Blue Cross Blue Shield IL Sued for Fraud, Robbing Chicago Taxpayers

Blue Cross Blue Shield IL Sued for Fraud, Robbing Chicago Taxpayers

Health Care Service Corp, dba Blue Cross Blue Shield IL, has been sued for fraud on behalf of the City of Chicago and its taxpayers, for inflating claim charges in order to skim taxpayer dollars.

As we have previously written, recent cases disputing “cross-plan offsetting” and improper cost containment activities have begun to see the light of day. While many of these cases involve private sector commercial health plans, the public sector is not immune to these questionable business practices. As more and more of these cases make their way through the courts, all self-insured health plan administrators, including public or municipal plans, charged with properly monitoring and safeguarding plan assets should do so, independent of their TPA’s own reporting. 

According to its website, Health Care Service Corporation, a Mutual Legal Reserve Company (HCSC) is the largest customer-owned health insurer in the United States and fourth largest overall, operating through health insurance Plans in Illinois, Montana, New Mexico, Oklahoma and Texas. The group benefits from its well-established market presence and leading overall market share in each of the five states in which it operates. With 8.1 million members, Blue Cross and Blue Shield of Illinois (BCBSIL) is the largest health insurance company in the state of Illinois. The insurer administers health plans for the City of Chicago employees.

The lawsuit was brought by Kathleen Harper, on behalf of the City of Chicago and its taxpayers, and alleges BCBSIL inflates medical provider charges then submits the inflated charges to the City of Chicago and keeps the difference between what it collects from the City’s reimbursement and what it actually pays to medical providers. According to the amended complaint, filed on October 9, 2018:

“These representations were not true or accurate. They were in an inflated amount and rather than reflecting the actual amount HCSC paid its providers…HCSC admits that the amount HCSC bills and receives from the governmental entities ostensibly as reimbursement for payments it has made to providers on behalf of these self-insured governmental entities is substantially less than it actually pays these providers.

The lawsuit also seeks unspecified damages and a  “full and complete accounting of said payments and receipts for the last ten years of any and all additional payments, ‘discounts’ or other sums HCSC has kept “for its own benefit” taken from the public funds taken by HCSC from one or more of the local government entities who have hired it to administer their self-insured health care plans

Other Blue Cross Blue Shield entities have faced similar problems before for this kind of activity. Recently, Blue Cross Blue Shield Michigan was hit with a flurry of lawsuits, for skimming unauthorized fees, from their self insured health plan clients. The lawsuits, filed between Aug. 9 and 11 2017 in federal court in Michigan, accuse Blue Cross of charging hidden and unauthorized fees to the employers’ health plan assets as a means of improving its financial position without alienating customers. The lawsuits build from a 2014 appeals court decision where Blue Cross was found liable for this conduct under ERISA and upholding a $6 million judgment against the insurer.

Since that 2014 decision by the U.S. Court of Appeals for the Sixth Circuit, more than 200 ERISA cases have accused Blue Cross of charging hidden health plan fees. The employers suing Blue Cross include a car dealer, a plastics manufacturer, an auto parts maker, and a college, among others.

Other recent cases illustrate the pervasiveness of these questionable practices. In one particularly egregious case, the Department of Labor sued TPA Magnacare, allegedly for charging fees that were not disclosed to its ERISA plan clients. According to court records, the plans paid MagnaCare the “full amount, yet MagnaCare remitted the lower charges to the providers and retained the undisclosed markup” 

In this case, the complaint alleges the business model being used by BCBSIL for the City of Chicago benefit plan constitutes fraud:

“The misrepresentations described above as well as this scheme itself, one that HCSC has admitted in public is its “business model” and allowing it to profit from this scheme constitutes fraud under the Common Law of the State of Illinois”

Astonishingly, the complaint alleges that BCBSIL intentionally prohibits the City of Chicago or any of its taxpayers from seeing how much BCBSIL actually pays itself in fees or how much it contracts with providers:

“HCSC takes compensation for its services as the Third-Party Administrator under its contractual agreements with the City in an amount that is not disclosed in amount or in detail to the citizens of Chicago or to other members of the public. The amount HCSC takes for its services is also not limited to any amount on the face of its contract or available for the public in any manner whatsoever…HCSC does not disclose to the governmental entities or to the public that bears the ultimate burden of payments made by those entities the terms of these separate contracts with its providers, asserting before the Courts of Illinois that these contracts are private, privileged from disclosure or otherwise will not be made available for review by these local government entities or their taxpayers.

The lawsuit also alleges that the City of Chicago has been aware of the practice since 1985 but has not acted to correct or change the practice. The City of Chicago is not named in the suit.

Court case info: Harper, Kathleen v. Health Care Service Corp dba Blue Cross Blue Shield IL;Case No. 2018-L-010842; Filed on 10/09/2018 in the Circuit Court of Cook County Illinois.

It’s a well-known fact from federal court documents and in healthcare industry news reports, that Billion$ of ERISA plan claims payments from self-insured plans may have been recouped or offset by self-insured plan TPA’s for the TPA’s fully-insured accounts. Additionally, many Billion$ more may have been similarly siphoned off based on “Fake PPO” discounts or  Phantom “Savings” fees. In the healthcare provider arena the No. 1 health care claim denial in the country today is the overpayment recoupment and claims-offset.  Correspondingly, for self-insured health plans, the No. 1 hidden cost is overpayment recoupment and plan assets embezzlement. 

As we have written about before, this practice of keeping the difference between amounts actually paid to the medical provider and the amounts that are removed from Plan trusts accounts, are estimated to be between 30% to 60% of all Plan claims expenditures. Simultaneously, as a result of this and other cases, including the Supreme Court’s decision to deny the BCBSM challenge of the Sixth Circuit Court decision, these same self-insured health plan administrators nationwide, should seek return of Billions in plan assets as a result of the TPA industry’s potential recovery of a billion dollars in overpayment recoupments and anti-fraud campaigns over the past 12 years.

Avym Corp. has advocated for ERISA plan assets audit and embezzlement recovery education and consulting. With new Supreme Court guidance on ERISA anti-fraud protection, we are ready to assist all self-insured plans recover billions of dollars of self-insured plan assets, on behalf of hard-working Americans. To find out more about Avym Corporation’s Fiduciary Overpayment Recovery Specialist (FOR) and Fiduciary Overpayment Recovery Contractor (FORC) programs contact us.



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