Details about State Health Plan, Blue Cross Blue Shield N.C. [News & Record, Greensboro, N.C.]

Sept. 29--How other states do it

Redactions are common in insurance contracts for health plans in other states, based on a News & Record analysis of contracts.

For instance, public versions of South Carolina's contract with Blue Cross Blue Shield of South Carolina are heavily redacted, perhaps as much as North Carolina counterparts.

Like in North Carolina, the company was allowed to make its own redactions, a state spokesman said. It redacted its entire cover letter on the contract, as well as acronyms used. Those are "confidential in their entirety," according to a notation.

Georgia and Virginia also let vendors make redactions. Georgia's contracts with Cigna and UnitedHealthcare aren't redacted nearly as heavily as North Carolina's with BCBSNC is, but some of the same information is targeted.

Administrative fees, down to what each company charges to process paperwork, are blacked out. So are the costs for procedures that Cigna negotiated with hospitals and drug discounts negotiated by both companies.

BCBSNC redacts more

Blue Cross Blue Shield of North Carolina has administered the State Health Plan since 1986, but its contract was re-bid last year and the company beat UnitedHealthcare to win it.

BCBSNC attorneys have argued it's appropriate to heavily redact the new 2,600-page contract because the document consists largely of the company's answers to questions the state posed during the bidding process. Some of the answers reflected business strategies and aren't part of the contract per se, they argued.

The format makes it simple to compare BCBSNC's redactions to those UHC made to its submissions.

UHC made far fewer redactions, even though its paperwork was just a bid and not a final contract.

UHC did redact key business information, though, including information about arrangements with hospitals and administrative fee proposals, much as BCBSNC did. Even a UHC leadership organizational chart is labeled confidential.

But UHC's bid details online tools available to members, the company's staff-to-member ratio, data on claim appeal and accuracy rates, and the results of fraud prevention efforts.

All of that information is blacked out in the BCBSNC contract.

BCBSNC's is the largest State Health Plan contract by far, but it remains to be seen how heavily redacted other vendor contracts are. The News & Record requested copies in late June and attorneys in the treasurer's office still are processing that request.

New contract, new fees

The State Health Plan once had a murky "cost-plus" arrangement with BCBSNC on administrative fees, which left unclear just what services the company could tack on fees for performing. Contract amendments addressed this in 2010, but BCBSNC's administrative payments continued to rise. The company made $118 million in administrative fees from the plan in fiscal 2012, nearly an 8 percent increase over the year before.

Those fees decreased nearly $10 million the next year, after the Department of the State Treasurer took over plan management. The treasurer's office also shelved the old contract, split it into parts and put new contracts out for bids last year. The new contracts took effect July 1, and BCBSNC retained the largest one. It now charges a flat $15.04 per-month administrative fee for every plan subscriber -- a term that includes employees and retirees but not their dependents.

That figure was blacked out in the contract until the News & Record hired an attorney and pushed the company to release it. More detailed information, showing how BCBSNC arrived at that figure, remains protected. But altogether, BCBSNC will make an estimated $89.6 million this fiscal year in plan administrative fees, according to the treasurer's office.

It's difficult to compare that to fees charges in the past because BCBSNC has less responsibility now. Lumping BCBSNC's administrative costs with other vendors on the plan, administrative costs are slated to increase nearly 13 percent this year under the new contracts.

However, data from past years shows these costs have been over-estimated in the past as a precaution. The treasurer's office said it expects actual administrative costs to decrease compared to last year, once final numbers come in next year.

Detailed costs unclear

We know how much taxpayers spend on health care for state employees and retirees: An average of about $2.2 billion a year for the last five years.

We don't know how much individual procedures -- colonoscopies, surgeries, etc. -- cost the state. BCBSNC negotiates those rates with hospitals and keeps them secret, as do other insurers.

The company provides an online cost-estimator tool, but it's available to only plan members, not the public, and includes a limited number of procedures.

Outside of that, we can ballpark rates based on an analysis the State Health Plan published earlier this year to compare its costs to Medicare reimbursement rates, which are available online from the federal government.

That report, by a national consulting group called The Segal Company, says the plan pays an average of 148 percent of Medicare rates for services.

Segal broke that down a bit, saying the plan pays 130 percent of Medicare rates for "professional services," such as surgery and child deliveries.

Outpatient services cost the plan 216 percent of what Medicare pays, while inpatient services cost 129 percent, the report states.

But since the rates for specific procedures vary widely, it's difficult to translate that information into per-procedure costs, which is a common way for insurance-plan managers to look at data and determine whether they're getting a good deal.

That's the sort of information the State Employees Association of North Carolina has been after for years. Without it, "they're still not showing us what we're paying," said Ardis Watkins, SEANC's legislative affairs director.

Disc sent by mistake

For months, the News & Record pushed the State Health Plan and BCBSNC to make public more information about the company's contract to manage the multibillion-dollar plan that provides health insurance to nearly 670,000 teachers, employees, retirees and their families.

Although State Health Plan officials said they have the information they need to oversee the plan and to judge BCBSNC's administration, public versions of the company's contract are so heavily redacted that it's impossible for the public to understand important details.

The treasurer's office, which houses the State Health Plan, allowed

BCBSNC to take the lead in negotiating with the News & Record over the contract, most of which the newspaper believes should be available to the public.

Something unusual complicated those talks: A health plan employee copied an unredacted version of the contract onto a computer disc by accident and mailed it to the News & Record in an effort to comply with an open records request.

The unredacted files are password protected, and the News & Record has not opened them. BCBSNC

initially rebuffed the News & Record's interview

requests for this article, demanded the disc be

returned, and strongly hinted at legal action.

Both sides hired outside attorneys. Eventually, the company agreed to

unredact all or part of 48 contract pages -- far less than the News & Record considers appropriate under state open-records law.

The matter of the disc remains unresolved.

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

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