State regulators slap BCBS of Alabama with $8M fine

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In addition to an $8 million fine, Blue Cross Blue Shield of Alabama must pay the state's department of insurance $100,000 for costs related to an investigation.

In what may be a cautionary tale for other insurers, Blue Cross Blue Shield of Alabama has been hit with an $8 million fine for charging rates that differed from those approved by state regulators.

The Alabama Department of Insurance says the rate variations occurred in about 1,400 small-group employer plans and some COBRA plans for former employees from 2005 to 2013, according to AL.com. The practice resulted in undercharges of almost $107 million and overcharges of almost $33 million.

The state levied the fine against Blue Cross Blue Shield of Alabama because it failed to inform regulators about its methods for raising or reducing rates. The insurer also must pay the state’s department of insurance $100,000 for costs related to the investigation.

Blue Cross Blue Shield of Alabama said in a statement to AL.com that its premium rate stabilization efforts, which ended in 2014, are common practice among insurers. “The goal was to smooth rate adjustments over time and provide small employers more predictability in their business planning,” the company said.

However, it acknowledged that it “mistakenly” did not document these practices in its small-group rate filings and failed to adjust the rating category for some small business customers when their annual employee health insurance enrollment fluctuated from the previous year.

The insurer says it has issued refunds to more than 1,400 small business customers and 2,200 COBRA customers, but it will not seek reimbursement from customers who were undercharged, according to the article. 

Blue Cross Blue Shield of Alabama is not the only Blues insurer to have run afoul of state regulators. In 2015, California fined Blue Shield of California and Anthem Blue Cross for misleading consumers about their physician networks on the state's insurance exchange. And last year, Blue Cross Blue Shield of North Carolina was hit by a $3.6 million fine for technical issues that wreaked havoc on its enrollment and billing systems.