Anthem Blue Cross 2000 Annual Report Download - page 24

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Anthem Insurance Companies, Inc.
Notes to Consolidated Financial Statements (continued)
14. Contingencies (continued)
In addition to the lawsuits described above, the Company is involved in other pending and threatened litigation of the
character incidental to the business transacted, arising out of its insurance and investment operations and is from time to
time involved as a party in various governmental and administrative proceedings. The Company believes that any
liability that may result from any one of these actions is unlikely to have a material adverse effect on its financial
position or results of operations.
Other Contingencies:
The Company, like a number of other Blue Cross and Blue Shield companies, serves as a fiscal intermediary for
Medicare Part A and B. The fiscal intermediaries for these programs receive reimbursement for certain costs and
expenditures, which are subject to adjustment upon audit by the Health Care Finance Administration. The laws and
regulations governing fiscal intermediaries for the Medicare program are complex, subject to interpretation and can
expose an intermediary to penalties for non-compliance. Fiscal intermediaries may be subject to criminal fines, civil
penalties or other sanctions as a result of such audits or reviews. In the last five years, at least eight Medicare fiscal
intermediaries have made payments to settle issues raised by such audits and reviews. These payments have ranged
from $0.7 to $51.6, plus a payment by one company of $144.0. While the Company believes it is currently in
compliance in all material respects with the regulations governing fiscal intermediaries, there are ongoing reviews
by the federal government of the Company’ s activities under certain of its Medicare fiscal intermediary contracts.
On December 8, 1999, Anthem Health Plans, Inc. (“AHP”), a subsidiary of Anthem, reached a settlement agreement
with the Office of Inspector General, Department of Health and Human Services (“OIG”), in the amount of $41.9,
to resolve an investigation into misconduct in the Medicare fiscal intermediary operations of Blue Cross and Blue
Shield of Connecticut, Inc. (“BCBS-CT”), AHP’ s predecessor. The period investigated was before Anthem merged
with BCBS-CT. The resolution of this case involved no criminal penalties against the Company nor any suspension
or exclusion from federal programs. This expense was included in administrative expenses in the statement of
consolidated income for the year ended December 31, 1999.
AdminaStar Federal, Inc., an affiliate of Anthem, has received two subpoenas from the OIG, one seeking documents
and information concerning its responsibilities as a Medicare Part B contractor in its Kentucky office, and the other
requesting certain financial records of AdminaStar Federal, Inc. and Anthem related to the Company’ s Medicare
fiscal intermediary (Part A) and carrier (Part B) operations. The Company has made certain disclosures to the
government of issues relating to its Medicare Part B work in Kentucky. The Company is not in a position to predict
either the ultimate outcome of this review or the extent of any potential exposure should claims be made against the
Company. However, the Company believes any fines or penalties that may arise from this review would not have a
material adverse effect on the consolidated financial condition of the Company.
Anthem guarantees certain financial contingencies of its subsidiary, Anthem Alliance Health Insurance Company
(Anthem Alliance), under a contract between Anthem Alliance and the United States Department of Defense.
Under that contract, Anthem Alliance manages and administers the TRICARE Managed Care Support Program for
military families. The contract requires Anthem Alliance, as the prime contractor, to assume certain risks in the
event, and to the extent, the actual cost of delivering health care services during the five-year contract period
exceeds the health care cost proposal submitted by Anthem Alliance (“the Health Care Risk”). Anthem has
guaranteed Anthem Alliance’ s assumption of the Health Care Risk, which is capped by the contract at $20.0
annually and $75.0 cumulatively over the five-year contract period. Anthem Alliance has subcontracts with two
other Blue Cross and Blue Shield companies not affiliated with the Company by which the subcontractors have
agreed to provide certain services under the contract and to assume approximately 50% of the Health Care Risk.
Effective January 1, 2001, one of those subcontracts will terminate by mutual agreement of the parties. As a result,
Anthem Alliance would then have one Blue Cross and Blue Shield subcontractor assuming 10% of the Health Care
Risk.