State audits of insurance plans find some issues

Audits of the state's largest health insurance companies found the financial management of taxpayer-supported health plans for low-income Minnesotans is "generally sound," but revealed enough areas of concern to warrant further attention.

The audits, released Thursday by the Department of Human Services, found examples where the state was inappropriately billed for lobbying expenses and advertising, and where certain plans donated millions to charitable organizations. Some of the managed care plans also set aside more money in reserves to pay for unpaid claims "than has been historically necessary," according to the state.

As a result of a "mathematical error," UCare paid an additional $1.57 million to the state to comply with an agreement made by all the plans to cap their 2011 profits at 1 percent.

"Several issues were identified that deserve further action and demonstrate the wisdom of this increased oversight of public programs," Human Services Commissioner Lucinda Jesson said in a statement. "Going forward, strong oversight of the management of these programs will continue and ensure that Minnesotans are receiving the best possible value for their public health dollars."

The nonprofit plans have faced unprecedented scrutiny by state legislators and Congress in recent years over what some say are excessive earnings. A federal investigation is ongoing after lawmakers questioned whether the state may have set higher rates for Medicaid, the health care program for the poor that draws a federal match, to help pay for a state-funded plan that covers single adults who don't qualify for Medicaid.

Gov. Mark Dayton ordered the audits in March 2011 to focus on the 2011 financial statements, in light of some of the questions. The state pays the plans more than $3 billion a year to manage the health of low-income families and some seniors.

The agreement on a one-year cap on profits garnered $73 million in payments from the four largest plans -- Blue Cross and Blue Shield of Minnesota, HealthPartners, Medica and UCare.

The plan, whose entire book of business involves servicing public programs, had paid almost $8 million as a result of the cap. That came on top of a voluntary $30 million it returned in excess reserves as the state was facing a budget deficit.

The audit revealed that Eagan-based Blue Cross and Blue Shield, under its Blue Plus plan, charged the state $88,000 in lobbying expenses -- $67,000 for Minnesota lobbying and $21,000 for federal lobbying -- raising questions about whether taxpayer money should be used for such purposes. Blue Cross also used 11.4 percent of Blue Plus funds on $1 million in television advertisements and a $134,000 sponsorship at Target Field, money not used to market its public program, but rather its "do" campaign.

Additionally, the audit found the company inappropriately allocated Medicare expenses, a federal program, to its Minnesota-backed plans.

Blue Cross and Blue Shield, the state's largest nonprofit, declined to address specifics of the audit.

"Blue Plus has a strong track record of serving public program members very well, with high-quality care and strong customer service," the company said in a statement. "We provided thorough responses to all requests related to this review process, in keeping with our support for transparency of information. We believe our financial reporting practices and methodologies are appropriate, reasonable and as the report states, in accordance with both state law and statutory accounting principles."

The results could prompt officials to revise the amount collected under the cap and incorporate findings when rates are set in the future, the Department of Human Services said. Some findings, such as the Medicare allocation, could draw further evaluation.