After outsourcing trouble, Blue Cross of Minnesota hiring 300-plus to manage public insurance enrollees

Blue Cross and Blue Shield of Minnesota is hiring more than 300 people as it prepares to bring back in-house work on Medicaid and related state public health programs that it started outsourcing in 2018.

The transition was rocky after Eagan-based Blue Cross awarded the contract for the back-office work to Amerigroup, a subsidiary of the large Indiana-based health insurer Elevance Health.

Records obtained this month by the Star Tribune show the Minnesota Department of Human Services issued eight corrective action plans between 2018 and 2020 against the HMO division at Blue Cross, fining the company a total of $13.15 million.

Dana Erickson, the chief executive at Blue Cross of Minnesota, did not mention the troubles in an interview, saying the decision to bring the claims processing and customer service work back in-house reflected her focus on growth at the state's largest nonprofit health insurer.

"We're naturally coming to an end of our contract with Amerigroup, so it was a good time to really reassess," Erickson said. "We actually see it as a huge opportunity for us to re-think the model that we have."

Medicaid and the related state public programs provide coverage for lower-income state residents as well as certain elderly/disabled populations. Service to the groups covered by the programs is "an important part of who we are — a very important mission," Erickson said.

The additional hiring already has started. Currently, Blue Cross employs about 3,025 people.

The outsourcing decision predated Erickson, who became CEO in October 2021. Bringing the work back to Blue Cross is one of her most visible moves in leadership thus far.

"We are very upfront, if you will, internally — if we talk about our goals — on growing," she said. "There's no reason that Blue Cross cannot maintain and grow its No. 1 market share, even with the competition we have."

Blue Plus for decades has been a managed care organization for enrollees in the state's public health programs. This month, the HMO is managing care for nearly 389,000 people enrolled in the state's health care programs.

The Minnesota Department of Human Services (DHS) says all eight corrective action plans at Blue Plus were resolved between 2018 and 2021.

DHS flagged numerous problems, from delays in responding to prior authorization requests to charging patients the wrong copay amounts for prescriptions. While those two corrective action plans and three others were resolved within 30 to 60 days and without sanctions, there were three that resulted in financial assessments.

The biggest — $7.49 million — stemmed from the insurer's failure to provide accurate and timely payment of claims to health care providers. DHS says the problem persisted, unaddressed, for two years.

The troubles surfaced in spring of 2019. DHS notified Blue Plus that a number of health care providers were complaining about the insurer not making timely payments and wrongly denying claims. The complaints came from providers across service areas, DHS said, including mental health for adults and children, home care, medical equipment and substance use disorder.

"DHS has serious concerns regarding Blue Plus' failure to have proper oversight of its subcontractor, Amerigroup, and the failure to implement proper claims adjudication," a DHS official wrote in a May 31, 2019, letter. "DHS is also concerned regarding the amount of time it takes Blue Plus' subcontractor Amerigroup to implement solutions once defects are identified."

The agency said it considered the problem an "urgent matter and a breach of contract" and was concerned about "the substantial likelihood of [this issue] adversely impacting a growing number of enrollees."

The problem persisted, state records show, from March 18, 2019, through April 4, 2021, resulting in sanctions of $5,000 per day for a 749-day period.

The insurer also was sanctioned $5.55 million for a problem with processing certain claims for payment to federally-qualified health centers and rural health centers. Blue Plus was out-of-compliance for a total of 555 days, DHS said, from April 8, 2019, through October 13, 2020.

The department also imposed a $110,000 sanction related to patient complaints that they weren't provided required transportation to health care appointments from an Amerigroup subcontractor. DHS raised the issue in 2018, and it was resolved by November of that year.

"All eight [corrective action plans] are related to the Amerigroup transition," DHS said in a statement to the Star Tribune.

Blue Plus said in a statement to the Star Tribune that it took multiple steps over the past few years to address the issues outlined by DHS while improving business partner agreements. The insurer said it was "confident that we have solved all of these matters for the duration of the current vendor agreement."

"As this contract will expire at the end of the year, Blue Cross is in the process of bringing capabilities back within our Blue Plus HMO, with full staffing by Blue Cross associates in 2024," the insurer said.

Amerigroup said in a statement: "Through the efforts of both of our organizations, any previous migration and implementation challenges have since been resolved.

"Blue Cross made a business decision not to renew our contract for 2024," the insurer said. "Amerigroup continues to collaborate with Blue Cross to uphold our contract promise and remain focused on serving Minnesota's Medicaid enrollees through 2023."

The upcoming transition from Amerigroup to Blue Plus will warrant increased oversight, DHS said in a statement, as with "any project of this magnitude."

"DHS will work closely with the plan before, during and after the handoff to help facilitate a successful transition and will be prepared to require prompt remediation if any issues are to arise," the department said.

Blue Cross already pays claims and handles customer service for other lines of business, Erickson said, so adding Medicaid offers the chance for more efficiency.

"Bringing back in those types of capabilities gives us an opportunity to leverage scale internally and again to try out some new, different solutions as we build it," she said. "It's a strategic move as well as one that I think supports our core operations."