A U.S. Senate subcommittee ordered Blue Cross and Blue Shield of Maryland yesterday to turn over nearly 10 years of data about its finances as part of a growing probe into some of the nation's largest and best-known health insurance plans.
In a far-reaching subpoena to the Maryland Blues, the Senate Permanent Subcommittee on Investigations asked for the financial records of 21 separate companies created by the insurer in the past decade, some of them without the state's knowledge.
Further, the panel is demanding what could be hundreds of boxes of documents regarding Blue Cross' cash flow, contracts, taxes, board meetings, loans, investments, actuarial data, claims files, correspondence with consumers and its entire payroll for the period.
The subpoena was due to be delivered yesterday, a committee source confirmed.
Blue Cross insures or administers health insurance for 47 percent of Marylanders and collects $1.4 billion a year in premiums. Yesterday, company executives said they looked forward to an opportunity to respond to questions and concerns raised by the committee, chaired by Sen. Sam Nunn, D-Ga.
"We welcome the fact that the Nunn committee has asked us to appear," said John Picciotto, Blue Cross' general counsel. "We intend to show them what we are about and to convince them we are a strong, healthy company and we are going in the right direction," he said, adding that collecting the documents could take "a long time."
The subpoena comes as Maryland regulators prepared to penalize Blue Cross as the result of a still-confidential but apparently highly critical study of the insurer's dealings with consumers and health-care providers.
In testimony to Congress last week, Maryland Insurance Commissioner John A. Donaho referred to some of the study's findings in charging that the Blues had showed a "wanton disregard" for its obligations to Maryland residents.
Among other things, he told the Senate panel that Blue Cross was late in paying more than 1 million claims to consumers over the past five years. The company then failed to pay interest on the late payments, as state law requires, he said.
Blue Cross officials declined yesterday to discuss the state hTC review, now in its final stages, saying it was preparing a response. However, Mr. Picciotto, the legal counsel, disputed the state's contention that Blue Cross failed to pay interest on late payments to policyholders. He said Blue Cross has interpreted the law covering late payments differently than have state officials.
Yesterday's congressional subpoena amounts to the largest request for documents involving an insurance firm in at least 20 years, according to regulators. It followed testimony before the Nunn committee Thursday by both Mr. Donaho and Washington's insurance regulator, Robert M. Willis, that they lacked adequate information to judge the financial condition of the insurers they regulate.
Insurance regulators in Maryland and 18 other states were subpoenaed by the congressional panel June 15 to produce some of the same Blue Cross documents it sought from the company yesterday. But, the regulators say, they lack much of the information. Maryland officials began complying with the subpoena last week and are expected to open their records to Senate investigators beginning Monday.
Blue Cross, a non-profit health service plan, is regulated by the state, which reviews its requests for rate increases as well as its solvency.
Last month, it was ranked as weak by a private research firm that assessed the financial condition of the nation's 73 Blue Cross plans. The Maryland company's reserves for future health insurance costs, now $74 million, are below guidelines set by the national trade association for Blue Cross plans, state regulators say. But Blue Cross officials maintain the firm's financial health is stable. Blue Cross reported profits in each of the past three years.
Among other things, congressional investigators want to know about a host of for-profit subsidiaries of Maryland Blue Cross. They include a credit-card business, a computer company, and a leasing business.
In his testimony last week, Mr. Donaho also said the insurance division received an unprecedented 1,000 complaints involving Blue Cross last year. He said the medical community was in a "furor" over the way Blue Cross handled several items, including requests for information.
Mr. Donaho also said that Blue Cross failed to provide "the most basic customer service." As an example, he said Blue Cross last month sought unsuccessfully to cancel insurance for 4,000 people months before their contracts expired. Mr. Donaho said Blue Cross backed down only after he threatened to impose sanctions.
His division also regulates Blue Cross in the District of Columbia.