Probe of Blue Cross-Blue Shields’ trade practices changes [Pittsburgh Post-Gazette]

Jun. 9--It's been nearly a year since the state Department of Insurance announced an "unfair trade practices" probe of Pennsylvania's four Blue Cross-Blue Shield health insurers, but the department has yet to release any findings from the investigation -- partly because of a legal challenge to the review and partly because the nature of the investigation itself has changed.

In March, the insurance department was sued by Pittsburgh's Highmark Inc., which sought an emergency declaratory judgment to prevent the release of the results of the investigation.

That request was denied, but the case is still active.

At the time, the insurance department said it was close to finishing its report about Capital BlueCross.

The week after the Highmark lawsuit was filed, the U.S. House approved the landmark health care expansion bill, which changes the rules health insurers must abide by.

Many of the new rules will take effect beginning in 2014.

"The competition question now has a new framing," said state insurance Commissioner Joel Ario. "We are updating our exam focus to now take that into account."

For example, Mr. Ario said the department was looking into whether health insurers' collective decision to start medical underwriting in the small group insurance market -- and the Blues' decision to move those products "downstream" to for-profit subsidiaries -- might affect the competitive landscape four years from now.

But doesn't that issue seem a bit far afield from the original question of unfair trade practices?

"We are shifting basically midflight because we have to," Mr. Ario said.

"The original issues are still there -- this is adding to the issues, not replacing the issues."

Regarding the exam itself, Highmark spokesman Michael Weinstein said there hadn't been much movement in the last two months.

"The litigation is still pending, and Highmark is still in discussions with the insurance department on the scope of the information the agency is requesting," he said.

The March lawsuit, Highmark Inc. v. the Commonwealth of Pennsylvania, is still active.

Most recently, Highmark filed an emergency protective order application "to compel production of documents" that have been gathered by the insurance department. (So far, there have been no hearings held on that request.)

Highmark said the insurance department exam was "illegal" and that the department was using, or asking for, proprietary data in carrying out its investigation.

Mr. Ario said he hoped to have the full exam, comprising research on all four Pennsylvania Blue Cross-Blue Shield insurers, completed by August or September, but that the ongoing lawsuit with Highmark could wreck that timetable.

With Gov. Ed Rendell's term ending this year and the possibility that Mr. Ario -- a Rendell appointee -- might be out of work too, a long court delay could mean that the exam's results aren't released on Mr. Ario's watch, if at all.

So was the suit a stalling tactic?

"No question that that's entered in as a factor in their thinking," Mr. Ario said.

Another possibility would be that the probe itself could be used as leverage to get the Blues to agree to an extension of the Community Health Reinvestment agreement, which funds adultBasic, the Children's Health Insurance Program and other health plans.

In February 2005, the state's four Blues jointly agreed to give about $1 billion over six years to the state health pool; that agreement was struck as the insurance department was simultaneously investigating whether the Blues' surplus was too large.

The agreement expires at the end of 2010, and the state's budget deficit for this year already stands in excess of $1 billion.

The insurance department announced the examination of the Blues' trade practices in July 2009.

In announcing the examination, the department said it hoped its review would be done by early 2010.

With that self-imposed deadline come and gone, maybe it's fair to wonder whether the investigation has hit a wall.

"There have been different investigations over the years against Highmark, and none of them have really stuck," said David Lagnese, a principal at the Pittsburgh branch of human resources and benefits consultant Towers Watson.

This much seems sure: Even if the reports are released this summer and contain recommendations for overhauling the state's insurance codes, it seems unlikely that an outgoing governor and insurance commissioner will have enough political capital remaining to implement the changes.

Bill Toland: btoland@post-gazette.com or 412-263-2625.

To see more of the Pittsburgh Post-Gazette, or to subscribe to the newspaper, go to http://www.post-gazette.com.

Copyright (c) 2010, Pittsburgh Post-Gazette

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.