Blue Cross Loses R.I. State Contract

October 11, 2004

UnitedHealthcare of New England has beens chosen to administer the insurance plan for Rhode Island’s 25,000 state employees and retirees, leaving rival Blue Cross & Blue Shield to complain the state seemingly “turned its back” on the nonprofit insurer.

The health-care contract is now held by Blue Cross & Blue Shield of Rhode Island, which has been widely criticized this year for rising premiums, reimbursement rates and benefits for its executives.

Gov. Don Carcieri said the new three-year contract is projected to save the state more than $25 million, when compared to the current Blue Cross contract. The state is self-insured. Rather than pay United a premium for each insured employee, the state will reimburse United for any claims.

“This is great news for state employees and for taxpayers,” Carcieri said. “This new contract is projected to save Rhode Island taxpayers … , while state employees will enjoy added conveniences, such as a broader pharmacy network.”

Blue Cross also bid on the new contract, which will cover 16,000 state employees and 9,000 retirees. The state’s current contract expires Dec. 31.

Blue Cross spokesman Scott Fraser said the company was disappointed. He said Blue Cross’ proposal would have saved the state nearly as much as United’s proposal, though he couldn’t provide details.

He said the state could also have allowed workers to choose between the insurers, rather than offer an exclusive contract. The state’s current contract is an exclusive deal with Blue Cross. In the past, state employees and retirees have had a choice of insurers.

Fraser said Blue Cross, the state’s dominant health insurer, deserved credit for being based in Rhode Island.

The decision, as it now stands, sends all the wrong signals to companies who are based in Rhode Island … This hurts a Rhode Island company while rewarding a company that is based out-of-state,” Fraser said.

United’s parent is based in Minnesota.

Carcieri said state employees would receive the same benefits under the new contract as they do under the current contract.

Carcieri spokesman Jeff Neal said that besides offering about $8 million more in savings over the current contract than did Blue Cross, United’s bid includes some extras. One allows workers to choose from an expanded pharmacy network.

The agreement also allows cities and towns to contract with United at the same administrative rates as the state.

The governor said state officials were working with United to improve its mental-health coverage. Some mental-health professionals have predicted that state workers will have a harder time getting mental-health care under the new contract, because United pays less to providers than Blue Cross.

Neal said the heavy criticism Blue Cross endured this year from Carcieri, lawmakers and community groups was not a factor in the decision to select a new insurer.

“The only factor was getting the best plan at the best price, period,” Neal said.

Blue Cross this year became entangled in a furor over lobbying that led to increased state oversight of the company. Ronald Battista resigned as company president in May, following pressure over rising rates and corporate perks.

Lawmakers approved requiring six public appointments to the nonprofit company’s board and created a state health insurance commissioner.

Copyright 2004 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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