Department of Managed Health Care Issues Enforcement Action Against Blue Cross of California

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By Meena Kaypour

On February 26, 2021, the Office of Enforcement within the Department of Managed Health Care (DMHC) concluded its investigation of Blue Cross of California concerning the Plan’s violations of the Knox-Keene Health Care Service Plan Act of 1975 and other regulations, fining Blue Cross $10,000. In a Letter of Agreement issued by the Office of Enforcement Deputy Director and Chief Counsel Sonia Fernandez, DMHC outlines the factual summary, liability analysis, suspected violations, and Corrective Action Plan.  Blue Cross of California accepted receipt of the agreement on March 10, 2021.

According to the letter, on October 30, 2018, a Blue Cross enrollee went into labor required transportation to a medical center in Los Angeles by an out-of-network ambulance company. The enrollee’s Evidence of Coverage (EOC) covers emergency ambulance services at a 50% coinsurance rate for non-emergency out-of-network ambulance services and a 30% coinsurance rate for emergent ambulance services, whether in-network or out-of-network. Blue Cross charged the enrollee with a 50% coinsurance rate. The enrollee filed a grievance with Blue Cross on April 16, 2019, asking for an adjustment because the transportation was for an emergency.

Blue Cross acknowledged the appeal and upheld its decision in an April 24, 2019 letter without addressing whether the transportation was emergent or non-emergent. The enrollee filed a grievance with DMHC’s Help Center on September 24, 2019. The Blue Cross’s response to the Help Center stated that it incorrectly classified the transportation as a non-emergency. It agreed to adjust the claim according to the enrollee’s out-of-network level of benefits for emergency transportation, leaving the enrollee with a 30% coinsurance rate.

The liability analysis cited Blue Cross for suspected violations of Health and Safety Code section 1386, subdivision (b)(1), acting at variance with the terms of a document filed with DMHC, and Health and Safety Code section 1368, subdivision (b)(6), Failure to adequately consider and respond to an enrollee grievance. Here, the enrollee was charged at the 50% coinsurance rate for out-of-network non-emergent services, but the Plan admitted that this was an error in its September 27, 2019 letter. DMHC also found that Blue Cross’s April 24, 2019 response to the enrollee’s grievance was inadequate. It failed to address whether the ambulance was emergent or non-emergent and failed to provide a clear explanation of the reasons for the Plan’s response, subjecting it to administrative penalties.

In addition to the $10,000 fine, the Corrective Action Plan outlined Blue Cross of California’s agreement with DMHC to utilize this enforcement matter as a case study at the Grievances and Appeals Quality Circle held September 24, 2020, where DMHC retrained its California Grievances and Appeals associates on the importance of properly escalating, clinically reviewing, addressing and auditing grievances that indicate an immediate clinical need, to ensure that the Plan responds to enrollees’ medical needs. Blue Cross was ordered to submit proof that it completed this deliverable within 10 days of its execution of the Letter of Agreement.

The Office of Enforcement handles DMHC litigation needs by investigating alleged violations of the Knox-Keene. The Office of Enforcement exercises its jurisdiction to prosecute violators in an administrative action before the Director of the DMHC, the Office of Administrative Hearings, or the California Superior Courts. When the DMHC finds the Knox-Keene Act is violated, the Director is authorized to take various actions, including assessing administrative penalties and issuing a cease and desist order requiring the subject of the order to stop the offending action. All subjects are afforded appropriate Due Process protections. The Enforcement Action Database allows a user to search enforcement actions posted since July 1, 2000. A user can search by health plan name, organization name, action date(s), penalty amount(s), document category, or violation section (California Health and Safety Code and Title 28 of the California Code of Regulations).

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