July 24, 2008-Bismarck Tribune

Hospital administrators greeted the news with relief. Lawrence Blue, the top administrator at Cavalier County Memorial Hospital in Langdon, said the reduction may have forced the hospital to cut back hours among its 130 employees.

“We operate on a very slim margin,” Blue said. “Things are tight as it is.”

Roger Unger, the administrator of the Linton Hospital, said rural hospitals would have been particularly hard-hit by Blue Cross Blue Shield’s planned payment reduction. The company dominates North Dakota’s health insurance market, with more than 350,000 policyholders.

“If we break even, it is a good year,” Unger said. “You depend on grants and fundraisers and those types of things to make up a deficit … If a (payment reduction) costs you $1,000, you’ve got to sell a lot of doughnuts to make up $1,000.”

Unhjem, at a news conference in Fargo on Wednesday, said the Fargo health insurer has also requested a formal hearing on Insurance Commissioner Adam Hamm’s rejection last week of a proposed 14.8 percent rate increase for a policyholder group.

Blue Cross Blue Shield’s bank depositor group, so named because premium payments are withdrawn directly from bank accounts, covers about 40,000 people.

Unhjem said the denial of the rate rise will cost the company $950,000 monthly in lost premium income, and may require it to seek an increase of 28 to 30 percent next year, he said.

Hamm called Unhjem’s statements “predictable and unfortunate,” and said the request was denied in part because he was unsure Blue Cross Blue Shield would follow through with promised increases in payments to medical providers.

Last year, Hamm granted the health insurer a 9.9 percent increase on its group health policies. Blue Cross had sought an increase of 17.3 percent, including a projected 5.6 percent rise for medical provider payments.

Even though the company got less than it requested, it said it would keep the intended medical provider raise, only to decide later to cut their payments by 2.5 percent, the insurance commissioner said.

As a result, Hamm said, he doubts Blue Cross Blue Shield’s promises that it will use part of its requested rate increase for bank depositor customers to improve medical providers’ payments.

“That becomes an unreliable piece of information for me,” Hamm said. “Once (Blue Cross Blue Shield) tells this department they’re going to do something … then they have to live up to their word.”

Unhjem said Wednesday that Blue Cross Blue Shield was discarding the idea of cutting medical providers’ payments by 2.5 percent. Under the plan, which was to take effect Aug. 1, the insurer was to withhold the money, with the possibility of paying it later if medical expenses declined.

“It became apparent to us that this withhold, even though it’s a relatively small amount, could have been the tipping point for some of those providers, especially some of the smaller rural providers,” he said.

Even Fargo’s MeritCare Health System, which expected to lose between $800,000 and $1 million from the payment reduction, said it “would simply push their precarious financial situation even further,” Unhjem said.

MeritCare recently announced employee layoffs and cutbacks in hours, along with the closing of a clinic in LaMoure, in southeastern North Dakota.

Hamm said he believed Unhjem’s claims of financial distress were exaggerated. Even if the company’s projected deficits for its bank depositor insurance group come true over one year, the insurer’s surplus would be reduced by only about 5 percent, Hamm said.

“This is a company that is financially strong,” Hamm said. “The department’s financial examiners would not be concerned.”

Unhjem said the company has imposed a “hiring frost” in an attempt to cut $1 million in personnel expenses, and has left 75 to 80 positions unfilled. Layoffs are not being contemplated, said Unhjem, who said the move would be “a gross overreaction.”

He said the company, which is organized as a nonprofit mutual and owned by its policyholders, is an efficient operator, paying out an average of 94 cents in claims for each dollar of premium income.