Gov. JB Pritzker’s state insurance department has fined the parent company of Blue Cross and Blue Shield of Illinois $339,000 for failing to notify the state last year about the removal of Springfield Clinic as an in-network provider.
The Illinois Department of Insurance continues to evaluate whether Chicago-based Blue Cross’ downstate preferred-provider network is adequate to meet patients’ needs after Blue Cross removed the clinic’s more than 600 doctors, advanced-practice nurses and physician assistants as part of a contract dispute with the Springfield-based, for-profit clinic.
The insurance department, in a news release, said Health Care Service Corp., the parent company of Blue Cross, violated the “material change notice requirements” in state law when two HMO plans lost access to Springfield Clinic on July 1 and four PPOs lost access to the clinic on Nov. 17.
Late fees of $1,000 per day began to accrue July 16 and Dec. 2, the deadline for HCSC to notify the state of changes. HCSC later filed documents with the department in March, resulting in late fees for 244 days in one case and 95 days in the other, the department said.
This is the first time that the department has issued a fine associated with the state’s Network Adequacy and Transparency Act, which was enacted in September 2017 for plans beginning Jan. 1, 2019, and beyond.
“Insurance companies must be able to show that they have adequate provider networks so that Illinois consumers have access to the medical care and providers that they pay for,” Pritzker said in the news release. “This fine should serve as notice that we will require insurers to maintain adequate provider networks and uphold all consumer protections under the law.”
The Illinois House Insurance Committee was scheduled to conduct a hearing March 22 at the Capitol on the contract dispute and the disruption in health coverage it has caused, but scheduling issues caused the hearing to be postponed.
The insurance department said in the news release that it reviews every plan’s network when the plan is filed, but the law “recognizes that a plan’s network may change mid-plan year.”
If there is a “material change” in the network during the plan year, the insurer must submit updated “network adequacy filings” within 15 days of the change occurring, according to the department.
Referring to Blue Cross, insurance department director Dana Popish Severinghaus said in the release: “We’re disappointed that the company continues to evade acknowledging this material change. Under Illinois law, the removal of a major health system like Springfield Clinic is a material change that could render a network, or parts of a network, inadequate. We are committed to exercising the department’s full authority to protect consumers from being harmed in a corporate contract dispute.”
The department said Blue Cross’ parent company must pay the fine immediately but has 10 days to dispute the action.
Chicago-based Health Care Service Corp. posted more than $44 billion in revenues in 2020 and $3.9 billion in profits, or a margin of almost 9%, according to documents filed with the National Association of Insurance Commissioners. HCSC operates Blue Cross plans in Illinois, Texas, Montana, New Mexico and Oklahoma.
Health Care Service Corp. is a “mutual legal reserve company” that operates on a not-for-profit basis for the mutual benefit of its member contract holders,” according to Illinois Department of Insurance documents.
Unlike a charity, however, HCSC is a “taxable insurance corporation subject to federal income and state and local taxes,” Blue Cross spokeswoman Lilyanna Fragoso said in an email.
“HCSC is not a tax-exempt organization,” she said.
Asked whether Blue Cross will dispute the fine, Fragoso said, “We are evaluating the department’s decision, and we will work collaboratively and in compliance with applicable laws and regulations.”
Fragoso added: “Blue Cross and Blue Shield of Illinois has been working closely with the Illinois Department of Insurance since contract negotiations first began with Springfield Clinic last May. Though we had a reasonable and well-informed opinion that Springfield Clinic’s decision to leave our network did not trigger any network change filing, when the department requested one within the past few weeks, we promptly complied.”
Springfield Clinic spokesman Zach Kerker said clinic officials “applaud” the Democratic governor and the insurance department “for upholding the public trust by enforcing laws that promote adequate access to affordable, high-quality health care.” Clinic officials estimated the contract dispute has affected about 100,000 central Illinois residents, many of whom lost in-network access to their longtime clinic providers if their employers didn’t switch to another insurer.
Using a doctor or other provider outside the Blue Cross network can mean much higher out-of-pocket costs for Blue Cross members. Blue Cross officials have estimated that 55,000 Springfield Clinic patients were affected by the network changes.
The public began to learn about the impact of the normally private negotiations between Blue Cross and the clinic last summer.
A Blue Cross official told The State Journal-Register at that time that discussions between the two over the continuation of a smaller contract resulted in clinic officials voiding that contract, known as Blue Choice.
Kerker told Illinois Times that Blue Cross wanted to offer the Blue Choice plan to more Blue Cross members, but doing so would be unaffordable for the clinic because of the low reimbursement rates in Blue Choice.
According to the SJ-R, the Blue Cross official said the company then terminated its other Blue Cross network agreements with clinic providers, effective Aug. 19 and Nov. 17, “in hopes of restarting negotiations on the smaller contract and also to promote a ‘broader discussion’ with the clinic about value and quality in contracts.”
The contract dispute remains unresolved.
State Rep. Sue Scherer, D-Decatur, said she requested the House Insurance Committee hearing to draw attention to the plight of thousands of Springfield-area residents who have been affected.
She said she hopes the hearing helps put pressure on both Blue Cross and Springfield Clinic to settle the dispute so patients can retain their longtime doctors and have peace of mind when it comes to their health.
“That’s my prayer,” she said. “This is just a true nightmare.”
Dean Olsen is a senior staff writer for Illinois Times. He can be reached at dolsen@illinoistimes or 217-679-7810.
This article appears in DCFS headed in the WRONG DIRECTION.
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