Vote to fire Blue Cross as health plan administrator was unanimous, NC treasurer says

The decision to move administration of the State Health Plan to Aetna from Blue Cross Blue Shield of North Carolina, which has been the third-party administrator for more than 40 years, came in a unanimous vote by the health plan’s board of trustees, State Treasurer Dale Folwell told The News & Observer.

The vote took place on Dec. 14, during a closed-session board of trustees meeting. That meeting as well as most of 2022 came during a “silent” period, meaning that board members, Folwell and others involved had to sign nondisclosure agreements and could not discuss details of the contract, Folwell told The N&O.

The board consists of 10 members, with two members each being appointed for two-year terms by the governor, the state treasurer and NC Senate and House leadership.

Folwell, who chairs the board, did not vote. The chair only votes to break ties, according to state law. The director of the Office of State Budget and Management serves as a non-voting member. The North Carolina State Health Plan for Teachers and State Employees also falls under the North Carolina Treasurer’s Office.

Asked whether he agreed with the decision, Folwell said he was “comfortable with what the board unanimously decided.” Folwell said he was confident Aetna would “bring more transparency and lower costs and higher quality health care for those that teach, protect and serve.”

Aetna was awarded the third-party administration of the state health plan for three years starting in 2025, with the option to renew for two, one-year terms. The plan oversees health care spending of more than $17.5 billion across five years and covers 740,000 teachers, state employees, retirees and their dependents, according to press releases issued by the Treasurer’s office. Retirees receiving Medicare are covered by the state plan administered by Humana and not BCBSNC.

Before the vote occurred, there was a bidding process that drew bids from Aetna, Blue Cross NC and UMR, a subsidiary of United HealthCare. All bidders filed proposals, which were reviewed and scored by the State Health Plan Evaluation Committee, made up of plan staff, according to information shared by the treasure’s legal staff.

The N&O sent a follow-up inquiry asking who composed this evaluation team. A spokesperson wrote that “due to the silent period restrictions, we are not releasing names of the evaluation team at this time.”

Following the ranking, the evaluation committee submitted a request for Best and Final Offers to all three bidders and, because they exceeded $1 million in value, they were submitted to the Attorney General’s Office for review. The evaluation committee presented the proposals to the Board of Trustees, with a recommendation to award to the highest point recipient. The scores for the three bidders were not released.

State Health Plan woes

Asked what the main reasons for this ouster were and whether BCBSNC had been meeting contract expectations, Folwell said the decision largely came down to the scoring system, but he also cited concerns with transparency and said the State Health Plan is facing significant financial challenges.

“This plan is going to need billions of dollars over the next several years to stay solvent,” Folwell said. “We have done a gillion things over the last five years to keep the plan going.”

He said the most recent renegotiation of the drug prescription plan was set to save over $700 million and that $250 million in administrative expenses had been cut from the health plan over five years.

Folwell’s office shared a letter the board sent Oct. 13 to Senate leader Phil Berger, a Rockingham County Republican, and House Speaker Tim Moore, a Cleveland County Republican. The board wrote that despite mitigating efforts, the State Health Plan expects a $4.2 billion budget gap over the next few years, largely due to rising health care costs.

This five-year shortfall, “absent price concessions from major healthcare providers or material shifts in reimbursement strategy,” will fall on the state and its taxpayers, the board wrote. It also wrote that without price “considerations” from providers, annual appropriations will need to grow from the current $2.6 billion to $3.9 billion by 2028.

The board suggested that legislatively mandated reference-based pricing — which establishes a set price for each health care service instead of negotiating prices with providers — could partially resolve the problem.

Folwell’s transparency concerns centered on the risk of plan members overpaying for medical claims and not receiving the proper discounts. Insurance companies negotiate discounts for plan members with health care providers. The services under the State Heath Plan contract include processing claims.

Folwell referenced a 2011 state auditor’s report that said the plan’s auditors did not have access to BCBSNC contracts and could not independently verify that the plan received the proper discounts from the provider network. BCBSNC released a statement back then that while the State Health Plan did not have access to the contracts, auditors did, including those in the state auditor’s office.

“All that we think about is what is in the best interest of our members,” Folwell said. “And we think based on how these scores came out, we’re very comfortable with the potential of partnering with Aetna, so that we can get health care transparency, hopefully higher quality, higher access and lower costs for health care.”

BCBSNC realizes “that they’ve had this business for a long period of time. And that this bid will come back up in three to five years from now. So our hope is that Blue Cross Blue Shield will look at the process of bidding on this contract, and will possibly learn some things from it,” Folwell said.

Silent period continues

The “silent” period remains in effect and an accounting of the closed session minutes of the Dec. 14 meeting will be released once it is lifted and the minutes are approved by the board, according to information shared by legal staff at the treasurer’s office.

The NDA requirement was first reported by The North Carolina Tribune, which also quoted Treasurer’s office spokesman Frank Lester as stating that the announcement delay was done to avoid “any member confusion prior to a new benefit year starting on Jan. 1,” Lester said.

According to information shared by legal staff, the silent period and NDA requirement take effect immediately upon the posting of the request for proposals and runs until there is a valid contract.

This is done for confidentiality purposes and means “all materials, notes, and conversations regarding this RFP are kept confidential until after the Contract is executed and the protest period has ended,” wrote legal staff.

After the silent period has been lifted, “information marked as trade secret or proprietary by the bidding Vendors in their proposals, as well as discussions surrounding this information, must still remain confidential,” wrote staff.

Blue Cross NC plans to appeal the contract decision and will request public records to learn more about the decision, The N&O reported Wednesday. According to Folwell, they have not yet received the appeal but according to legal staff, it must be filed within 30 calendar days from the date of the contract award. If a protest meeting is granted, the executive administrator should attempt to schedule it within 30 calendar days, or as soon as possible thereafter. Within ten days of the meeting, the executive administrator is to respond to the appellant in writing with the decision.

The NC Tribune also reported that State Health Plan executive director Dee Jones left her job on Dec. 16, two days after the Aetna decision, to start a new position with the IT firm CGI starting this month, according to her LinkedIn page. Sam Watts, the legislative liaison for the treasurer’s office, will serve as interim executive director for the Health Plan.

Folwell told The N&O that he “was shocked when she (Jones) put in her notice several, several weeks ago, about her interest in doing something different for 2023.”

“There’s absolutely no connection between Jones not being an employee here and this contract,” he said.