ROANOKE TIMES
Copyright (c) 1996, Roanoke Times
DATE: Sunday, April 28, 1996 TAG: 9604290054
SECTION: VIRGINIA PAGE: B-7 EDITION: METRO
DATELINE: RICHMOND
SOURCE: Associated Press
The state's largest health insurer has settled a lawsuit with Lynchburg, which claimed it had been defrauded of up to $1 million.
Lynchburg sued Trigon Blue Cross Blue Shield over the insurer's billing practices, which were the focus of a 1994 state investigation that led to multimillion-dollar fines and customer refunds.
The city, which hired Trigon to run its health-benefits program for about 1,000 employees, said Trigon kept part of the discounts the insurer had negotiated with hospitals for treating city employees. The suit was to come to trial next month.
Neither Trigon nor the city would disclose terms of the settlement.
``Both parties are satisfied,'' said City Attorney Walter Erwin. ``There was something in it for both of them.''
Charlottesville has filed a similar suit, as have some private employers.
Instead of buying a policy that obligated Trigon to pay for employees' hospital visits, Lynchburg paid those costs itself. It paid Trigon a fee for running the program - including negotiating discounts. The city still uses Trigon.
Trigon officials have said employers have always understood the insurer would keep some of the discounts it negotiates - its contracts say it will share the benefit of those discounts with employers, spokeswoman Brooke Taylor said.
The Lynchburg suit involved Trigon's handling of discounts from 1984 to 1994. At the time, Trigon's contracts said the passing on of discounts would be at Trigon's sole discretion.
Trigon's contracts now detail how the discounts will be shared. Lynchburg's contract says the city gets 80 percent of any discounts and Trigon keeps 20 percent.
Trigon's handling of hospital discounts also is at issue in a federal investigation. The Department of Labor has notified Trigon that a preliminary investigation of its administration of so-called ``self-insured'' plans such as Lynchburg's suggests the insurer may have violated several parts of the federal Employment Retirement Income Security Act.
The department has estimated that from 1990 to 1993, Trigon kept nearly $59 million it probably should have passed on to employers. That represented about 30 percent of the discounts Trigon had negotiated.
Labor Department staff members believed keeping the discounts and not disclosing the amounts violated a federal law.
LENGTH: Medium: 53 linesby CNB