Blue Shield of California claims outsource company cost them millions

By Elizabeth Alt | Jul 9, 2018

Blue Shield of California recently filed a complaint in U.S. District Court for the Northern District of California against HealthPlan Services Inc. (HPS) that alleges HPS cost Blue Shield to lose tens of millions of dollars in mistakes and poor service after HPS was hired to help Blue Shield during the Covered California exchange.

Blue Shield of California recently filed a complaint in U.S. District Court for the Northern District of California against HealthPlan Services Inc. (HPS) that alleges HPS cost Blue Shield to lose tens of millions of dollars in mistakes and poor service after HPS was hired to help Blue Shield during the Covered California exchange.

The complaint alleges breach of contract, breach of implied covenant of good faith and fair dealing and seeks declaratory relief.

The complaint alleges HPS was hired by Blue Shield “to keep reliable, accurate records of Blue Shield’s health plan subscribers, and to use those records to perform billing and other account-management services” after Blue Shield realized the 2014 implementation of Covered California health care marketplace would create “logistical and administrative challenges” with the increase in customers shopping for health care plans.

Blue Shield claims that HPS stated they were a “business process outsourcing specialist with the right skills, experience, and personnel to maintain secure, accurate, and reliable data for Blue Shield’s new IFP (individual and family plan) customers, on and off the Covered California exchange.” Blue Shield hired HPS to load and maintain the website information on health care plans, process new customers, generate and send bills, collect payments and manage delinquent payments, among other tasks. If HPS fell below the high standard set out in the agreement both parties signed, “HPS was required to compensate Blue Shield for the resulting losses automatically, by applying a 'Service Level Credit' to its future invoices to Blue Shield.”

Blue Shield claims that since 2014, HPS has “repeatedly failed” to “maintain customer data that is consistently and reliably accurate.” Blue Shield also alleges they wrote off over $20 million “in revenue that HPS was hired to collect,” that HPS cost Blue Shield tens of millions of dollars in inaccurate customer refunds, never applied Service Level Credits to Blue Shield, and that Blue Shield has exhausted a substantial amount of time and money to fix and monitor HPS’ work.

Blue Shield claims that “HPS’ failures were so egregious that, beginning in 2016, Blue Shield started performing individual reviews and approvals of all refunds that HPS proposed over a certain amount – in essence, doing HPS’ work for HPS.”

Blue Shield is seeking a trial by jury.

The plaintiffs are represented by Peter A. Wald, Marcy C. Priedeman, R. Peter Durning, Jr of Latham Watkins LLP.

U.S. District Court for the Northern District of California, Case Number 3:18-cv-3730

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