Byline: Price Colman Rocky Mountain News Staff Writer
Insurance regulators are threatening criminal and civil action against the Denver-managed New Mexico Blue Cross and Blue Shield plan, citing the insurer's failure to comply with various regulations.
A Feb. 7 letter from New Mexico's top insurance regulator - obtained by the Rocky Mountain News - complained that the Blues plan illegally moved to Denver and New York at least $19 million in trust money. The insurer's financial records also aren't being maintained in New Mexico.
``The issues are very serious,'' New Mexico Insurance Superintendent Chris Krahling said. ``We're concerned about everything stated in that letter.
``My staff and I have raised the issues presented here on numerous occasions with the executive management of the companies, but little progress has been made in correcting the situation,'' Krahling said. ``I cannot allow this to continue.''
Nevertheless, he hopes to resolve the issues by a state-imposed March 8 deadline.
The flap has potentially serious implications for Denver's Rocky Mountain Health Care Corp., the management arm of Blues plans in New Mexico, Colorado and Nevada. Krahling's letter warned that unless the problems are corrected, regulators could oust Rocky Mountain Health Care Corp. as manager of the New Mexico plans.
It also said regulators could suspend or revoke the New Mexico plans' licenses. That would cost the Colorado Blues the ability to tap into a $21 million credit line guaranteed by the New Mexico plans.
The letter also said the New Mexico Blues plans' financial health has been damaged by improperly pledging assets.
Attached to the warning letter was a draft cease-and-desist order that could be enacted if the New Mexico Blues fail to respond appropriately.
Colorado Insurance Commissioner Jack Ehnes said New Mexico regulators' concerns could affect the Colorado Blues' efforts to convert from a not-for-profit to a publicly traded, for-profit.
``Any company that approaches a transaction like this (conversion) with regulators needs to show a business plan, an ability to act with integrity,'' he said. ``If the issues bear validity . . . it hurts their ability to move ahead with those transactions.
``We have a clear obligation . . . to look at these. We'll follow up with the company very quickly.''
But Stephen T. O'Dell, executive vice president of business operations for Rocky Mountain Health Care Corp. and Blues plans in the three states, said that the conversion isn't in jeopardy and that he's confident the issues will be resolved.
``Obviously, the letter is serious, no question about it,'' said O'Dell. ``It addressed a series of issues they want to see corrected. The fact is we're going to correct them and correct them in a way the department agrees with.''
``There are a lot of things that are in there that are technical,'' he said. ``They don't have anything to do with the Colorado conversion. They won't have any impact on it at all.''
In addition to suspending or revoking the New Mexico Blues' license and putting the company into receivership, New Mexico regulators could fine the company and responsible board members up to $10,000 for each criminal and civil violation.
