Blue Cross Blue Shield redacts details of N.C. State Health Plan [News & Record, Greensboro, N.C.]

Sept. 29--A lack of transparency in the health care industry costs Americans more than $100 billion a year, according to an ad campaign by Blue Cross Blue Shield of North Carolina.

"It's shocking how little we know about the cost of health care," the company says in one of its "Let's Talk Cost" commercials.

It's too hard to compare the cost and quality of care and that leads to "exploding" insurance premiums, it says.

The company should know: It's the state's largest health insurer with 75 percent of the market.

The commercial suggests a cure: transparency.

Yet secrecy is such a priority for BCBSNC that it obscures its contract with state government by claiming the information is protected from public scrutiny by state trade-secret laws.

That leaves the public and nearly all state employees in the dark about how much value they get for their money.

During the last five years, BCBSNC has made more than $100 million annually for the State Health Plan for teachers, state employees and retirees.

Taxpayers will kick in about $2.43 billion this year to pay for the program, including medical care costs. The nearly 670,000 teachers, employees, retirees and family members covered by the plan will contribute another $468 million or so, based on plan estimates.

But neither taxpayers nor insured public employees can see enough of the contract to make sense of it. If they ask for it, as did the News & Record, they will get a copy of the more than 2,600-page document that consists largely of blacked-out blocks of text.

Other pages are simply removed. So much of the contract has been redacted that it's impossible to say how much is redacted, but the edits are massive in scope.

The rates that BCBSNC negotiates with hospitals and doctors, which the State Health Plan then pays, are shielded from public view. Those are closely-held secrets throughout the insurance industry, so it's not surprising they're kept secret despite being part of a state contract.

But the company doesn't stop there. With the state's permission, it conceals details both important and mundane:

--An explanation of administrative fees the company charges the state -- labeled a trade secret and redacted.

--Basic information about how the company identifies and prevents insurance fraud -- redacted.

--An eight-page list of BCBSNC subcontractors -- redacted.

--A list of existing clients that the company used as references to get this contract -- redacted.

--The amount of a one-time fee the state paid BCBSNC to set up a telephone-enrollment service -- labeled "trade secret and proprietary" and redacted.

The redactions are so broad that BCBSNC wouldn't share sample enrollment letters -- the kind sent to thousands of plan members -- until the News & Record hired an attorney.

A spokesman for BCBSNC defended the company's right to keep information about a public contract from the public, although he acknowledged a copy supplied to the News & Record was "probably over-redacted."

"When we protect documents, we don't do it lightly," spokesman Lew Borman said. "We do it because we want to protect things, not from the public, as much as from our competition."

Short list with access

State law details who, by job title or public office, has the right to read the full State Health Plan contracts and who can learn how much the plan pays hospitals and doctors for medical procedures.

The list includes top government officials, and State Health Plan officials "monitor costs aggressively" through monthly claims reports, according to the N.C. Department of Treasury, which oversees the plan.

But plan officials haven't had access to BCBSNC's contracts with hospitals, which lay out the rates the company has negotiated for care. Without them, the plan can't independently compare BCBSNC's rates to what the plan actually pays, according to a complaint the state auditor's office raised in a 2011 report.

This since has been addressed, and the plan now is seeking an outside auditor to make the comparison, according to the treasurer's office.

That state auditor is one of the people, by law, who can read the full plan contracts. But Auditor Beth Wood had a hard time several years ago convincing BCBSNC to give her access.

"We had trouble just getting our hands on the contract," Wood said. "They kept saying that it was confidential."

Even state legislators who want information about plan costs must agree to keep quiet.

State Rep. Donny Lambeth, R-Forsyth and a member of the House's state-personnel committee, asked for cost data earlier this year. He said two people from the State Health Plan came to see him.

"They basically said that they were willing to share the information, but I had to sign a bunch of releases and assume liability," Lambeth said. "It was actually pretty intimidating. I decided I didn't need to see that information because I was too much at risk."

Despite the secrecy, there's widespread agreement that it's easier to get basic information about the plan since it moved to the treasurer's office.

Until 2012, a handful of top state legislators ran the plan, a long-standing arrangement that fell apart for several reasons, including Wood's audits. When Republicans wrested control of the General Assembly from Democrats, they moved the plan to the treasurer's office.

GOP leaders expressed satisfaction with the move. The State Employees Association of North Carolina, which represents 55,000 state employees and retirees, still has complaints but acknowledges the improvements.

"We went more than a decade without being able to see any of (the contract) at all," said Ardis Watkins, SEANC's legislative affairs director.

Secret from public, but not from a competitor

BCBSNC's most protected information is the amount of money it sends hospitals and doctors for various procedures.

The company negotiates those rates to get a volume discount for its customers, a practice at the core of its business model.

But public records show the state handed 18 months of claims data to one of BCBSNC's biggest competitors, UnitedHealthcare, as part of the State Health Plan contract bidding process last year.

The idea was to give competing companies an idea of the plan's past costs as an aid in quoting new rates. Because BCBSNC had run the plan for decades, it negotiated past costs for the state.

Even though its competitor, UHC now has the claims data, BCBSNC still asserts the information is a trade secret and the public is not entitled to see it.

After weeks of questions about this, the treasurer's office said Thursday that it won't release this data to the News & Record because it includes information about individuals and their health, which is protected from public view under state and federal law.

The treasurer's office said the law prohibits it from releasing the data even if the office first redacts names and other identifying information.

But once identifying information is been removed, according to N.C. Press Association attorney Mike Tadych, the data no longer qualifies as private health information and should be available to the public. Tadych also represents the News & Record.

Who decides what is visible to the public?

BCBSNC decides what the public can see -- and can't see -- in its contract with the State Health Plan.

That's common practice for the treasurer's office, which lets the private companies it works with identify their trade secrets, which are protected by state law. Other states have similar policies.

Officials do review redactions for "reasonableness." They asked BCBSNC to lift its redactions twice last year, public records show, but otherwise agreed to the blackouts.

Day-to-day plan operations are handled by various private vendors, the largest being BCBSNC, and a State Health Plan staff under state Treasurer Janet Cowell.

But a board of trustees votes to award contracts and make policy changes. Cowell is chairwoman. The governor's budget director is a member, and another eight people are appointed by the governor, the treasurer and the General Assembly. Trustees include current and retired employees, as well as appointees from the health care industry.

Cowell's spokesman and four other trustees responded to requests for interviews from the News & Record.

Of the four trustees, only Dr. Paul Cunningham, dean of East Carolina University's medical school, said he had read the BCBSNC contract. He defended the redactions, saying the insurance business is highly competitive with limited profit margins.

Borman, BCBSNC's spokesman, put the companywide profit margin at 1 percent last year. It has hovered between 3 and 4 percent in other recent years, he said. The company, which is organized as a nonprofit, has built a cash surplus in the neighborhood of $1.8 billion.

Other trustees said they trust State Health Plan staffers to make sure things are in order.

"If we were to request (the contract), I'm sure we would (get access)," said Bill Medlin, a retired P.E. teacher and athletics administrator. "But we just don't see any need."

Trustee Kim Hargett, an elementary school teacher, said she's "really pleased with Blue Cross." She feels good about the company's most recent contract, which went into effect July 1.

"I think it's fair to say that we have put some items in place that will allow our administrative folks to make sure that we are doing right by our members, as well as the taxpayers," Hargett said.

Legislature says let the Sunshine Law in

More transparency is coming -- not just for the State Health Plan, but for health care costs in general.

The N.C. General Assembly passed a law this year requiring hospitals to disclose information about the deals they cut with large insurance companies, starting in 2014. That information will be posted online, allowing patients to compare prices from hospital to hospital and see the discounts that large insurance companies receive compared to uninsured patients.

The new law specifically mentions payments the state makes to BCBSNC on behalf of state employees. That means anyone should be able to compare what the State Health Plan pays for, say, a colonoscopy to what other plans pay.

In its bid to manage the State Health Plan contract, BCBSNC said its size allows it to deliver the best access and lowest costs for plan members. With this information public, they will have to prove it to taxpayers, legislators and rank-and-file employees, rather than the few state officials who can access that information now.

"I know they say it's proprietary," said state Sen. Bob Rucho, a Republican from Mecklenburg County who pushed this bill.

"What we say is we need to be able to make comparisons. The more sunlight we can put on it the better we will be."

BCBSNC uses similar language in its commercial on transparency.

"The more we all know about the cost and quality of our care, the more we can make a difference," the narrator says.

Staff Writer Taft Wireback contributed to this report.

?Contact Travis Fain at (336) 373-4476, and follow @travisfain on Twitter.

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