A state examination of the operation of Blue Cross and Blue Shield of Maryland from Jan. 1, 1986, through 1988 has found an "unacceptable" high level of late payment of claims by the state's largest health insurer.
The report, which was done by the Maryland Insurance Division, found that in a sampling of 390 claims from May 1, 1988, through Feb. 28, 1989, 16 percent of the claims took more than 30 days to process.
"This percentage of claims paid outside of 30 days is unacceptable," the report said. "Insurance industry norms for claims payments usually average approximately 90 percent of all claims paid within 15 calendar days," the study said.
The examination, which is done every three years, could not find evidence that Blue Cross had paid interest on late claims, which is required under state law. "This apparent lack of interest payments on delayed claims should be investigated as soon as possible," the study said.
While saying its claims-payment procedure is more efficient now, Blue Cross said a solution to the problem involves new systems technology and it has established a special work group to tackle the problem.
Blue Cross, which handles more than 1 million claims a month, has improved its system in the last three years. It now process 96 to 98 percent of hospital claims and 90 to 93 percent of professional claims within the 30-day limit, according to prepared statement by Phil Grantham, senior vice president of Blue Cross and Blue Shield of Maryland.
Even though Blue Cross does not keep track of interest payments on late claims, interest is paid if the claimant submits a request with the necessary documentation, Grantham said. "We have initiated an internal review to identify a practical, cost-effective method of tracking claims where interest is payable," he said.
In its formal response to the commission, Blue Cross also noted that it advances funds to hospitals so that the services are essentially paid at the time that a patient is discharged.
The report also found that processing of claims is slowed down by Blue Cross' practice of sending claims to another company to be microfilmed before they are processed. This adds three to four more days to the process.
The amount of claims sent to the microfilm firm, B&B Services, is measured by the inches of paperwork. "Actual claim counts sent to B&B are never known -- just the inches," the report said.
Assuming it takes an average of five days for the claims to be microfilmed, the report said the actual percentage of claims paid after 30 days could be as high as 24.5 percent.
The study also said Blue Cross did not meet state reserve investments requirement as of Dec. 31, 1988. But Blue Cross said it has met the standard since Dec. 31, 1989.
The report also noted that Blue Cross has failed to send information to the National Association of Insurance Commissioners despite repeated requests by the insurance commissioner since 1983. Blue Cross said it will send the information by March 31.
Submitting such information is voluntary, though Blue Cross had in the past had said it would comply. John A. Picciotto, chief legal officer for Blue Cross, said it was an oversight that the insurer had not compiled previously. However, if the NAIC needs past information, Blue Cross will provide it, he said.
The Insurance Division has taken an increasing interest in the operation of Blue Cross in recent months.
Last month the agency requested bids from interested companies to do a study on "the overall effectiveness and efficiency of management and operations" at Blue Cross.