Blue Cross takes next step to win back State Health Plan

Blue Cross of North Carolina is asking two judges to overturn the State Health Plan’s decision to give one of the biggest contracts in state government to health insurance giant Aetna.

In December, the State Health Plan’s board of trustees awarded the third-party administrator contract to Aetna after Blue Cross NC had held it for more than 40 years. The health plan’s interim executive administrator, Sam Watts, then upheld the award after appeals from Blue Cross NC and United Healthcare, another bidder.

Aetna is expected to begin handling claims for the health plan, which serves 740,000 teachers, state employees and retirees, in 2025. It bid $17.5 billion dollars to handle the contract over a five-year period that begins in 2025.

“Blue Cross NC made the lowest-cost proposal for this contract,” the company said in its filings Thursday with the state Office of Administrative Courts and state Superior Court in Durham. “It also offered the Plan’s members the most comprehensive network of providers. Despite those facts, the Plan awarded the contract to Aetna instead of Blue Cross NC.

Blue Cross said the health plan’s board based its decision “by applying arbitrary criteria, by failing to gather and consider critical information, and by using a distorted scoring system. Because of those flaws, the process that led to this award was an improper procedure, and the Plan’s award to Aetna was erroneous, arbitrary, and capricious.”

State Treasurer Dale Folwell and Watts said at a news conference last week that while Blue Cross NC had the lowest price, it was only slightly lower than Aetna’s. And that Aetna performed better on a technical evaluation of services that would be provided.

That evaluation is different from past years, relying on a yes/no format as opposed to open-ended questions that Blue Cross NC contends would better reflect its strengths.

The health plan put the contract out to bid last year after Blue Cross NC struggled with technical issues caused by a claims processing system it purchased called FACETS.

Folwell said in a statement that his office is “disappointed, but not surprised that these legal challenges were taken.”

“We are looking forward to vigorously defending the unanimous decision of the State Health Plan Board of Trustees — consisting of members appointed by the Governor, President Pro-Tempore of the Senate, Speaker of the House, and the Treasurer — to accept the recommendation of the Plan’s professional staff,” he said.

This story was originally posted February 16, 2023, 3:45 PM.