Blue Cross will not appeal judge’s State Health Plan ruling

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  • Blue Cross Blue Shield of North Carolina will not appeal a judge's decision upholding the shift of a State Health Plan administrator contract to Aetna.
  • Blue Cross had challenged the process the health plan used to select Aetna. Blue Cross had held the contract for more than 40 years.
  • State Treasurer Dale Folwell responded that he is "pleased" BCBSNC will not challenge the "well-reasoned opinion" from Administrative Law Judge Melissa Owens Lassiter.

Blue Cross and Blue Shield of North Carolina will not appeal a judge’s decision upholding the shift of a State Health Plan administrator contract to Aetna. Blue Cross’ decision to drop its legal complaint means the shift will take place as scheduled on Jan. 1.

“We are pleased that Blue Cross NC is choosing not to appeal the well-reasoned opinion of Judge Melissa Owens Lassiter of the Office of Administrative Hearings,” said State Treasurer Dale Folwell in a prepared statement. Folwell’s office oversees the State Health Plan. 

“The members of the State Health Plan and taxpayers like them deserve to have this uncertainty ended,” Folwell added. “We will continue to be relentless in our pursuit of improving benefits for teachers and state employees in a cost-effective manner for taxpayers.”

Lassiter issued a July 8 order upholding the decision to replace BCBSNC with Aetna as the health plan’s third-party administrator. Blue Cross had challenged the process used to grant the TPA contract to Aetna.

“Blue Cross failed to meet its burden,” ALJ Melissa Owens Lassiter wrote in a 72-page order. “Even if Blue Cross had proved that the Plan erred with respect to guarantee scoring or the calculation of the overall scores, the error would be harmless because it would not change the fact that Aetna scored the highest overall.”

“Blue Cross did not demonstrate by a preponderance of the evidence that, but for the supposed errors by the Plan, Blue Cross would have or would likely have been awarded the TPA Contract,” Lassiter wrote. “Consequently, Blue Cross failed to demonstrate that any of the alleged errors by the Plan substantially prejudiced its rights and thus, did not met its burden under N.C. Gen. Stat. § 150B-23(a). Neither did Blue Cross challenge the terms of the [request for proposal] or identify any way in which the Plan exceeded its authority or jurisdiction, used improper procedure, acted erroneously, arbitrarily, or capriciously, or violated any statute or rule.”

“To the contrary, the preponderance of the evidence showed that the Plan conducted the procurement carefully and thoughtfully, fairly and in good faith, and that its decisions were properly within its discretion,” Lassiter added. “It also showed that the vendors’ proposals were evaluated and scored carefully, accurately, and fairly by the Plan and Segal as the Plan’s contractor, and that to the extent the Plan relied on Segal’s analyses and recommendations, that reliance was in good faith and properly within the Plan’s discretion.”

Folwell praised Lassiter’s decision shortly after its release. “From the beginning, it has been clear that the State Health Plan (Plan) performed a well-reasoned, high-integrity, and correct procurement process for third-party administrative services,” Folwell said. “This process clearly revealed that Aetna’s bid was superior to Blue Cross NC’s, and the Plan’s Board of Trustees properly approved the contract’s award to Aetna.”

“Unfortunately, Blue Cross NC was a sore loser in thinking that it was entitled to nearly a half century monopoly on the State Health Plan’s business,” Folwell added. “They decided to try a ‘sue till you’re blue’ strategy, costing the state over $1 million in legal fees, for which taxpayers would welcome a reimbursement from Blue Cross NC. Thankfully, Judge Lassiter saw through their legal gymnastics.”

Folwell looks “forward to continuing to serve our 740,000 members with Aetna as a partner. It’s a long runway, but both Aetna and the State Health Plan are hard at work to ensure that the Plan’s members receive the care they need when the new contract begins on Jan. 1, 2025,” he said.

Open enrollment begins in October. Folwell’s office is “working hard to ensure” that process “goes well and the transition will be seamless for our members,” he said.

Blue Cross challenged the State Health Plan’s decision to award its third-party administrator contract to Aetna for 2025-27. BCBSNC had held the contract for more than 40 years.

Blue Cross’ contract bid was $45 million lower than Aetna’s over the course of the three-year contract, according to a BCBSNC news release. “Blue Cross NC’s proposal had the lowest administrative fees and tied for first on network pricing.”

The release also touted Blue Cross as providing the broadest network of health care providers. “Based on a preliminary review of publicly available information, Blue Cross NC’s statewide network of total provider locations appears to be 38% larger than Aetna’s.”

The legal complaint also emphasized the State Health Plan’s “oversimplified” bid process, with an “arbitrary scoring process,” according to the release. The State Health Plan had issued a request for proposals before making its decision.

“The RFP relied on yes/no questions on 310 highly complex technical requirements and prohibited Blue Cross NC from providing explanations of capabilities or helpful context,” Blue Cross argued.

Folwell announced on Jan. 20 that the State Health Plan had rejected appeals of the Aetna contract decision.

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