State Health Plan emails show ‘lost confidence’ in Blue Cross NC before big switch

Newly released emails show that problems with Blue Cross Blue Shield of North Carolina’s claims processing system last year prompted the State Health Plan to put the high-dollar contract out to bid — a move that could end the health insurer’s long tenure handling the work.

Last month, the health plan’s board voted to give the three-year contract to for-profit Aetna, though non-profit Blue Cross NC and the third bidder, a for-profit United HealthCare subsidiary, are appealing the decision.

Aetna’s proposal would cut administrative costs by $140 million while providing more transparency on provider charges, state Treasurer Dale Folwell has said.

Emails obtained by The News & Observer from the treasurer’s office show problems quickly surfaced early last year after Blue Cross NC moved the State Health Plan’s roughly 740,000 members into its FACETS claims processing system.

The insurer switched to FACETS in 2016, and back then ran into processing problems that drew nearly 3,500 complaints from providers and customers outside the state health plan, and a record $3.6 million fine from the state Insurance Department that year.

Treasurer’s staff watched the problems unfold and told Blue Cross NC that it wanted the State Health Plan to be the last client using the FACETS system, the emails show. The staff hoped by then the kinks would have been worked out.

The email correspondence from last year indicates that they were not fixed.

Frustrated exchanges

In a March 11 message sent to Blue Cross NC CEO Tunde Sotunde and Vice President Roy Watson, State Health Plan Executive Director Dee Jones said that the health plan administrator had only been able to resolve roughly half of more than 100 processing problems, “a significant number of issues for a program that was rolled out years ago.”

Other correspondence shows the system had wrongly dropped some medical-care providers and told Blue Cross enrollees their providers had been dropped when they weren’t.

“I know there are a lot of people trying to solve these issues but I have lost confidence that there will be complete resolution anytime soon,” Jones wrote to Sotunde and Watson on March 29. “I have also lost confidence in Blue Cross NC’s ability to provide the right resources to effectively administer the Plan’s business needs.”

Three weeks later, as more issues emerged, Jones told them “the plan has lost confidence in Blue Cross NC and will be posting a TPA RFP later this year to proactively ensure that the Plan’s needs are met.”

“RFP” refers to a request for proposals, a bidding process governments use to select a contractor. TPA refers to a third party administrator – in this case a contractor that negotiates prices with hospitals and other health care providers and that processes the bills.

That move meant Blue Cross would not be given a chance to extend its administration through 2026, treasurer’s officials said. The current contract ends Jan. 1, 2025.

Blue Cross NC has been the plan’s third party administrator for more than 40 years. Its State Health Plan contract from 2022 through 2024 was worth $9.4 billion, according to the statement released when Folwell announced the contract in 2020.

One email shows Folwell’s frustration with Blue Cross NC. In a Feb. 13 email to Sotunde and Watson, he threatened to go public. ”Please Stop taking this account for granted and get your hands dirty and fix your problems!” he wrote.

Sotunde responded with an apology. “I assure you that our teams are urgently working to resolve the outstanding problems,” he wrote.

Business North Carolina has reported that these issues were aired in board meetings of the State Health Plan’s trustees, with Watson apologizing for the problems in a June meeting.

Penalties paid for performance

Blue Cross NC paid more than $900,000 in penalties for failing to meet performance guarantees and credited the health plan with $1 million toward administrative fees because of the problems with FACETS, treasurer spokesman Frank Lester said last week.

The State Health Plan issued the RFP in August. The selection process required board members to focus on the three bidders’ proposals and technical evaluations by the treasurer’s staff. In a closed-to-the-public session last December, the board unanimously selected Aetna to take over the contract in Jan. 1, 2025.

Jones left her job two days after the Aetna decision to start a new position with IT firm CGI, according to her LinkedIn page.

Sara Lang, a Blue Cross NC spokesperson, said in an email today that while it’s not “unusual to have issues during system changes of this magnitude and complexity,” the migration “led to challenges that are not representative of our strong and productive relationship with the State Health Plan.”

“Blue Cross NC has been fully transparent while working through solutions, communicating regularly and openly with State Health Plan staff and board members. We hold ourselves accountable and remain committed to providing the highest level of service to more than 580,000 teachers and state employees and their family members,” Lang said.

Lang said Blue Cross NC “strongly” believed its bid to continue administering the State Health Plan was in plan members best interest and that it would continue its appeal.

Under the Dome podcast: The latest developments with the State Health Plan

In its appeal, Blue Cross NC has attacked the RFP process, saying the plan’s scoring system for proposals left the company with little opportunity to explain why it is the best option.

“The scoring system assigned no points to the strength, depth, and breadth of each bidder’s provider network,” wrote Matthew Sawchak, an attorney for Blue Cross NC. “Those networks play a pivotal role in North Carolinians’ access to high-quality health care.”

Sawchak also wrote in the appeal that the RFP didn’t take into account the difficulties in switching to a new administrator, “such as the need to change providers, the need to adjust to different approaches to reviewing claims, and the need to request new prior authorizations for certain treatments.”