When the private sector places "undue burden" on government

If you need yet another reason to understand why healthcare reform is desperately needed, check out this story in today's Chicago Tribune with this alarming headline:

Illinois Blue Cross settles allegations that it denied sick kids coverage.

Here's what happened, according to the Trib:

"The cost of the medical care, which included so-called private-duty nurses for sick children and other ill patients, should have been covered by Illinois Blue Cross, but instead was shifted to Medicaid at a cost of nearly $12 million, prosecutors said. The claims were denied based on 'internal, undisclosed guidelines that were more restrictive than the language provided to patients in plan policy materials,' Madigan’s office said."

As a result of the lawsuit, the company will "pay $25 million to settle allegations that it denied coverage to sick children in need of nursing care by 'fraudulently' shifting their claims to Illinois’ Medicaid program, state and federal prosecutors said this morning."

The case against BCBSIL was initiated by the Illinois Attorney General's office after "years of complaints" from consumers. These are consumers with children who are seriously ill - in need of medical services that included at-home nursing.

Imagine that you are those consumers - imagine that you are a parent of a desperately sick child - and in addition to taking care of your seriously ill child, you are concurrently fighting your insurance company to pay for covered services.

Lisa Madigan, Illinois Attorney General, pulled no punches when talking about the settlement:

"'Blue Cross Blue Shield’s inappropriate denial of legitimate claims placed an undue burden on the state’s finances,' Madigan said in a statement. 'My office is committed to holding health care insurers accountable on behalf of the people of Illinois for this type of deception and fraud.'"

Blue Cross denies the allegations that it engaged in "inappropriate conduct." Of course they deny the allegations. Because for an insurance company, diminishing claims payouts improves their medical loss ratio. So why not "fraudulently" deny coverage to sick children until a regulator cracks down on them for doing it?

Here's a link to the Illinois Attorney General's press release.

BCBSIL does not have a press release on this. However, in the Trib story, they offer this explanation for the situation:

"'This dispute began many years ago when we reviewed certain claims and determined that the benefits sought were not covered by the applicable insurance plans and policies,' Illinois Blue Cross spokesman Jack Segal said. 'These plans and polices determine which benefits are covered and which are not. Several years ago, in cooperation with the state attorney general, we expanded our explanation of benefits to ensure that our members understood what nursing benefits are covered under their plans.'"

But why would a company like BCBSIL pay out this $25 million settlement if they did nothing wrong? Has the Illinois Attorney General's suit inspired them to be nice and pay for services that were not covered?

Or is this yet another example of of a company privatizing profit and socializing loss?