Blue Cross Fined Over Shared-Deductible Plans

May 12--Blue Cross and Blue Shield of Minnesota is paying a $90,000 penalty and offering money to some subscribers over allegations the health insurer didn't inform consumers about how to get the best deal with certain high-deductible plans.

In a consent order this month, the state Commerce Department says Eagan-based Blue Cross sold family coverage to hundreds of two-person households when those consumers likely would have been better off purchasing separate one-person policies.

The Commerce Department launched an investigation after a married couple in Burnsville complained about more than $3,000 in extra out-of-pocket spending last year due to a shared deductible in the family plan they purchased from Blue Cross.

The insurer didn't inform the couple, Commerce alleges, that they could have purchased two single plans for the same total premium, with separate deductibles that might have been a better deal.

"We found that this couple was just the tip of an iceberg," said Mike Rothman, the Commerce commissioner, in a Wednesday interview.

"Blue Cross and Blue Shield was selling these family plans to couples without children, when they should have been offered -- and probably purchased -- two individual health plans instead," he said. "In this situation, the concern is that it's more profitable for the company, but not suitable for the consumers, when these family plans are offered to them."

In agreeing to the consent order, Blue Cross does not admit wrongdoing.

With the settlement, Blue Cross must reimburse extra out-of-pocket costs incurred by about 350 families that purchased 2015 policies with what insurers call "family, non-embedded deductibles." In addition, an unspecified number of families that purchased the plans for this year must be given the chance to switch to separate policies.

Any costs for Blue Cross in offering reimbursements to consumers come on top of the $90,000 penalty, which Commerce says is the department's largest fine against a health insurer in five years.

"These types of plans represent a very small subset of our individual business," Blue Cross said in a statement. "The circumstances leading to plan selection vary depending on each situation, and there are situations under which a non-embedded deductible is preferred for families of two."

Kathleen Winter-Montag of Burnsville got the sense something was wrong in 2015 as she was paying more and more out of pocket for her health care. A Blue Cross customer for about 15 years, she called the insurer to find out why the coverage wasn't kicking in.

Winter-Montag learned that she and her husband were covered by a policy where they jointly had to incur $10,400 in out-of-pocket costs before coverage would begin for most services.

For the same total premium, the couple could have purchased separate policies, each with a $5,200 deductible, but Commerce said they didn't fully understand that option.

During 2015, Winter-Montag says she generated about $9,000 in out-of-pocket costs. Had she been in a solo policy with a $5,200 deductible, she would have avoided about $3,800 in out-of-pocket costs.

"The whole thing just felt so unethical," Winter-Montag said. "We were purchasing a product -- their product -- that was not in our best interest, and they were OK with that. The result was a financial hardship for us."

In its statement, Blue Cross said it provides a range of options so consumers can select the choice that best fits their circumstance. Providing clear information to consumers is a "top priority," the company added.

"During this period of unprecedented change within the insurance industry, Blue Cross and Blue Shield of Minnesota continues to adapt and adjust to best serve our customers' needs regarding affordability, coverage and service," the insurer said. "If we fall short of meeting these expectations, we act quickly to make appropriate adjustments."

Rothman said there are circumstances where two-person households might prefer a policy with a shared deductible, such as if they expect that the family's size will increase during the year. But complainants in the case clearly would have been better off, he said, with two individual policies.

"It was not just one couple with a problem, but that Blue Cross and Blue Shield failed to perform what we call an adequate suitability review for hundreds of Blue Cross consumers," Rothman said. "The company should have been straightforward with consumers."

In its statement, Blue Cross said it will help subscribers change plans if they choose to do so. The option to switch, as well as reimbursements, are available to two-member households that newly purchased the plans in 2015 or 2016. The settlement does not apply to people who bought the plans through the state's MNsure health insurance exchange.

Blue Cross must report to Commerce later this year about payments made to consumers, and the number of subscribers that switched to single deductible plans.

"Work is underway to help educate our affected members on all of their plan options moving forward," the company said. "We encourage everyone to examine their plan needs as their family circumstances change."

Dated May 5, the consent order marks the third fine against Blue Cross in about seven months.

In November, Blue Cross paid a $20,000 penalty for denying a patient's claim for services, even though the medication in question had been deemed medically necessary by external reviewers. The insurer agreed to a $1,500 penalty in March related to the failure to unconditionally provide requested information in a timely manner, according to Commerce.

Twitter: @chrissnowbeck

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