FEHBP contractor agrees to pay $1.5 million settlement

An insurance company has agreed to pay $1.5 million to settle allegations of overcharging the Federal Employee Health Benefits Program.

According to the Justice Department, between 1992 and 2002 Anthem Blue Cross and Blue Shield of Indianapolis overcharged the Office of Personnel Management, which administers the FEHBP, by including "impermissible profit" in its charges. Justice also claimed that the company failed to pass on to OPM the full amount of its share of money from drug company rebates.

Anthem, which is owned by WellPoint Health Networks, supplies insurance to FEHBP participants in Indiana, Kentucky and Ohio.

"The prosecution of this and similar actions reflect the department's continuing commitment to ensuring that contractors meet their responsibilities to federal health care programs, including the FEHBP," said Peter Keisler, assistant attorney general for Justice's Civil Division.

The accusations against Anthem were raised by Andrew M. Garner III, a former employee of the company, under the False Claims Act, which allows private citizens to bring suit on behalf of the government and potentially receive a share of the proceeds.

Garner alleged that Anthem knowingly included a profit of about 10 percent in the company's billings to OPM for printing, mail sorting and the microfilming and archiving of documents.

Garner also alleged that in order to encourage its customers to use a list of preferred medications, those prescriptions were offered to Anthem users at a lower cost than comparable brands. This increased sales for the drug manufacturers, who in turn gave rebates back to Anthem. But Anthem refunded only a portion of those rebates to OPM. Garner said that the average rebate for the preferred medications was $4 per prescription but that Anthem gave OPM only $1.

According to his attorney, Tim Keller, Garner will file an objection to the settlement some time in the next two weeks, arguing that the $1.5 million is not "fair, adequate and reasonable under the circumstances." Keller would not disclose the amount his client believes is appropriate. Garner and Justice officials must negotiate what percentage of the settlement he will receive.

Garner was terminated in 1998 from his position as director of marketing and health maintenance plan operations in Anthem's Cincinnati, Ohio, office. Keller says his client was terminated because of complaints he made to the company about the FEHBP contract.

A spokesperson for Anthem, Debbie Davis, said the company has cooperated with federal officials and is "pleased to have resolved the government's concerns." The settlement does not include an admission of liability on the part of the company.

Davis said Anthem will continue to provide health insurance under FEHBP and that the settlement will not affect any of its current clients.