DEPARTMENT AND CIGNA HEALTHCARE RESOLVE CLAIMS-HANDLING VIOLATIONS

***

COMPANY TAKES CORRECTIVE ACTION; $200,000 FINE IMPOSED

TRENTON - Banking and Insurance Commissioner Holly C. Bakke today announced that CIGNA HealthCare of New Jersey has resolved claims-handling violations cited by the Department this Spring.

On May 10, the Department released findings and recommendations of its Market Conduct Examination, which revealed excessive claims-payment delays and other claims-related violations by CIGNA Healthcare of New Jersey.

As a result of the Department's examination, CIGNA HealthCare has agreed to take corrective measures to assure that the objectionable practices do not continue.

"CIGNA HealthCare has given the Department full cooperation in addressing and correcting the problems found in our examination,'' Commissioner Bakke said. "The company was diligent in following our recommendations. It took responsibility for the problems and instituted comprehensive reforms. The consumer is the winner.''

A $200,000 fine imposed by the Commissioner reflects CIGNA HealthCare's willingness to take corrective action. The fine would have been higher if CIGNA HealthCare had not demonstrated cooperation in taking corrective steps. CIGNA HealthCare waived its right to a hearing and consented to the $200,000 penalty.

The Market Conduct Examination revealed that CIGNA HealthCare failed in more than 84,000 cases during the Department's review period to comply with the Department’s "prompt-pay" laws that set time limits for either paying or denying the claims of doctors and hospitals. CIGNA also engaged in underpayments, failed to pay the required 10-percent interest penalty on late claims payments, and in general failed to keep adequate records and controls of its claims-handling processes, according to the examination by the Market Conduct unit of the Department's Office of Consumer Protection Services.

CIGNA HealthCare acknowledged that its approach to payment on late-paid claims was not compliant with New Jersey law and has instituted an interest payment program that has resulted in paying medical providers and members about $131,000 in interest on late claims.

CIGNA HealthCare's inability to fully gather and report claim information has been addressed by a company-wide consolidation and upgrade of its systems.

To address the finding that CIGNA HealthCare vendors did not perform as well on claims processing as the company's in-house staff, the HMO has severed relations with one vendor and has agreed to institute more rigorous audits and supervision of vendor claim practices. Acknowledging its overall responsibility for its vendors' actions, CIGNA HealthCare also has informed vendors in writing of their responsibility to comply with New Jersey laws and regulations.

At the Department's direction, all CIGNA HealthCare claims personnel have received formal procedural guidelines directing them to adhere to all New Jersey claim payment rules, including deadlines for paying claims, payment of interest, and proper coordination of benefits.

Commissioner Bakke explained that Market Conduct examinations are designed to accomplish four goals: to ensure that policyholders get what they pay for; to identify areas in which a company is performing well, and encourage those practices in the future; to identify immediate corrective actions that a company must implement, including the payment of restitution; and to provide a basis for the implementation of sanctions for violations of law.

"CIGNA's change of direction shows that the Department's Market Conduct Exams meet the goal of better customer service," Commissioner Bakke said.