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State regulators are reprimanding a Blue Cross and Blue Shield of Minnesota subsidiary after a federal report questioned whether the company failed to suspend payments to a health care provider as requested by the state.

The Minnesota Department of Human Services (DHS) outlined a corrective action plan for Blue Plus, the insurance company's HMO division, in a May 22 letter obtained by the Star Tribune.

The state alleges Blue Plus for several years breached contract provisions related to monetary recovery in instances of fraud and abuse by HMO subcontractors.

In a statement, the Eagan-based health insurer says it's talking with DHS to substantiate the accuracy of conclusions reached by the federal government and whether there was a misunderstanding over how the health plan handles payment suspensions.

"We have provided DHS with documentation on how our Blue Plus HMO did have appropriate policies and payment suspensions already implemented at the direction of the state in all instances where there was an active contract with the provider," the health insurer said.

The letter followed a draft report from the federal Centers for Medicare and Medicaid Services (CMS) in March about program integrity and managed care oversight, which identified a risk to the Minnesota Medicaid Program. Neither state nor federal officials have provided the Star Tribune with a copy of the draft report.

CMS has also called on the state to make sure Blue Plus promptly notifies a Medicaid fraud control unit whenever it suspends payments to a health care provider.

Medicaid provides coverage for lower-income residents and certain elderly/disabled populations.

State officials wrote in the May 22 letter that Blue Plus was "in breach of DHS contract for Prepaid Medical Assistance and MinnesotaCare" between 2019 and 2022.

"Failure to cure this breach or return the completed [corrective action plan] ... may result in further remedies or sanctions," the letter said.

Blue Plus said when it receives notice from the state to stop payments, it does so through a process called "prepayment review" that could be misunderstood as merely a delay in payment.

"In all cases where Blue Plus was directed by the state to stop payments for specific providers, we did so in a timely manner and in compliance with our contract requirements," the HMO said in a statement.

Blue Plus is one of several private HMOs hired by the state to manage care for people enrolled in the Prepaid Medical Assistance and MinnesotaCare programs. These are the largest sources of coverage within Minnesota's Medicaid programs, which collectively were providing coverage to about 1.1 million people in June.

Medicaid is jointly funded by the state and federal governments.

In January 2023, the Star Tribune reported on eight corrective action plans issued by DHS to Blue Plus between 2018 and 2020 that resulted in fines exceeding $13 million. Those problems involved an outside vendor responsible for claims processing and customer service, but Blue Cross said this vendor's work was not the subject of the most recent corrective action plan.