14 January 2010

Saginaw City, County, and Community Schools Sue BCBS of Michigan

mLive

Saginaw County, the city of Saginaw and Saginaw Township Community Schools have filed lawsuits against Blue Cross/Blue Shield of Michigan, claiming the insurer overcharged a total of about $7 million in “secret” fees they say they didn’t know were assessed.


The county has claimed the insurer overcharged it $4 million, while the township schools have estimated the amount reached $1.8 million. Both suits were filed in Saginaw County Circuit Court.

The fees, imposed on the county and the schools in 1994, weren’t disclosed until 2008, court filings said.

Meanwhile, the city of Saginaw is part of a lawsuit filed in Genesee County Circuit Court that seeks more than $1 million against the insurer over the same issue, said William H. Horton, a Troy attorney who represents the city, the county and the township schools.

Lawyers have sought to make that case a class action lawsuit with the Genesee County Road Commission and Tuscola and Cass counties, said Elizabeth A. Favaro, also an attorney for the plaintiffs.

Attorneys argued the city, schools and the county weren’t told of the “secret and hidden fee” added to hospital claims in addition to administrative and “stop loss” fees for catastrophic insurance coverage that were disclosed, Favaro and court records said.
Several Michigan counties have filed lawsuits against the insurer over the same issue, court records said.
Blue Cross/Blue Shield has denied wrongdoing. It said the plaintiffs failed to show evidence they didn’t know of the disputed charge, called an administrative services contract access fee, court records said.

“We’ve also demanded that (Blue Cross) stop charging these (access) fees,” Horton said.

The city, county and the school district are self-insured but use Blue Cross/Blue Shield to manage health insurance premium funds.

The insurer charges the access fee as part of the billed cost to handle the claims, court records said.

“These fees were expressly authorized by the Blue Cross contract,” said Blue Cross spokeswoman Helen Stojic, who added that group savings on hospital claims “year after year” gave the city, school district and the county “substantial savings that far exceed the fees.”

She did not have an exact amount.

“It’s unfortunate that knowing these facts, the groups and their attorneys have chosen to take legal action,” she said. “Despite the legal action, all of the groups continue to do business with us.

“We don’t believe these cases will be successful.”

Deputy County Controller Charles H. Cleaver said keeping Blue Cross to manage the self-insured fund doesn’t mean the county is satisfied.

“If we were happy with that, we wouldn’t file a lawsuit,” he said.

In late December opinions released this week, Saginaw County Circuit Judge Fred L. Borchard ruled against Blue Cross/Blue Shield’s motion to dismiss the county and school district’s lawsuit. Borchard also denied the request of both plaintiffs for an immediate finding of a breach of contract. The judge’s opinion said the contract language on the access fee was “ambiguous,” but he would leave it to a jury to decide if a breach of contract occurred.

Any money that the county might recover would go into an employee health insurance fund, Cleaver said. It’s premature to say how the schools might handle a judgment, Favaro said.

Several Michigan counties have filed lawsuits against the insurer over the same issue, court records said.

In a settlement with Oakland County, Blue Cross/Blue Shield agreed to pay $650,000 and provide three years of free administration of Oakland’s self-insured plan, The Detroit News reported in November. The free administration was worth $8.5 million to the southeast Michigan county, one official estimated.

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