PacificSource Pays $135,000 Fine For Service Appeals Violations

Springfield-based PacificSource Health Plans has paid a fine of $135,000 for nearly 4,500 instances in which the commercial health insurer violated state laws on how insurers must handle complaints from members and health care providers.

The 4,425 violations took place March 1, 2017 through Dec. 31, 2018 and centered on how PacificSource mishandled appeals filed by members and health care providers when the company denied services, according to the consent order by the Oregon Department of Consumer and Business Services, which oversees commercial health insurers.

For example, in 939 instances, PacificSource failed to make a decision on an appeal by a provider within 30 days of receiving the appeal, according to the order. That drew a $20,000 fine.

Other violations included failing to comply with state rules on when appeals filed by providers needed to be acknowledged and failing to comply with state rules on when to provide written notification to providers about decisions.

The PacificSource agreed to the order – which was filed last August - and has paid the fine.

In a statement to The Lund Report, PacificSource said:

“Unfortunately, we had some staffing issues in our Grievance & Appeals Department during the period covered by the investigation and acknowledge and regret that we did not meet the requirements of the law. We have paid the fine, corrected the issues and are now in full compliance.”

The violations came as PacificSource was growing rapidly. The parent company, which operates across the Pacific Northwest, has a suite of health insurance operations. Its coordinated care organizations provide Oregon Health Plan insurance to Medicaid members; its Medicare arm insures the elderly; and PacificSource Health Plans provides commercial and individual plans. PacificSource Health Plans’ Oregon operations – and PacificSource’s Oregon Medicare plans - are the only units regulated by the state business agency.

PacificSource Health Oregon operations grew by more than 11,000 members from the end of 2017 to the end of 2018, when membership reached nearly 114,000, state records show.

The violations revolve around the inner workings of the benefit denial and appeals process, familiar to anyone who has sought a certain medical procedure, service or medication, is told by the insurer that it’s not covered or necessary, and who contests that decision.

The process is often criticized as a time-consuming and treatment-delaying bureaucratic maze, although insurers say it is an important tool for controlling costs and avoiding wasteful treatment.

Members -- and the health care providers who typically carry out most of the appeals -- want the process to be quick so they can get on with treatment.

The state-mandated deadlines are key to keeping the process brisk, said Brad Hilliard, a spokesman for the state consumer agency.

For example, if a provider needs prior authorization before proceeding, delays by an insurer mean that "the consumer is not getting a service that they need and may be entitled to," Hilliard said. If delays lead to a past-due balance on a consumer's account, "a consumer could be refused future services or treatments from a provider, could actually be required to pay the bill out-of-pocket, and could received a negative credit report if a bill goes unpaid," he said.

In thousands of instances, PacificSource failed to meet the response deadlines spelled out in state rules, the order shows.

State investigators clumped PacificSource’s violations into eight categories, depending on the rule violation in question.

For example, state rules required insurers to make a decision on a member’s appeal of denial of service within 30 days. But in the time span investigated, on 206 occasions PacificSource failed to meet that deadline. That was out of 727 member appeals for denial of benefits that the company received in that time.

Also, in the time span investigated, providers filed 2,831 appeals with PacificSource challenging the company’s denial of benefits. On 2,031 occasions, PacificSource failed to acknowledge the appeal within the required seven days; on 939 occasions PacificSource failed to make a decision within the required 30 days; and on 747 occasions, PacificSource took longer than the required 30 days to give the provider a written notice of the decision. 

The bulk of the fine -- $80,000 – was for PacificSource’s mishandling of provider appeals.  

You can reach Christian Wihtol at [email protected].







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