Anthem Blue Cross 2002 Annual Report Download - page 86

NOTES
to Consolidated Financial Statements (Continued)
Anthem, Inc. 2002 Annual Report 81
a motion seeking an interlocutory appeal of the class
certification order in the Indiana Court of Appeals. On
May 20, 2002 the Indiana Court of Appeals granted the
Company’s motion seeking an interlocutory appeal of the
class certification order. In any event, the Company
intends to continue to vigorously defend the case and
believes that any liability that may result from the case
will not have a material adverse effect on its consolidated
financial position or results of operations.
In addition to the lawsuits described above, the
Company is also involved in other pending and threat-
ened 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 mate-
rial adverse effect on its consolidated results of operations
or financial position.
Other Contingencies
The Company, like a number of other Blue Cross
and Blue Shield companies, serves as a fiscal intermediary
for Medicare Parts A and B. The fiscal intermediaries for
these programs receive reimbursement for certain costs
and expenditures, which is subject to adjustment upon
audit by the Federal Centers for Medicare and Medicaid
Services, formerly the Health Care Financing Administra-
tion. The laws and regulations governing fiscal intermedi-
aries for the Medicare program are complex, subject to
interpretation and can expose an intermediary to penal-
ties 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 recent years, at
least eight Medicare fiscal intermediaries have made pay-
ments 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 intermedi-
aries, there are ongoing reviews by the federal govern-
ment of the Company’s activities under certain of its
Medicare fiscal intermediary contracts.
AdminaStar Federal, Inc. (“AdminaStar”), a subsidiary
of Anthem Insurance, has received several subpoenas
prior to May 2000 from the Office of Inspector General
(“OIG”) and the U.S. Department of Justice, one seeking
documents and information concerning its responsibili-
ties as a Medicare Part B contractor in its Kentucky
office, and the others requesting certain financial records
and information of AdminaStar and Anthem Insurance
related to the Company’s Medicare fiscal intermediary
(Part A) and carrier (Part B) operations. The Company
has made certain disclosures to the government relating to
its Medicare Part B operations in Kentucky. The Company
was advised by the government that, in conjunction with
its ongoing review of these matters, the government has
also been reviewing separate allegations made by individ-
uals against AdminaStar, which are included within the
same timeframe and involve issues arising from the same
nucleus of operative facts as the government’s ongoing
review. The Company is not in a position to predict
either the ultimate outcome of these reviews 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 these reviews
would not have a material adverse effect on the consoli-
dated financial position or results of operations.
As a Blue Cross Blue Shield Association licensee,
the Company participates in the Federal Employee
Program (“FEP”), a nationwide contract with the Federal
Office of Personnel Management to provide coverage to
federal employees and their dependents. On July 11,
2001, the Company received a subpoena from the OIG,
Office of Personnel Management, seeking certain finan-
cial documents and information, including information
concerning intercompany transactions, related to opera-
tions in Ohio, Indiana and Kentucky under the FEP con-
tract. The government has advised the Company that, in
conjunction with its ongoing review, the government is
also reviewing a separate allegation made by an individual
against the Company’s FEP operations, which is included
within the same timeframe and involves issues arising
from the same nucleus of operative facts as the govern-
ment’s ongoing review. The Company is currently cooper-
ating with the OIG and the U.S. Department of Justice
on these matters. The ultimate outcome of these reviews
cannot be determined at this time.
Anthem Insurance guaranteed certain financial con-
tingencies of its subsidiary, Anthem Alliance Health