ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Thursday, February 15, 1996 TAG: 9602150050
SECTION: B-6 BUSINESS EDITION: METRO
DATELINE: RICHMOND
SOURCE: Associated Press
The U.S. Department of Labor believes Trigon Blue Cross Blue Shield may owe nearly $59 million to businesses that hired it to run their health insurance programs.
The money came from discounts the insurer negotiated with hospitals but did not pass on to the businesses.
A preliminary investigation of Trigon's administration of the health benefit plans shows the insurer may have violated the federal Employment Retirement Income Security Act, the department said in a letter.
Trigon spokeswoman Brooke Taylor said the company is cooperating with the department and hopes to convince the agency that it did not violate the law.
From 1990 to 1993, Trigon kept $58.6 million in discounts instead of passing them on to the businesses, according to the letter. The September 1995 letter was written by Gerard Gumpertz, regional director of the Labor Department's Pension and Welfare Benefits Administration.
Gumpertz said Labor Department staff members believe keeping the discounts and not disclosing the amounts to the client businesses violated a federal law that says plan administrators such as Trigon have a special duty of trust to the people who use the plans.
Taylor said the plans and the people covered by them were not harmed.
``They received the benefits of the contracts they negotiated with us,'' she said, referring to the plans.
She said the plans all were aware Trigon negotiated discounts. She said Trigon's contracts at the time disclosed that passing on the benefits of the discounts would be at Trigon's sole discretion.
``They received a substantial amount of the discounts,'' she said.
Now, Taylor said, Trigon contracts say a fixed percentage, usually 80 percent, of discounts will be passed on to employer plans. Gumpertz's letter said that from 1990 to 1993, employer plans affected got roughly 70 percent of the discounts.
The 381 employers the federal department said were affected hired Trigon to run the plans, but didn't buy insurance from the company. The employers paid claims from their own resources, and paid fees to Trigon to arrange networks of doctors and hospitals and to process claims.
While individual policyholders have been reimbursed by Trigon for overcharges caused by the hidden discounts, the employers who hired Trigon to run their plans have not.
In August, Lynchburg and Charlottesville filed separate but similar lawsuits charging Trigon deceived them by keeping discounts negotiated with hospitals and doctors.
Lynchburg claims it was defrauded of up to $1 million. Charlottesville claims up to $750,000. At the time, Trigon said it would vigorously defend itself against the lawsuits.
The Colonial Williamsburg Foundation and Colonial Williamsburg Hotel Properties Inc. filed suit against Trigon and its HealthKeepers Inc. subsidiary in May, seeking to recover discounts that Trigon failed to credit to Colonial Williamsburg's health benefits plan.
LENGTH: Medium: 62 linesby CNB