State regulators on Monday announced nearly $5 million in fines against California's seven largest health plans for underpaying claims to thousands of doctors and hospitals.
The health insurers also will have to pay tens of millions of dollars in restitution to those who were underpaid, said Cindy Ehnes, director of the California Department of Managed Health Care.
The penalties are the result of an 18-month audit launched after providers complained about long-standing difficulties in getting reimbursed properly and on time.
The insurers will be required to submit plans for changing their payment practices to avoid such problems in the future.
"California's hospitals and physicians must be paid fairly and on time," Ehnes said. "Providers are struggling to stay afloat in a very difficult business environment. Improper payment of provider claims runs the risk that our health care delivery system could grind to a halt."
The fines, totaling $4.85 million, included $900,000 for Anthem Blue Cross, $900,000 for Blue Shield of California, $800,000 for United/ PacifiCare, $750,000 for HealthNet, $750,000 for Kaiser Foundation Health Plan, $450,000 for Cigna, and $300,000 for Aetna.
A spokesman for the plans said they will collaborate with state officials.
"We have long recognized that the administrative side of health care coverage can take valuable time away from patient care, which is why the plans have been working to
streamline processes both at the health plan level and in doctors' offices," said Patrick Johnston, president and chief executive officer of the California Association of Health Plans.
"California health plans remain dedicated to these efforts and will continue to work to make our system more efficient and effective to help prevent errors, reduce costs and ensure resources are devoted to patient care," he said in a written statement.
The state allows a 5 percent error rate, but the audit found that on average, insurers failed to pay about 20 percent of claims properly, Ehnes said.
When the audit began, insurers were failing to pay some claims within the required 45 working days, said Lynne Randolph, spokeswoman for the Department of Managed Health Care. Since then, however, many of the plans are paying on time, but not always the proper amount, she added.
Ehnes said she decided to order the audit after one frustrated provider told her that submitting a bill for payment was little more than "a ticket to chase payment," instead of a guarantee of payment.
The fines drew praise from a consumer health advocate who worries about the time diverted when providers seek reimbursement.
"Consumers would rather that the time and resources of health providers go to patient care, rather than in fighting to get insurers to pay correctly," said Anthony Wright, executive director of Health Access California.
Ehnes estimated that about 70 percent of the restitution payments will go to hospitals and about 30 percent to physicians.
The audit also found flaws in the appeals process that providers must use to protest an underpaid bill or claims denial. Ehnes noted that with some firms, the appeal goes directly to the same person or department that made the original decision, virtually guaranteeing the same result.
Five of the seven plans were found to have flawed dispute procedures. The exceptions were Anthem Blue Cross and Blue Shield of California, which met requirements, Ehnes said.
After insurers submit their corrective action plans, the Department of Managed Health Care will do a follow-up audit within 18 months to ensure that the changes are made, Ehnes said.
"Health plans have to know that you mean business and they have to know you will follow up," she said.
