Efforts to make State Health Plan contracts transparent fall short

New law to make state health plan open falls short; relies on insurer

dranii@newsobserver.comAugust 22, 2012 

An effort by state lawmakers to make the contracts for administering the State Health Plan transparent seems to have fallen short of its goal in at least one respect.

It turns out that disclosure of the individual contract amounts isn’t necessarily required under the law that went into effect last year, according to the state Treasurer’s office, which assumed oversight of the State Health Plan as of Jan. 1.

However, Blue Cross and Blue Shield, which won the largest of the contracts, intends to disclose the contract amount anyway after the deal is finalized.

“All of the parties agreed it is in the best interests of the state to release the estimated contract amount after an agreement has been reached and executed,” said Lew Borman, spokesman for North Carolina’s largest insurer. In other words, we are the winner but we haven’t won yet.”

That disclosure is expected in about two weeks. The three-year contracts take effect July 1.

Last week the state treasurer’s office announced that the State Health Plan’s board of trustees had approved awarding three new contracts with an estimated annual cost of $95.9 million. But that announcement, which also noted that the new contracts will save the state $22.4 million a year, didn’t include a breakdown of the individual contract amounts.

The state is self-insured but farms out the administration of the State Health Plan, which covers 663,000 state employees, teachers and retirees and their dependents.

Although last year state lawmakers passed a law that declared the contract to administer the State Health Plan “a public record,” the state treasurer’s office and Blue Cross say that disclosing the contract amount isn’t necessarily required. That’s because the law also stipulates that “contracts with the state health plan retain the trade secret protections provided under” state law, spokeswoman Julia Vail wrote in an e-mail.

Blue Cross and one of the other winning bidders, South Carolina-based Benefitfocus, “have marked their cost information ‘confidential’ and, as such, the plan is not authorized to release the information,” spokeswoman Vail wrote.

Dana Cope, executive director of the State Employees Association of North Carolina, is pleased that the contract figures will be released but questioned whether a court would uphold the interpretation of the law endorsed by the state and Blue Cross.

“This culture of secrecy regarding the State Health Plan and its contracts needs to end,” Cope said.

Years of controversy

State lawmakers voted for transparency last year after years of controversy over the administration of contracts awarded to Blue Cross.

The law they passed also required that the contracts be put up for competitive bid rather than the no-bid contracts that had prevailed. It also banned cost-plus contracts that call for profit to be based on a percentage of total costs. Critics argued that was a built-in incentive to boost costs, and that the contracts awarded to Blue Cross in the past were sweetheart deals.

The law also shifted oversight of the plan to a new board of trustees housed in the state treasurer’s office.

Three plan contractors

This year the state carved up administration of the plan into three different contracts; previously there had been one.

Blue Cross notified the state on Monday that it would be willing to disclose the amount of its new contract once it is finalized, Vail said. Blue Cross also voluntarily released its current contract last year. It showed that the nonprofit received 0.625 percent of its billed costs. The state ended up paying the company $118.3 million n fiscal 2012.

Benefitfocus also has informed the state that it intends to release the amount of its contract. Company officials couldn’t be reached for comment.

Blue Cross was awarded the contract for processing claims, handling billing and providing a network of health care providers. Benefitfocus won a contract for handling enrollment of active and retired state employees.

A third contract, for administering COBRA plans for employees who are laid off, was awarded to Kansas-based COBRAGuard, which did not identify any of its bid information as confidential or proprietary. Its contract is worth $1,173,809 per year.

Ranii: 919-829-4877

News & Observer is pleased to provide this opportunity to share information, experiences and observations about what's in the news. Some of the comments may be reprinted elsewhere in the site or in the newspaper. We encourage lively, open debate on the issues of the day, and ask that you refrain from profanity, hate speech, personal comments and remarks that are off point. Thank you for taking the time to offer your thoughts.

Commenting FAQs | Terms of Service