Buffalo-based HealthNow New York fined $1 million for denying claims for infertility treatment and other violations
State insurance regulators on Monday imposed a hefty $1 million fine on HealthNow New York for multiple violations of state law, but the Buffalo-based company said it has already corrected past claims practices.
The state penalized Buffalo’s largest health insurer for improperly denying claims for infertility treatment and for not giving consumers enough notice of rate hikes.
The parent of BlueCross BlueShield of Western New York and Blue Shield of Northeastern New York must pay $600,000 in fines after an investigation prompted by one woman’s complaint about infertility coverage discovered thousands of similar violations.
The insurer, which admitted guilt, must also reprocess and pay the claims for as many as 2,500 women in the Buffalo, Albany and Central New York areas. Most of the improper claim denials involved about $150, and the company must pay interest on what it owes.
Additionally, HealthNow will pay an additional $450,000 for other insurance law violations, including giving only 15 days’ notice of rate increases instead of the 30 days required by state law. That violation affected more than 1,100 people in 2005.
It was also hit for not paying claims within 45 days of receipt, failing to deny or request more information from members within 30 days, and inconsistent financial reporting.
The company now has 90 days to develop a plan to correct the violations and present it to regulators. “The Department will be examining the insurer later this year to verify that corrections have been made,” Superintendent of Insurance Eric Dinallo said in a statement.
The combined penalty, while not the largest ever by the state, marks a significant slap on the wrist for the health insurer, which serves more than 815,000 consumers across upstate New York. This is the first time regulators used a comprehensive enforcement action to deal with infertility complaints instead of handling them individually.
And regulators noted they increased fines under the Spitzer and Paterson administrations — from what they were under Gov. George E. Pataki— to create more of a deterrent against bad behavior. Last year, regulators fined Oxford Health Plans $4 million in the largest health insurer penalty.
“That’s pretty substantial. It’s a big fine,” said Insurance Department spokesman Ron Klug of HealthNow’s fine. “We want to take consumer protection seriously, and we want to make sure we make companies comply. One of the ways you can do that is by making sure you’ve got reasonably stiff fines.”
But HealthNow, while admitting guilt, said the fines were for policies that have been changed.
Company officials noted that the penalties resulted from an audit of practices dating back as much as nine years, and that changes were already implemented in October 2006 to address all of the problems. Only a written status report is now due to the state in three months.
“The audit by the New York State Department of Insurance reviewed policies and procedures that existed several years ago. Since that time, Health- Now has restructured the way it does business, with a new operating model in place,” said spokeswoman Karen Merkel- Liberatore. “We are confident that appropriate steps necessary to prevent recurrence of similar violations in the future have been made.”
The substantial penalty, announced by regulators on Monday, stemmed from a multi-year investigation by regulators that began as a routine “market conduct” exam of systems and procedures in place from October 1999 through December 2003.
But it was overshadowed by an Ithaca woman’s complaint in 2004 that HealthNow denied her $154 claim for payment for an intrauterine insemination treatment. The insurer told the woman the treatment wasn’t covered, but reversed course after she challenged them. That’s when regulators told Health- Now that coverage was required because the treatment wasn’t excluded by law.
Meanwhile, the department began a full examination of HealthNow’s records, discovering other improper denials.
“Infertility can be a very difficult experience. Women should not have the added burden of fighting for health benefits they are entitled to receive,” Dinallo said in a press release. “It took a lot of courage for one woman to come forward with her experience, but now others will benefit from her strength.”
Separately, the examination also found HealthNow didn’t give sufficient notice for rate hikes in 2005. State “file and use” regulations allow insurers to raise rates without prior approval with 30 days’ notice.
HealthNow, however, gave only 15 days’ notice that year for about 1,100 members whose policies renew in the middle of a month instead of on the first day of the month.
“We have been fully cooperating with officials from the Department of Insurance for more than four years,” Merkel-Liberatore said. “Since the changes were implemented, prompt pay fines and consumer complains have been reduced, while response time to member concerns has improved.”
