ND audit: $35K party, $15M bonuses at Blue Cross Blue Shield

[Joanne98]

Source: AP


BISMARCK, N.D. — Blue Cross Blue Shield of North Dakota used premium payments to fund $15 million in employee bonuses, cover $35,000 for a retirement party and pay for other questionable expenses, according to a state audit released Tuesday.

Insurance Commissioner Adam Hamm said he ordered the company to make changes after insurance examiners found inappropriate or excessive expenses paid with policyholders' dollars. He said the nearly inch-thick report raised questions about compensation, travel policies, investments and severance packages.

Hamm said the report showed "a lack of judgment" by board members and senior management. It was the first audit of the nonprofit company since 2004.

"I expect and demand that those things won't happen again," Hamm said.

Company officials said Tuesday that changes were already being made when Hamm ordered the audit in March, following criticism of a sales managers' trip to the Grand Cayman Islands that cost $238,000. The company's chief executive at the time, Mike Unhjem, was fired later that month.

"The culture of this organization is very different than it was a few months ago," said board chairman Dennis Elbert.

The company provides health care coverage to more than 375,000 North Dakota residents and 75,000 nonresidents.

Hamm said that of the $418 million in the company's administrative expenses over the past five years, the audit found "millions and millions of dollars in excessive expenses."

The report said that premium payments funded nearly $15 million in employee bonuses that were almost assured regardless of performance, a $3.5 million investment in a hotel in Fargo and sales reward trips to resorts totaling $1.2 million.

In one case, the audit found that $34,814 was spent for a party for a retiring vice president.

"Health care premiums are for health care, they are not for expensive retirement parties, corporate jets, risky hotel investments or a compensation structure that rewards senior management regardless financial performance," Hamm said.


Read more: http://www.google.com/hostednews/ap/article/ALeqM5jzTzv6Yw5fqfQNCvMAUIkpBdHqGAD9AJI8L80

---

Here's the Insurance Commissoner's report

Hamm releases Blue Cross Blue Shield target exam report

Posted on 9/8/2009

BISMARCK, N.D.-North Dakota Insurance Commissioner Adam Hamm today released the Report of Target Financial Examination (Report) of Noridian Mutual Insurance Company, doing business as Blue Cross Blue Shield of North Dakota (BCBS).

The Report is being released after the Insurance Department received written authorization from BCBS to publish the Report prior to the date required by state law.

The Report includes findings of excessive expenses paid with policyholders' dollars. Some of the main areas of concern include compensation, travel policies, investments and severance packages.

"The bottom line is that health care premiums are for health care, they are not for expensive retirement parties, corporate jets, risky hotel investments or a compensation structure that rewards senior management regardless of BCBS's financial performance," Hamm said.

Hamm has directed the company to address these matters immediately. In the directive letter that accompanies the Report, Hamm outlined that as a nonprofit mutual insurance company, BCBS's Board of Directors and management are obligated to act in the best interest of BCBS members in providing cost effective health care benefits to its members.

"I direct the Board to adopt and implement stricter standards in all matters of BCBS operations, human resources and financial management to ensure that the organization is managed for the good of its members," Hamm said.

BCBS is required to file a written explanation within 30 days outlining the actions the company will take to adopt and implement changes.

The Insurance Department used a team of financial insurance examiners to conduct the exam. It covered a period from Jan. 1, 2004 through March 31, 2009 and took the Department 14 weeks to complete. Much of this time was spent in Fargo gathering information from company executives.


Click here to read the report.
http://www.nd.gov/ndins//uploads/resources/537/exam-report---noridian.pdf

[msongs]

1. my county has more ppl than ND - imagine the billions in blue cross waste in california nt

[Joanne98]

2. Yeah. You should send this report to your Insurance Commissioner and ask

if they have a similar investigation going.

[tinrobot]

3. And how many people paid premiums but were denied coverage?

My guess is... a lot.

[Joanne98]

4. Here's a comment from a ND Democratic blogger

Blue Cross Blue Shield Investigated By ND State Insurance Examiners

Just remember this from Blue Cross Blue Shield when they say they need to increase insurance rates in North Dakota! Thanks to the Fargo Forum for this investigation.


Nearly $15 million in employee bonuses that were almost assured regardless of performance.

Sales reward trips to posh resorts totaling $1.2 million.

A $3.5 million investment in a murky hotel partnership lacking audited financial statements.

All this and much more during just the past five years are among almost half a billion dollars in expenses detailed in a report by state insurance examiners who probed spending practices by Blue Cross Blue Shield of North Dakota.

Sounds like the "Blues" aren't hurting for cash. Of course, they only wound up with a 22% increase of insurance rates in Michigan after going after a 59% increase. Maybe we should all get in the insurance racket.


The report’s bottom line: The lavish expenses for the controversial trip to the sandy Caribbean beaches were symptomatic of a broader culture of extravagant spending by the company that collects almost 90 cents of every $1 in private insurance premiums paid in North Dakota.

Altogether, Blue Cross Blue Shield of North Dakota premium payers picked up the tab for $418.3 million in administrative expenses over the five-year period.

As noted by examiners, those expenses are used to determine members’ premiums, which have skyrocketed in recent years at double-digit rates along with soaring medical costs.

Blue Cross Blue Shield executives and directors repeatedly have boasted that the company has among the lowest administrative costs in the nation, less than 7 cents of every $1 in premiums.

Notably, however, more than two-thirds of the increase in expenses during the examination period went to employees of Blue Cross Blue Shield as well as its affiliates and subsidiaries, examiners found.

Sounds like Blue Cross Blue Shield is going to find their practices under scrutiny and that in turn will bring out even more damning information that the "Blues" might not have been on the up and up when discussing their rates and practices. Just another reason why either the insurance companies need tighter regulations, or more competition.

http://anangrydakotademocrat.blogspot.com/2009/09/blue-cross-blue-shield-investigated-by.html

[avaistheone1]

8. "Nearly $15 million in employee bonuses that were almost assured regardless of performance." Uh?!!

These health insurance companies behave like the Wall Street banksters.

The greed and arrogance of the health insurance companies think we are going to agree to mandatory premiums! I don't think so. That is not going to happen.

[Blaze Diem]

5. Ahh Yes. NDakota, Blue Cross & Blue Shield...Home of Senator Kent Conrad

Seems lavish trips & bonuses weren't all they bought.

Pathetic

[Joanne98]

6. The gang of six tried to get a deal TODAY before the speech... GEE

Do ya think this report had anything to do with that?

[bl968]

7. The truth is

Some non-profits are not really true non-profits, they just divest what would be profits in a normal company through their payroll, and as incentives and other bonuses.

[Divine Discontent]

9. those SICK IN THE HEAD bastards. millions in bonuses, big parties - & medical needs denials!

FU** BCBS!

[NecklyTyler]

10. K&R

[Hubert Flottz]

11. Bush's people would never have looked into this.

Stealing was legal under GOP/MOB rule. Corporations were above the law because the law was busy playing politics.

Edit...This is a story we should all send a link to, to our congress critters...

[Hubert Flottz]

12. Sent links to story to...

Robert Byrd, Nick Rahall and Jay Rockefeller. Thanks.

[madrchsod]

13. Ed Schultz was the guy responsible for the investigation.......

[Kolesar]

14. Meanwhile, my employer has suspended bonuses & 401k and cut our pay 5%...eom

[quiet.american]

15. Ouch. nt

[Hugin]

16. K&R