ROANOKE TIMES
Copyright (c) 1997, Roanoke Times
DATE: Tuesday, February 4, 1997 TAG: 9702040108
SECTION: VIRGINIA PAGE: C-4 EDITION: METRO
SOURCE: DAN CASEY STAFF WRITER
The company that has handled health insurance for city employees for years has agreed to pay almost $200,000 to Roanoke to avoid a lawsuit over hundreds of overcharges from 1991 and 1992.
In paying the city's general fund $193,951, health insurer Trigon admits no wrongdoing, a Trigon spokeswoman said.
The company, once known as Blue Cross and Blue Shield of Virginia, negotiated discounts with health care providers without informing the city of the cheaper rates or passing them along to city taxpayers.
Trigon banked the overcharges, a pattern of action that has led to similar lawsuits across the state and millions of dollars in penalties for the insurer.
"This is an extremely favorable settlement to the city, and I'm proud to announce it," City Attorney Wilburn Dibling Jr. told council immediately before it unanimously passed a resolution agreeing to the settlement.
Earlier, Dibling had outlined terms of the agreement to council members in a private executive session called to discuss a pending legal settlement.
In 1991 and 1992, Blue Cross and Blue Shield of Virginia was a third party administrator for health claims for hundreds of Roanoke City employees. That meant that it handled billings for city employees' health claims, but didn't provide insurance directly.
During that time, Trigon negotiated discounts with doctors and hospitals that lowered the fees of health care providers without passing along the savings to the city, which is largely self-insured for health insurance.
That practice ended in 1993, when the city won a cheaper rate from Trigon in exchange for allowing the company to keep the discounts, Dibling said.
Prior to 1991, Trigon acted like a traditional health insurer for city employees, a relationship that makes the city ineligible for any discounts in force then.
Negotiations over the 1991 and 1992 overcharges began about 18 months ago, Dibling said.
The unrefunded discounts totalled $219,079. During settlement talks, Trigon offered to pay about $188,000 plus a little more than $5,000 interest on that money. Council agreed to those terms in order to avoid a lengthy and expensive legal battle, Dibling said. The money will be paid in to the city's general fund no later than Monday.
It was unclear Monday whether city employees, who may have made co-payments based on the overcharges, would share in the settlement.
The settlement was the latest in a series of disputes Trigon has been embroiled in since the state began investigating it more than three years ago.
The company, which insures 1.8 million Virginians, paid $5.95 million in fines and $23 million in restitution to its subscribers in 1995 after a state Attorney General's investigation showed policyholders were overcharged for services.
It has reached separate undisclosed settlements with the city of Lynchburg, Colonial Williamsburg, and Wildfowl Heating Inc. of Richmond.
Lawsuits are pending by the city of Charlottesville and Albemarle County, said Brooke Taylor, a Trigon spokeswoman.
"We have always maintained, and we continue to maintain that ... our contracts gave us the right to retain the discounts we negotiated," she said.
The company, which as a not-for-profit insurer had accumulated a $600 million surplus by 1995, has since gone public and sold stock as Trigon Healthcare Inc.
Trigon has negotiated discounts of hospital charges for years, but until 1994 calculated its charges on the basis of the original, undiscounted charge.
After the Richmond Times-Dispatch disclosed the practice in 1993, the insurer changed its procedures. The General Assembly in 1994 enacted legislation banning the practice.
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