’t get some of the benefits of being a not for profit, and some of the subsidies that come along with that.

Blue Cross and Blue Shield Association executives were forced to comment on the company’s tax-exempt status, something the Chicago-based business has benefitted from since 1958.

The mutual legal reserve company has stockpiled $20 billion as of 2021 while operating on “a not for profit basis,” Wolowitz revealed when pressed. The chief administrative officer blamed a need for additional reserves during the pandemic.

That profit margin is double the $10.29 billion HCSC had accumulated by the end of 2013, according to 2016 court records. And that doesn’t include big bonuses paid out to top executives.

“So why are you tax exempt and still hold these 20 billion in reserves?” Rep. Sue Scherer mused.

The Decatur Democrat, who pushed for this hearing, said its become personal.

“I am only here for one reason, and that is to help my constituents. They’re dying, literally,” she said in tears as the hearing got underway.

Scherer was one of several lawmakers to share first or secondhand accounts of bad experiences with Blue Cross insurance. Many in the room were a degree or two of separation away from inflated medical bills and the dead-end search for a new doctor at a time when time is everything.

The two sides continue to dispute the number of patients affected. That number is integral to the Department of Insurance’s ability to determine whether Blue Cross customers have an adequate network of providers to choose from under state law which hinges on a patient-to-provider ratio.

Blue Cross executives continued to assert that 55,000 members were affected when they kicked those patients’ Springfield Clinic providers out of network, counting just the insured patients who have received care from the clinic in the last 18 months. That total does not include paying customers who were healthy for the last year-and-a-half, or others who delayed care during the last two years of the COVID-19 pandemic.

Springfield Clinic doctors said 20-25% of their patients, roughly 110,000 of them, are Blue Cross customers impacted by the split. Dr. Sagins said that number couldn’t be off by more than a couple thousand.

No matter how you slice it, BCBSIL’s did not have enough of multiple types of doctors in its online directory when Target 3 investigators called through it, finding an apparent violation of the state’s Network Adequacy and Transparency Act of 2017.

One of the biggest discrepancies was in the directory of obstetricians. We found zero available to take new patients in the Springfield area within the 15 days state law requires.

“We are with our patients through some of the most joyous times of their lives when we deliver their babies. And we’re with our patients through some of the most devastating times of their lives, when we give them a diagnosis of breast cance,” Springfield Clinic OB/GYN Cheryl Brown testified.

“And we have no identifiable reason as to why this happened.”

Dr. Brown started calling through the online directory herself since we started reporting.

“My patients need more than that,” she said. As she scrolled through the list, she saw “a group of names that are completely unfamiliar to me. And so I look at the address. And I realize this is not a physician’s office. These doctors don’t exist.”

Brown was shocked to find a familiar name on the list of OB/GYNS, a doctor that retired in her second year of residency 21 years ago.

Ramachandran said Blue Cross counts on notice from providers in order to update its own network, adding “a lot of them do comply.”

Brown confirmed our investigation when she found several providers listed in-and-around Springfield that no one had heard of. Target 3 investigators discovered at least three.

“We know all OB/GYNs in central Illinois, it is not a big community. Okay. These names are not real. They do not exist, but they are on the list,” Brown said.

“I think it’s everybody’s responsibility,” Dr. Sagins said. “We’ve got a group of people that that’s all they do is credentialing.”

“We’re always around 97 to 100% correct whenever we have an audit regarding how we maintain that,” he added. “I think, you know, again, the responsibility is also on the insurance company, also to make sure that, or any department, to make sure that that’s kept tight.”

Department of Insurance Director Dana Popish Severinghaus, the first to take questions from lawmakers, confirmed the department will be filing emergency rules by the end of the week to tighten regulations for insurance companies in throughout the state.

Committee chair Rep. Stephanie Kifowit (D-Aurora) questioned whether the $339,000 fine Popish Severinghaus’ levied against BCBSIL was enough. The state fined the company $1,000 a day for every day Blue Cross failed to report a “material change” to its network.

The DOI director confirmed the fine that Blue Cross paid Monday will be deposited into the state’s General Revenue Fund. It’s the state’s first-ever fine issued against an insurer for failing to report a material change.

The state of Georgia’s Insurance and Safety Fire Commissioner hit Blue Cross Blue Shield with a $5 million fine Tuesday for some of the same violations we uncovered weeks ago. A report from WRBL cites “a number of serious issues,” including improper claims settlement practices, failure to reply to consumer complaints in a timely manner and inaccurate provider directories.

It’s unclear if Blue Cross Blue Shield of Illinois will be penalized for the dead-end directories we first revealed weeks back. Popish Severinghaus said they’re reviewing a newly filed directory from the company and she expects the department to report its own adequacy findings in a few weeks. “Retroactive corrective actions” are on the table “if necessary, including the adjustment of past claims,” the director said.

“This is a cancer that’s growing that we’ve got to find some solutions to,” Rep. Scherer said in closing her questions for the Department of Insurance.

The state has recieved 19 complaints related to this dispute, Popish Severinghaus said. “It’s not necessarily indicative that there aren’t more I think, anecdotally, across the board Representative Scherer has heard a lot more complaints than that.”



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