Blue Cross and Blue Shield administrative expenses examined

Print More

(Host) Blue Cross and Blue Shield of Vermont has agreed to hire an outside expert to look at its administrative expenses.

Meanwhile, Governor Jim Douglas says he’s concerned about the size of the increase in the company’s administrative fees.

VPR’s John Dillon reports:

(Dillon) Blue Cross and Blue Shield of Vermont is a non-profit company and is closely regulated by the state.

Last month, the Department of Banking Insurance Securities and Health care Administration rejected the company’s request to raise its administrative fees by 21%. The state wants the company to provide more information including detail on its executive salaries and bonuses to find out if the fees were justified.

Now the company and the state have reached an agreement on how the review will be handled. Christine Oliver is deputy commissioner for health care administration.

(Oliver) “Specifically, Blue Cross will retain a qualified independent examiner approved by the commissioner to prepare and deliver a report analyzing Blue Cross’ administrative expenses.”

(Dillon) Governor Jim Douglas told reporters this week that the matter is before regulators, and he didn’t want to comment in detail.

(Douglas) “But just as an individual, I’m always concerned when overhead of a company providing an essential service is apparently significant compared to the rate increase they’ve requested.”

(Dillon) Blue Cross says it filed for a big increase this year because the administrative fees the state had approved in previous years had not kept pace with the company’s actual expenses.

Blue Cross Vice President Kevin Goddard said last week that the fees amounted to a very small portion of the company’s overall premiums.

(Goddard) “It’s a very, very small number. The entire administrative expense budget of the company is well under 10%. Ninety-one or ninety-two cents of every dollar we collect goes right back out the door to providers for payment for health care services that our members receive. That’s half of what’s commonly in the industry.”

(Dillon) But Steve Jeffrey, executive director of the Vermont League of Cities and Towns, says administrative fees were a big piece of the League’s recent Blue Cross rate increase.

(Jeffrey) “The increase in the administrative services charges that Blue Cross was going to levy against us would have increased our rates by 5.21% in and of themselves. From our perspective that certainly was not an insignificant portion of what we were going to have to pay.”

(Dillon) The League of Cities and Towns health trust recently decided to switch from Blue Cross to Cigna, a large national health insurer.

The state is also looking at salaries and bonuses paid to Blue Cross executives. The president of the company was paid about $850,000 in 2005, including $440,000 in bonuses.

By comparison, the chief executive of MVP Health care – a company that provides coverage here and is roughly the same size as Blue Cross – earned about $358,000 in 2005.

For Vermont Public Radio, I’m John Dillon in Montpelier.

Comments are closed.