RALEIGH — The change in the Third-Party Administrative contract (TPA) for the state health plan announced earlier this month by N.C. State Treasurer Dale Folwell is likely to be challenged by the current plan administrator.
The current plan administrator is Blue Cross Blue Shield NC (BCBSNC), which has held that contract for forty years. The new administrator, approved by a vote taken by the plan’s board of trustees, will be Aetna.
During a monthly call with reporters, Folwell said that while the plan’s board of trustees voted to go with Aetna in December 2022, BCBSNC recently said it will appeal the decision.
“This is a consequential decision that will impact more than 580,000 State Health Plan members and threatens North Carolina jobs,” BCBSNC said in a statement when the change was announced. “Blue Cross NC is pursuing a formal appeal and seeking more information through a public records request to ensure the best outcome for North Carolina and all State Health Plan members.”
BCBSNC followed through, filing its protest with State Health Plan acting director Sam Watts on Jan. 12.
“We welcome the opportunity to engage in a factual, thoughtful and transparent review of the State Health Plan’s contracting process for third party administration services going into effect two years from now,” Folwell said in a Jan. 12 statement on BCBSNC’s appeal. “Just like Blue Cross Blue Shield of North Carolina has the right to point fingers at everyone else for losing the contract after 44 years, the State Health Plan, Board of Trustees, professional staff and I all have a duty to seek the best financial value and member service for those that teach, protect and serve as well as taxpayers like them.”
A second protest was filed on Jan. 13 by UMR Inc., which is a subsidiary of both UnitedHealthcare and the company’s TPA. UMR’s 30-page protest filing claims the decision to choose Aetna was an “improper” contract award and that the review was not a “comprehensive, fair and impartial evaluation.”
Folwell’s response to UMR’s protest filing was similar to that of his statement on BCBSNC in that Folwell welcomes “the opportunity to engage in a factual, thoughtful and transparent review of the State Health Plan’s contracting process for third party administration services,” and that that process was fair.
The multiple protest filings and the contract being worth tens of millions means a likely legal challenge is on the horizon.
BCBSNC’s current TPA contract was estimated to be paid $79 million just in administrative expenses during 2022. Folwell said an estimated $140 million in administrative savings are possible with the move to Aetna. UMR’s protest filing disputes that savings claim, stating they believe costs will rise by “at least $500 million.”
According to a presentation given to the State Health Plan’s Board of Trustees in December, as of Oct. 2022 the plan’s expenses for fiscal year 2022 came in at $1.4 billion with a beginning cash balance of $590.7 million and ending cash balance of $739 million.
North State Journal asked if retirees would be impacted by the change in the TPA. Folwell said it would not really impact retirees and that most retirees were still on the indemnity plan.
“Nearly 90% of our 155,000 retirees are participating in the Humana Medicare Advantage program,” Folwell said. “That program continues to be zero premium to the member and zero cost to the taxpayer.”
In answering North State Journal’s question about possible changes to benefits as a result of the move to Aetna, the treasurer corrected inaccurate reporting that BCBSNC was the state’s insurer.
“Blue Cross Blue Shield has never been the insurer for the State Health Plan,” said Folwell. “Think of it like a car and a transmission. You can change the transmission out, which is what we call the Third-Party Administrator. It doesn’t change the chasse or the body or the engine.”
Folwell went on to say, “We continue to be a self-funded plan” and the benefits are set by the health plan’s board of trustees. He later added he continues to see incorrect reports “across the state” that BCBSNC is the state insurer. Folwell said those reports were “false” and “They are our back-office operator.”
During the call, Folwell also said he expects family premiums which are set by the board of trustees each year to remain frozen at least for the next “year or so.”
“Our expectation is that we continue to freeze family premiums for the next year or so and, hopefully, actually even reduce family premiums sometime during that period of time,” Folwell said.
Folwell added that “As far as the deductibles and copays, we still have our Clear Pricing Project, which allows people who participate in that not to have to pay deductibles, which is very important.”
The treasurer was also optimistic premiums may be reduced during that year or so which could help attract healthier and younger persons to the plan and offset older subscribers.
“My point of saying that to you is that this is very, very important because we have to lower, not just freeze family premiums so that we can attract younger, healthier people to this plan to offset people like myself at my age,” said Folwell.
The Clear Pricing Project includes 27,000 health care providers as participants, according to Folwell. Citing both President Biden and former President Trump’s efforts to bring transparency to health care pricing, Folwell said his office will continue working on the Clear Pricing Project.
Rising health care and prescription drug costs “going up by double digits” were cited by Folwell to underscore the need for more transparency in pricing as well as reduction in overall costs.