Editor's Note: This article has been amended to reflect the timeline of radio spots aired by the insurer and clarify the nature of remarks on core systems by CEO Wilson.
No one ever said insurance technology wasn’t complex, costly or invaluable when it comes to keeping a company—and related careers--alive. North Carolina’s largest insurer, Blue Cross Blue Shield, experienced this first hand when the company’s core customer enrollment and billing system crashed six months ago.
And Alan Hughes hasn’t had a good day since. As COO of the health insurer, he was charged with network management as well as the company’s information and technology infrastructure. With a successful career in information technology leadership dating back to 1989 at companies such as GE Commercial Finance, American Express and Bankers Trust, Hughes was credentialed when he joined BCBS in 2009 as CIO. The company announced his resignation this week.
According to a report in the Raleigh News & Observer, in March, Hughes told employees “the company discovered a ‘fatal problem’ with its Facets software when it was migrating individual customers from legacy technology systems." But, says the report, believing the problem could be patched, it continued using the system during open enrollment. Once it was clear that the problems were intensifying, the decision was made to halt claims payments in order to change the configuration and make sure the payments would be made properly and without error.
Blue Cross isn’t saying exactly why the system failed, but the company has been a leading voice for modernization. Company CEO Brad Wilson told the N.C. Institute for Emerging Issues in January, "Health care has to find ways to dismantle [legacy] systems as quickly as possible, providing financial incentives for accelerating change and realizing cost savings." Wilson also extolled the virtues of innovation and said that I.T. professionals should be free to take risks to better serve customers.
But the fallout from this error will be felt by Blue Cross, its customers, physicians, the healthcare vertical, and the insurance industry as a whole.
For example, BCBSNC insures just less than 4 million people in the state, and admits that of the 400,000 individual insureds largely covered under the Affordable Care Act (ACA), approximately 25,000 were affected by service disruptions and errors in enrollment, billing, and customer service. Earlier this year, the insurer already had reported revenue losses tied to ACA enrollment, but to lend gravity to this more recent issue, Blue Cross was hit with 147,000 calls on day-one of the crash alone, received nearly half-a-million calls the first week, and is now under investigation by the North Carolina Department of Insurance due to customer complaints. Blue Cross has promised the NC DOI it would conduct a thorough internal review.
As the 2017 open enrollment period nears on November 1, repairs and possibly a complete overhaul of its enrollment and billing software are ongoing, and will take place under the leadership of Hughes’ replacement, Gerald Petkau, who previously served as BCBSNC’s CFO. Petkau will be responsible for the company’s customer service, claims processing, project management and IT functions.
In January, BCBSNC aired radio spots to publicly apologize to the company’s customers and temper their anger. This is a good time to point out that we are in the people business, the relationship business, and maybe most importantly, the trust business. So if technology is an enabler to our larger business objectives, when an enormous, systematic failure of a core operating system happens, insurers across business lines must learn from the mistakes.
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