Raleigh, N.C. — The State Health Plan Board of Trustees has decided to split up its contracts for administrative services now provided by Blue Cross Blue Shield of North Carolina, saving more than $22 million a year.
The board voted Monday to award three contracts to three different providers. The changes will take effect July 1, 2013.
Blue Cross, the state’s biggest insurer, will continue to hold the lion’s share of the contract – administering claims processing, billing, and managing the provider network for the State Health Plan, which serves more than 663,000 members.
Two other services now managed by Blue Cross have been awarded to other companies.
A firm called BenefitFocus will take over the State Health Plan’s eligibility and enrollment services. A second company, CobraGuard, will manage the Plan’s post-employment COBRA benefits and billing.
State Treasurer Janet Cowell chairs the Plan’s Board of Trustees. Her spokeswoman, Julia Vail, said the new contracts should save the State Health Plan $22.4 million a year, or 19%, in administrative costs.
"The total estimated annual cost of the Enrollment and Eligibility, COBRA-Individual Billing and Third Party Administrator contracts is $95,910,949," Vail said. "In fiscal year 2012, the Plan paid BCBSNC $118,321,967 for similar services."
Vail said the bid process, launched in February, was "competitive and transparent." It was the first open bid process for the Plan's administrative component since 2006.
“The Board made its decision based on a desire to offer quality health benefits, provide an excellent member experience, and ensure services are provided at a competitive cost,” said Vail.
Blue Cross did not bid for the eligibility and enrollment contract, but did submit an unsuccessful proposal for COBRA administration.
Still, President and CEO Brad Wilson called the board’s decision “a good outcome for state employees and for BCBSNC.”
“We will continue to serve the great majority of State Health Plan members. Employees across our company worked hard to put together a competitive proposal emphasizing cost and quality, and we faced tough competition for this business,” said Wilson in an emailed statement.
Blue Cross also bid for, but did not win, a contract for a new optional State Health Plan service starting in 2014.
The board voted instead to award two contracts for Medicare Advantage to Humana and United Healthcare.
The new service will help Medicare members with claims processing and health management. “By awarding two contracts for this product, the Plan and its Medicare-eligible members will have greater flexibility and choice,” Vail said.
The State Employees Association of NC has battled Blue Cross over its sealed State Health Plan contract for years. The group insisted that the insurer's deal with Democratic lawmakers allowed BCBSNC to inflate its profits, while state employees saw year after year of cost increases and benefit cuts.
SEANC even backed a successful 2010 bid to unseat former SHP Oversight Committee co-chair Rep. Hugh Holliman (D-Davidson).
The contract, finally opened to public scrutiny last year, didn't bear out the worst of the SEANC's allegations, but the uncapped "cost-plus" contract contributed to significant cost overruns.
Lawmakers voted in 2011 to move the State Health Plan under the oversight of the state Treasurer, a change championed by SEANC Executive Director Dana Cope.
"SEANC has fought for this day for many years," said Executive Director Dana Cope in a statement. "Finally the State Health Plan has conducted an open and competitive bid process. This will save taxpayer and state employees money. We congratulate the winners!"