Posted 3/18/09 (Wed)
By Neal A. Shipman
BLUE CROSS BLUE SHIELD OWES NORTH DAKOTANS AN EXPLANATION!
If there ever was the proverbial 400-pound gorilla in the insurance business in North Dakota, it would definitely have to be Blue Cross Blue Shield. The company has a virtual stranglehold across the state and it has used its size and strength to pretty well insulate itself from public comment or scrutiny when it comes to how it handles its business affairs. Up until very recently when the North Dakota Insurance Dept. rejected proposed rate increases, Blue Cross Blue Shield has pretty much enjoyed the benefit of being able to set the rates of what it charges its customers (the policyholders) and at the same time be able to force the doctors, hospitals and other medical providers that take care of those North Dakotans in need of health care with just a portion of what it costs to provide that care.
That’s not to say that Blue Cross Blue Shield doesn’t do a good job at what it does. We may not like how the company increases premiums and controls its expenses, but no one can argue that the company does provide quality insurance coverage to North Dakotans.
But recent events have opened Blue Cross Blue Shield to some much deserved criticism and a cry for an investigation into its workings and management. The first incident was the firing of CEO Mike Unhjem after it became public that the insurance company had financed a $250,000 retreat for Blue Cross Blue Shield employees to the Cayman Islands at a time when the company was requesting three separate rate increases. The second, and probably more appalling, announcement came later last week when the board honored Unhjem’s contract by awarding him a $2.2 million severance package.
In a prepared news release issued by Blue Cross Blue Shield, it was noted that Unhjem was fired partly because of the retreat, which had been a company practice for the past 18 years, but also because of other errors in judgment that he had made over the past couple of years that damaged the image of Blue Cross Blue Shield and that he had violated terms of his employment agreement.
So please excuse North Dakotans for misunderstanding something here. Most North Dakotans were non too pleased to learn that the companies that the U.S. Government is now providing with billions of dollars in bailout funds are taking junkets, paying executives big bonuses and conducting business as usual in these most trying of economic times.
And again, most North Dakotans probably also believed that this was just big business practice on Wall Street and no business in the state would operate under such unsound business practices.
But guess what? North Dakotans were wrong.
The management and board of Blue Cross Blue Shield of North Dakota apparently also believed that at a time when the company was losing millions of dollars there was nothing wrong with increasing Unhjem’s salary from $390,000 in 2005 to just under $1.1 million in 2008. That’s a mighty hefty salary increase in anyone’s books. But to top it off, after Unhjem was arrested for drunken driving in 2006, a new employment contract was drafted in 2007 with language inserted that provided the mechanics for Unhjem to receive his $2.2 million “Golden Parachute” when he was fired.
Unhjem may very well have made several errors in judgment that the board feels damaged the image of Blue Cross Blue Shield of North Dakota. But before the board goes pointing fingers solely at Unhjem, they need to take a good look at their involvement and how their past decisions have also greatly damaged the image of the company.
The Blue Cross Blue Shield board needs to answer to their customers, the policyholders in North Dakota, the rationale for their decisions in approving such significant pay increases for a person whom they believed was exercising poor judgment, as well as why in the world they would include a $2.2 million severance package into that person’s employment contract.
North Dakotans, as well as the North Dakota Insurance Dept. which has final approval on any future rate increases for Blue Cross Blue Shield, are waiting for an answer. Hopefully, the answer will come sooner than later.