When the San Francisco 49ers opened Levi’s Stadium in Santa Clara in 2014, it was not the great sightlines that caught my eye on my first visit to watch a high school football game. It was the fact that Blue Shield of California had a pricy luxury suite at the new venue. As a Blue Shield of California subscriber at the time, I was wondering when my costly premiums would afford me the opportunity to attend a Niners football game in style in the Blue Shield suite.
So, after a scolding from the state, it appears Blue Shield of California is facing new criticism that it did not adequately pay back policyholders for excessively spending on administrative costs in 2014, according to a recent Los Angeles Times article. Officials from the health insurer strongly rejected the most recent allegation that was made by a former company executive in a complaint to state regulators.
Before tackling the premium problem, it is important to revisit the Blue Shield suite at Levi’s Stadium.
A 2014 San Francisco Chronicle article said suites like the one Blue Shield leased at the San Francisco 49ers’ new home are “priced at between $250,000 and $400,000 a year and require a 10-year or 20-year commitment. That puts the price anywhere from $2.5 million to $8 million.” That suite price tag, which covers 20 tickets and parking, does not include food and drink. If you have been to a sporting event recently, you realize that adds another $1 or $2 billion to the final check (well, it sure seems that way at the register).
A Blue Shield spokesman told The San Francisco Chronicle in 2014 that the luxury box’s primary purpose “is to interact socially with some of our larger membership groups,” and it would not be available to executives for “their personal use.” No word that anybody from the State, the 49ers or any watchdog group has checked ID at the door, or for that matter, found out who has been enjoying the Suite Life courtesy of the Blue’s checkbook.
If the latest allegations in the filed complaint are substantiated by investigators, Blue Shield could be forced to pay additional rebates to customers. I am still waiting for my first refund check.
The latest complaint may be another loss for Blue Shield, which is California’s third-largest health plan. Blue Shield of California already lost its tax-exempt status for failing to deliver sufficient public benefits, such as affordable health coverage. According to the LA Times article, Blue Shield has about 3.4 million customers in California. However, the complaint relates to only the nearly 500,000 Californians who bought individual Blue Shield plans, rather than gain coverage through an employer.
The latest charge stems from a series of administrative errors that Blue Shield made in 2014, when the plan was extending coverage through the new insurance marketplace created by the Affordable Care Act, known as Obamacare. At issue is a complex bit of accounting required by the law to ensure that consumers’ insurance premiums go mostly toward care, not executive compensation or other administrative costs. Yes, you are starting to see the picture here and the bottom line is it isn’t pretty for consumers.
An insurer selling health plans that customers buy on their own — as opposed to getting them through an employer — must spend at least 80 percent of its customers’ premiums on their medical care or issue rebates to those customers. This mandate makes complete sense to me. Health insurance premiums are to insure medical coverage is largely paid for if, and when, it is needed by the subscriber and/or the subscriber’s family. The premium dollar has limits as to being spent on the executive good life…or advertising.
Amid the difficult transition to the new marketplace, Blue Shield stated it paid millions of dollars in medical claims that it subsequently concluded were erroneous because members had dropped their coverage or received care out of their network that should not have been fully covered.
The insurer told California regulators that 2.6 percent of its claims were paid in error. As a mea culpa, the plan did not seek to recoup the excess payments from customers or medical providers, according to Blue Shield of California officials. Unfortunately, the overpayments were included when Blue Shield reported to the federal government how much it paid in medical claims and how much it spent on administrative costs. That action, in turn, inflated Blue Shield’s ratio of medical spending to administrative spending. This is a crucial calculation known as the Medical-Loss Ratio, or MLR, that is used to determine potential penalties on insurance companies.
According to The Los Angeles Times article, Blue Shield did not meet the standard of spending 80 percent of its customers’ premiums on healthcare in 2014 and was forced to refund more than $64 million. If Blue Shield had not included the overpayments in the calculation it reported to the government, it would have fallen even further under the 80 percent threshold and had to pay even more rebates, former Blue Shield Public Policy Director Michael Johnson said. Johnson should know as it was he who filed the complaint this summer with the California Department of Managed Health Care.
Johnson left the company in 2015 and has become an outspoken critic. He is now in a legal fight with his former employer as he proudly wears the Whistleblower Belt. How much more Blue Shield might have to pony up to subscribers is not clear. However, Johnson is seeking to hold the insurer accountable for failing to comply with the law.
Let’s hope Blue Shield does not fumble the ball this time. While I am no longer a Blue Shield subscriber, I would be happy to settle up with a Levi Stadium invite to the Suite. I will even check IDs in the room to make sure all is still on the up and up in Santa Clara.