July 20, 2024

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New documents on how Aetna won NC State Health Plan contract

New documents on how Aetna won NC State Health Plan contract


The state’s new contract with Aetna will begin in 2025.


Documents released Tuesday show that Blue Cross NC had the lowest bid among three major health insurers vying to administer the State Health Plan — one of state government’s largest contracts — but Aetna won out with a higher score for services provided.

The state treasurer’s office released the records as Blue Cross demands more information and continues to object to the process, in what could be the prelude to a court fight.

Their bids and a third by a United Healthcare subsidiary were so close that each came out on top in at least one of the two major areas determining the outcome: price and services provided.

Sam Watts, the State Health Plan’s interim executive administrator, said in a news conference the cost difference between Blue Cross and Aetna was so minimal that they had the same top score on price, while Aetna and United had the same top score on services provided.

“It’s not much of a stretch for you to imagine that if someone ties for first place on both sides of a 50/50 evaluation they’re going to end up with more points at the end of the day, so consequently Aetna wins,” Watts said.

Asked about the trove of documents released by the state treasurer’s office and the finding that though the bid was tight, Aetna’s costs are slightly higher, an Aetna spokesperson provided a written statement from Jim Bostian, the company’s North Carolina president.

The State Health Plan Board of Trustees, Bostian wrote, “reviewed each bidder’s response in this RFP process and unanimously selected Aetna. Aetna is committed to an open, honest, and member-centered relationship with the State Health Plan, and to serving those who teach, protect and serve North Carolina.”

Sara Lang, a Blue Cross NC spokesperson, wrote that the company’s bid serves the best interests of the plan’s members and that it was critical for the public to understand how costs and access to care for teachers and state employees would be affected by the change.

“We are disappointed that, despite our records requests in December, the Plan has not revealed key details on how it assigned scores to each vendor’s proposal. Blue Cross NC will continue to pursue efforts to ensure the best outcome for teachers, state employees and North Carolina taxpayers,” Lang wrote.

Cost, networks and premiums

The documents released Tuesday by the treasurer’s office on a special webpage included the three bid proposals, an evaluation given to the State Health Plan board and briefings given to the bidders after Aetna won out.

All three bidders were in the $17.5 billion range, with BCBS coming in at $17.505 billion compared to Aetna at $17.522 billion, a difference of $17 million or less than a tenth of a percent. United’s bid was $17.792 billion. That cost would pay for five years of administering a plan that serves roughly 740,000 members, including active employees and retirees.

Watts and State Treasurer Dale Folwell said that while Aetna’s bid was slightly more overall, its claim processing cost, which accounts for the vast majority of the contract, was the lowest at $17.023 billion. Blue Cross had the lowest administrative cost that makes up the rest of the contract.

Asked about whether Aetna’s lower claims cost might lead to providers not getting the amount of money they expect and in turn, leaving Aetna’s provider networks, the treasurer said the health plan has “dealt probably on a monthly basis with networks and providers going in and out of contract all the time. This is not something that’s new.”

”It’s just the nature of the fluidity of contract negotiations, which has been further complicated by the consolidation and the cartelization of health care in the hands of fewer and fewer people,” Folwell said.

Provider network size is likely one of the biggest concerns for beneficiaries. Aetna has said that more than 98{08cd930984ace14b54ef017cfb82c397b10f0f7d5e03e6413ad93bb8e636217f} of Blue Cross’s claims came from providers currently in Aetna’s network, while Blue Cross has said that its statewide network of total provider locations appears to be 38{08cd930984ace14b54ef017cfb82c397b10f0f7d5e03e6413ad93bb8e636217f} larger than Aetna’s.

Asked about this, Folwell said: “There are a lot of ways to slice and dice provider networks and it goes back to how things are contracted as to how you want to measure it … we’ve got time to sign up willing and capable vendors.”

As for whether the lower claims costs might reduce premiums, Folwell said it was “a disappointment to me after six years of talking about this, that we have not been able to reduce family premiums.”

“We want to lower family premiums,” he said.

In the state’s third-party administrator arrangement, premiums are set by the state.

Folwell previously told The N&O the state had frozen premiums for five years despite costs for the State Health Plan rising.

Folwell said he sees opportunities to lower premiums with Aetna at the helm. In October, he and the other members of the plan’s board wrote to state legislative leaders that the plan is looking at a $4.2 billion budget gap over the next five years because of rising health care costs.

Bidders answered yes or no questions

The State Health Plan asked the three bidders a series of yes-or-no questions regarding the services they could provide. Aetna and United each achieved the maximum score of 310 points, with Blue Cross slightly behind at 303.

Aetna and United confirmed in their bids they could provide plan members with a unique ID number that would stay unchanged even if the plan had to switch to another administrator, Watts said. That means they are less likely to fall victim to the serious glitches the State Health Plan and other Blue Cross customers faced in recent years when the company switched claims processing software.

Blue Cross had held the State Health Plan third party administrator contract for more than 40 years. The plan sought bids because of the claims processing problems.

Watts said Aetna and United also confirmed they could pay out-of-network providers directly instead of issuing checks to health plan members that they in turn would use to pay providers. Watts cited a recent CNN news story in which a patient with a drug addiction spent a Blue Cross NC insurance check to pay for a binge that ultimately killed him.

“These are things we wanted to avoid and improve our service to our members,” Watts said.

He and Folwell also said Aetna’s proposal provides more transparency on costs, which they see as a big plus in helping the State Health Plan find ways to reduce costs for members and taxpayers.

Blue Cross appealed the bid process, contending that the yes-or-no questions on provider services left out important information. Watts and Folwell pushed back on that, saying it left state officials drowning in unnecessary details and adding more subjectivity into the decision making.

Watts likened it to buying a car. A customer wants to know that the heater works, not hear some spiel about the circumstances in which it might or might not work.

“There’s a layer of ridiculous in having to parse through maybes,” he said.

He said the treasurer’s office has used the yes/no format on other bid proposals in the past year, but neither he nor Folwell gave much explanation as to what research they had done to determine it was the proper format.

‘Sore loser’

United also appealed the bid process. Watts turned down both appeals. The bidders could seek to overturn the bid in state court.

Blue Cross will continue to administer the State Health Plan until the end of 2024. That gives Aetna time to set up its staff and make sure its provider network will provide easy access for members across the state.

Aetna has said it will dedicate 600 employees to handling the plan and expects to expand its work force in the state.

Watts and Folwell said all three bidders delivered strong proposals. But Folwell showed his displeasure at Blue Cross’s response to losing the contract.

“When you win, you should be humble,” Folwell said, citing the Bible as a reference. “Aetna has been humble in its winning. And no one likes a sore loser.”

It was such a strong statement that Watts took a pause in his planned remarks.

“It’s hard to follow that,” he said.

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Dan Kane began working for The News & Observer in 1997. He covered local government, higher education and the state legislature before joining the investigative team in 2009.