A preferred broker that has provided state and local government retirees with vision and dental coverage for nearly a decade is suing to keep the state from awarding the contract to a company that won it in bidding earlier this month.
Raleigh-based State Insurance Services narrowly lost out in the bidding to Pierce Insurance of Farmville, state officials announced this month.
State Treasurer Janet Cowell said then that the change would save retirees an average of $130 a year compared to what they had been paying.
State Insurance Services and a group of state retirees filed a class-action lawsuit Wednesday against the state, the Treasurer's Office and Cowell personally in Wake County Superior Court.
The complaint alleges that the bidding process was flawed, and argues that taking bids was improper because State Insurance Services has a valid contract through 2012.
Dan Boyce, the Raleigh lawyer whose firm represents State Insurance Services, said that the bids were supposed to be based on the value offered to the retirees and that Pierce Insurance's plan wasn't as good. If Pierce had offered the same value as State Insurance Services' plan, it would have had to charge more than its competitor. Conversely, if State Insurance Services had matched Pierce's plan, it would have beaten Pierce's price, Boyce said.
There also were a host of problems with the way the bids were evaluated, he said.
A spokeswoman for Cowell's office couldn't be reached for comment on the lawsuit Wednesday night.
According to the lawsuit, Cowell's office gave written notice Wednesday that it planned to cancel State Insurance Services' existing three-year contract, which was supposed to last through 2012. The state doesn't have a valid cause to do that, the complaint says.
Also, Cowell's estimate of a total of $13 million in savings to retirees over three years was inaccurate, the lawsuit says, because State Insurance Services had offered a plan that Cowell herself said was close to Pierce's in cost.
At stake is the right to market supplemental dental and vision coverage to 220,000 state retirees whose pensions are managed by Cowell's office.
Pierce is also is the broker for NCFlex, the supplemental benefits program for current state employees.
The contract to be the retirees' preferred broker of supplemental vision and dental coverage has been controversial because of State Insurance Service's political ties.
The company's principals include political fundraisers who help raise money for Cowell's predecessor, Richard Moore, who awarded State Insurance Services its earlier contracts.
Cowell has said her campaign also received contributions from principals of that company as well as those with two other firms that bid for the supplemental insurance contract, though she didn't know of any related to Pierce.
Pierce's new contract was supposed to start in April.
The lawsuit asks the court to block that, to replace the flawed standards for evaluating the bids and award State Insurance Services damages and legal fees.
