New Jersey Blues ordered to pay $8 million for putting claims on hold

The Blues plan in New Jersey has signed a consent order to reprocess claims in which it was paying as a secondary insurer along with Medicare, which could mean more than $5 million paid out to physicians and members, plus more than $3 million to the state.

Horizon Blue Cross Blue Shield of New Jersey was routinely setting those claims aside as "pending," leaving them unpaid while the company ascertained whether a claim stemmed from a preexisting condition, according to the state. Under the agreement with the state's Dept. of Banking and Insurance, the company must pay any money owed to members and doctors, plus 12% interest, pay a fine to the state and disgorge the interest it made off the unpaid claims. The total payments will be more than $8 million.

The payments to members and physicians who lost money must be paid by Oct. 1, according to the agreement. Where the insurer owes a doctor or member $49.99 or less, it will pay the state instead of sending a check to the individual.

The company is expected to pay more than $5 million to doctors and members and an additional $1.3 million to the state for the less than $50 payments, according to the consent order. The company also will pay a $500,000 fine. Finally, it must pay the state an estimated $1.3 million it made on interest while it held on to the pending claims payments.

Under the agreement, Horizon did not formally admit any wrongdoing but waived the company's right to a hearing regarding the matter. It also agreed to revise its practices for handling claims from Medicare beneficiaries for whom it provides secondary coverage.

As part of class-action settlements that Horizon and other Blues signed in 2007, the plan agreed to change the way it placed claims in "pending" status while it determined whether a preexisting condition applied, said Larry Downs, counsel for the Medical Society of New Jersey.

"It's been a problem where Horizon delayed determinations, and it took months and months for them to get resolution," he said.

The medical society had complained to state regulators about the "pending" payments but was unaware of the state investigation until the settlement was made public.

Downs said the society believes the $1.3 million in so-called de minimis payments, where doctors or members are owed less than $50, should go to doctors and members, not to the state.

"We think to the extent you can identify who should get the money, it should go to them," Downs said. He said the society met in early March with the Dept. of Banking and Insurance to discuss the issue.