Md. Blues face inquiry before Senate panel Focus is on "irregularities" in federal worker coverage

July 30, 1992|By Patricia Meisol | Patricia Meisol,Staff Writer

WASHINGTON -- Blue Cross and Blue Shield of Maryland will face a two-day hearing in September before a U.S. Senate subcommittee on a host of problems, including a "pattern of irregularities" in the Blues' handling of health benefits for federal employees.

The state's largest insurer is already under subpoena by the Senate panel for a decade's worth of financial records in a widening Senate investigation into Blues health insurance plans nationwide.

Beginning yesterday and continuing today, the Senate Permanent Subcommittee on Investigations is detailing the 1990 downfall of the Blues of West Virginia, the first-ever collapse of a Blues plan, which stuck subscribers with paying their own medical bills.

At the hearing yesterday, witnesses detailed the insider deals, mismanagement and executives' plans to enrich themselves that preceded the plan's collapse.

In response to a query by Chairman Sam Nunn, D-Ga., John Sopko, the chief staff investigator, said that the Maryland plan would be examined next because of problems with its handling of a contract for federal employees.

Senate sources said that Maryland would be on the agenda ahead of two other subpoenaed plans, in part because the Maryland Blues refused to give federal auditors access to their books when called on to account for $3.6 million in questionable charges on that contract.

In addition, the sources said, they have received additional information confirming testimony by Maryland Insurance Commissioner John A. Donaho earlier this month in which he expressed concerns over the Blues' money-losing subsidiaries and charged that the Blues had effectively avoided his scrutiny by currying favor with the governor and lawmakers in Annapolis.

This week, in the wake of a Mr. Donaho's testimony, the Maryland Blues agreed to give the state access to financial information Mr. Donaho said was crucial for regulators.

An audit of the Maryland Blues' federal contract covering a six-year period and completed in 1990 found problems in virtually every area where costs are typically charged incorrectly. In it, the Office of Personnel Management's inspector general questioned more than $1 million in claims that the insurer couldn't document or had duplicated, along with expenses, such as marketing and public relations, that federal contractors aren't allowed to bill.

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