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Whistleblower suit alleges illegal practices at Blue Cross Blue Shield

FARGO – A former medical director at Blue Cross Blue Shield of North Dakota filed a whistleblower claim Tuesday against the company, saying he was fired for pointing out what he described as illegal insurance practices that could be costing the company’s customers millions of dollars in higher premiums and out-of-pocket costs.

According to the lawsuit filed in Cass County District Court, Dr. Kenneth Fischer, former director of behavioral health for Noridian Mutual Insurance Co., which does business as Blue Cross Blue Shield of North Dakota, discovered the company had been allowing some members to receive more benefits than others, even though they were on the same plan.

The company would overpay providers out of employer accounts, and then fail to recover those overpayments, the lawsuit states.

The company had no legal means to do so, the lawsuit alleges. The suit also says the company didn’t pursue any means of recovering the money.

The lawsuit comes just days after BCBSND announced $72.9 million in losses for 2013.

Of that, $51 million was attributed to subsidiary Noridian Healthcare Solutions, which sustained heavy losses from a contract to build the bungled Maryland health care exchange.

CEO and President Paul von Ebers was fired Friday after a vote by the BCBSND board of directors.

The lawsuit alleges that Fischer, who was hired in 2011, didn’t have any experience in the insurance industry and didn’t fully understand what was going on with Blue Cross Blue Shield’s business practices until almost three years later.

He discovered what he believed to be faulty practices in his behavioral health area, the lawsuit claims, but soon found it was part of a “significant and widespread” pattern throughout the company, “later determined to infect the entire book of business of BCBSND.”

The Forum of Fargo-Moorhead reported premium increases for the company’s individual customers in 2010 and 2011. It’s set to rise again this year by about 14.4 percent for individual coverage.

Fischer’s lawsuit alleges that he first told Jacquelyn Walsh, vice president of clinical excellence and quality, about his concerns in 2012, but that nothing happened for several months.

In a meeting last Nov. 1, the lawsuit says, Fischer again sat down with Walsh and told her about the alleged illegal insurance practices he discovered, including:

  •  Thousands of claims had been wrongly paid that were previously denied by a medical director, and sometimes reviewers and appeals reviewers.
  •  “Place of service” coding was knowingly done incorrectly by workers in Walsh’s division.
  •  A decade-long culture of “workarounds” was in place that skipped behavioral health analyses and claims.
  •  There was no training or oversight for some of the staff who reported directly to Walsh.
  •  Some key employees had left, taking their expertise with them with no plans in place to recover it.

Fischer insisted Walsh take action, or he would go over her head, the lawsuit says.

Fischer did that three weeks later, meeting with Senior Vice President Sharon Fletcher.

Fletcher allegedly assured him he had done the right thing, and promised to hold Walsh accountable.

Instead, Fischer learned on Dec. 5 that Walsh had complained about him to the company’s human resources department, saying he was disrespectful and raised his voice during their meeting.

Human resources officials referred the issue to an outside law firm, but Fischer’s lawsuit claims he never saw the substance of the allegations against him. In the meantime, nothing was done about his concerns.

Fischer aired his concerns again Dec. 10 in an almost four-hour-long meeting with Noridian’s chief compliance officer, the lawsuit says.

During the meeting, Fischer’s suit says, he informed the compliance officer that the company was violating both the Employee Retirement Income Security Act and the Federal Employees Benefit Health Plan.

The alleged violations could lead to repayments to employer groups and penalties in the millions of dollars, as well as criminal liability in some cases, the lawsuit claims.

Through mid-January to mid-February, Fischer was involved with a mandatory market conduct exam with the Insurance Department.

The exam was concluded Feb. 20. The lawsuit says Fischer was fired days later, ostensibly for failing to attend a meeting with his management team on Feb. 25.

Fischer’s lawsuit says the company also tried to pressure him to resign by listing “unfiled and uninvestigated” charges against him as part of the external human resources investigation, which was completed about a week before the exam with the Insurance Department.

After Fischer was fired, the complaint says, the company continued to retaliate by trying to destroy his reputation by defaming him within his industry.

The lawsuit seeks unspecified damages, including for Fischer’s lost wages and for emotional distress.

Pat Monson, Fischer’s attorney, said proving the irregularities laid out in the complaint would not be part of the suit.

“It would be up to the DOI (Department of Insurance), OIG (Office of Inspector General) and other regulatory agencies to look into the irregularities,” he said.

Dan Conrad, the company’s chief legal officer, said Noridian Mutual Insurance Co. and its legal counsel “are confident that the claims made by the former employee have no merit.”

He declined to comment further, saying the company intended to prove the facts of the employment dispute in court.

North Dakota Insurance Commissioner Adam Hamm said he could not comment on pending litigation.

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