BCBSND has issued a number of factual corrections to a news story the Forum of Fargo-Moorhead leaked prematurely September 8 before the 15-day audit report confidentiality period had ended.
BCBSND President and CEO Paul von Ebers, Finance SVP and CFO Dave Breuer and Communications VP Denise Kolpack presented story corrections when they met with the editorial staff at the Forum of Fargo-Moorhead September 9. "We have asked the Forum to correct the factual errors," Kolpack said.
Below are BCBSND's story corrections, first listing the Forum's statement and then BCBSND's factual correction. BCBSND also issued an Audit Q&A.
BCBSND's corrections to September 8 Forum story
Altogether, Blue Cross Blue Shield of North Dakota premium payers picked up the tab for $418.3 million in administrative expenses over the five-year period.
There is no context to this statement. $418.3 million is a large number of and by itself. In that same time frame, BCBSND paid claims of $5.3 billion.
As noted by examiners, those expenses are used to determine members' premiums, which have skyrocketed in recent years at double-digit rates along with soaring medical costs.
Using the examiner's numbers in the report, administrative costs have increased at an annual average rate of 5.8%, not double-digit. The costs as reported do not explain additional programs and mandated requirements. One of the additional lines of business is the Medicare Advantage and Prescription Drug Program. These costs represented nearly $4 million in administrative costs that did not exist in 2004 because the programs didn't exist. Advanced Medical Home and Wellness Programs were added to keep claims costs down over the long term.
Under that same time frame, BCBSND claims payments increased at an annual average rate of 7.52%.
Notably, however, more than two-thirds of the increase in expenses during the examination period went to employees of Blue Cross Blue Shield as well as its affiliates and subsidiaries, examiners found.
Expenses at Blue Cross Blue Shield of North Dakota and other companies under the corporate umbrella of Noridian Mutual Insurance Co. climbed by $64.2 million over five years ending in 2008, with 68% of the rise – $43.7 million – consumed by increased employee compensation and benefits.
First of all, BCBSND is a service company and the bulk of our expenses are employee and related costs. In 2008, employee compensation and benefit costs made up about 65% of the budget. So when we receive additional workload/contracts, it would be very natural that the increase in costs would be similar to that same percentage as reported by The Forum. As for the 68%, it's true that in the Noridian enterprise, which includes Noridian Administrative Services (NAS), costs increased by $64.2 million, but the largest part of that increase came from NAS, which competitively bid and was awarded additional government workload. Most notably, NAS was awarded the Durable Medical Equipment (DME) workload for 17 states. Thirty-five million of the $64.2 million comes from NAS and is primarily due to growth. The increased workload for NAS has added more than 1,000 jobs in North Dakota, and Medicare work is paid by the federal government. The increased workload helps keep administrative costs down by spreading corporate overhead and sharing of back-office support functions.
The lion's share of that increase went to 15 top Noridian executives, whose salaries and benefits totaled $31.2 million during the five-year examination period.
Because this statement follows the total increase of $64.2 million, it gives the reader the impression that of the $64.2 million, $30 million was due to executive increases, when in fact the salary and PAR for executives went up $2 million over the five-year period.
As part of their compensation, the 15 executives pocketed $5.5 million in bonuses, $3.6 million of which were billed to Blue Cross Blue Shield, under an incentive program examiners concluded was rigged to pay out even when the company suffered losses.
This statement is not true. The company has had bottom line net gains after PAR payouts and after taxes each of the five years completed under this examination.