The U.S. Department of Labor believes Trigon Blue Cross and Blue Shield in Virginia may owe nearly $59 million to businesses whose health insurance programs it was hired to run.
The money came from discounts the Richmond-based insurer negotiated with hospitals but did not pass on to the businesses.
A preliminary investigation of Trigon's administration of the health benefit plans shows the insurer may have violated the federal Employee Retirement Income Security Act, the department said in a letter, a copy of which was obtained by the Richmond Times-Dispatch.
Trigon spokeswoman Brooke Taylor said the company is cooperating with the department and hopes to convince the agency it didn't violate the law.
From 1990 to 1993, Trigon kept $58.6 million in discounts instead of passing them on to the businesses, according to the letter, written in September 1995 by Gerard Gumpertz, regional director of the Labor Department's Pension and Welfare Benefits Administration.
Gumpertz said Labor Department staff members believe keeping the discounts and not disclosing the amounts to the businesses violated a federal law that says plan administrators such as Trigon have a special duty to the people who use the plans.
Taylor said the plans and the people covered by them were not harmed.
"They received the benefits of the contracts they negotiated with us," she said, referring to the plans. She said the plans all were aware Trigon negotiated discounts. Furthermore, she said, Trigon's contracts at the time disclosed that passing on the benefits of the discounts would be at Trigon's sole discretion.
"They received a substantial amount of the discounts," Taylor said.
She said Trigon contracts now say a fixed percentage, usually 80%, of discounts will be passed on to employer plans. Gumpertz's letter said that from 1990 to 1993, the affected employer plans got roughly 70% of the discounts.
The 381 employers the federal department said were affected hired Trigon to run the plans but didn't actually buy insurance from the company. The employers paid claims from their own resources; they paid fees to Trigon to arrange networks of doctors and hospitals and to process claims.
While individual policyholders have been reimbursed by Trigon for overcharges caused by the hidden discounts, the employers who hired Tri-gon to run their plans have not.
Last August, attorneys for the cities of Lynchburg and Charlottesville filed separate but similar lawsuits charging Trigon deceived them by keeping discounts negotiated with hospitals and doctors.
The Colonial Williamsburg Foundation and Colonial Williamsburg Hotel Properties filed suit against Trigon and its HealthKeepers subsidiary last May, seeking to recover discounts that Tri-gon failed to credit to Colonial Wil-liamsburg's health benefits plan.
When Lynchburg and Charlottesville filed suit, the cities claimed they were defrauded of up to $1 million and $750,000, respectively. At the time, Trigon said it would vigorously defend itself against the lawsuits.