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Blue Cross NC appeals loss of state worker contract to Aetna

Health insurance
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Blue Cross and Blue Shield of North Carolina on Thursday formally appealed the decision by the health insurance plan for public employees to choose a different company to administer the plan after more than 40 years.

Blue Cross, the state's dominant insurer, filed its request for a protest meeting with State Health Plan acting director Sam Watts. The plan's board of trustees voted last month to replace Blue Cross with Aetna starting in 2025. State Treasurer Dale Folwell announced the bid winner last week.

As the next third-party administrator, Aetna could oversee health care spending of more than $17.5 billion over a five-year period, the plan has said. The job involves handling health care expenses for several hundred thousand state employees, teachers, their family members and retirees, ensuring claims are paid and building out a provider network.

In the protest letter, an attorney for Blue Cross said in part the bidding process assembled by the plan was simplistic and the scoring system arbitrary, and that it failed to take into account how a provider network change would harm plan members. Durham-based Blue Cross estimates its provider network is nearly 40% larger than Aetna's.

"State Health Plan members are more than customers, they are our neighbors, our friends and our family, and we have filed this protest to ensure the best outcome for them, for taxpayers, and for our state," Blue Cross CEO Dr. Tunde Sotunde said in a news release.

Folwell, whose office oversees the plan and who is trustee board chairman, has defended the award to Aetna. The initial contract is three years. His office has said the Aetna contract could result in $140 million in cost savings should it extend to five years.

"We submitted an aggressive proposal affirming the State Health Plan's commitment to high-quality and affordable health benefits," Jim Bostian, Aetna's North Carolina president, said in a written statement Thursday.

UMR Inc., a subsidiary of United Healthcare, also bid for the administrator's contract. Watts' final decision could end up being challenged in court.

The State Health Plan anticipated paying $79 million in administrative expenses to Blue Cross during 2022 as part of the current third-party contract.

Folwell's office said the contract will affect the plan's 740,000 members. But Blue Cross said the contract covers 580,000 people — that leaves out those who participate in Medicare Advantage plans.

Folwell has been unhappy with Blue Cross over the years because of obstacles to accessing company documents that he said would show whether the plan gets the best prices for member health expenses from insurers. Legislation that advanced at the General Assembly in 2022 but failed to become law could have addressed that.

A published report this week highlighted recent unhappiness by plan officials about a software system used by Blue Cross.

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