After judge dismisses lawsuit, Regence BlueShield of Idaho remains state employee health insurer

Originally published Oct. 14 on IdahoCapitalSun.com.

An Idaho judge dismissed Blue Cross of Idaho’s lawsuit seeking to invalidate a $1.1 billion contract to provide health insurance to Idaho government employees. 

Idaho 4th District Judge Joseph Borton ruled on Sept. 27 that Blue Cross didn’t have standing in its lawsuit. 

That means Regence BlueShield of Idaho remains Idaho’s government employee health insurer. 

Blue Cross, which held the contract since 2004, alleged Idaho used an unlawful, new process to award the contract. Meridian-based insurer Blue Cross is considering appealing the decision, spokesperson Bret Rumbeck told the Idaho Capital Sun.

Borton wrote in his ruling that even “construing the record in a light most favorable to Plaintiff (Blue Cross) the Court does not find that Plaintiff suffered any injury in fact; its contract effectively expired according to its terms.” 

The judge wrote that he didn’t “find evidence to establish” that the new contracting process, called an invitation to negotiate, “was causally connected to the expiration and nonrenewal of the health insurance contract between Plaintiff and the State.”

Idaho’s state health insurance plan covers around 62,000 people. That includes more than 25,000 employees and over 35,000 of their family members.

In July, Idaho switched its government health insurance plan to being run by Regence, a Lewiston-based insurer.

That was the first time Idaho changed state government health insurers in almost two decades. Regence had previously held the contract before that, the Sun reported. 

A Regence spokesperson told the Sun the state’s process to award the contract was fair.

“Regence BlueShield of Idaho found the procurement process to be fair, transparent and consistent with state procurement law,” spokesperson Lou Riepl said in a written statement. “We’re pleased with this outcome. It allows us to maintain our unwavering focus on providing exceptional service to all state of Idaho group health insurance plan participants in compliance with the contract we were awarded by the state earlier this year.”

Blue Cross maintains that the bidding process was unlawful, Rumbeck told the Sun.

“We are disappointed that the district court did not address whether the purchasing process was lawful, and are considering appealing,” he said in a statement. “There was not a lawful bidding process used to obtain the best possible value for health insurance for the tens-of-thousands of state employees and their families.”

HOW THE INSURANCE SWAP HAPPENED, AND WHAT THE JUDGE RULED

In March, Blue Cross sued Idaho and asked a judge to void the contract award to Regence.

Regence was not a named party in the lawsuit, which Blue Cross filed against Idaho’s government contract agency, the Idaho Department of Administration and Idaho state contract officials.

The new, since-revoked contracting process, used by the Idaho Department of Administration, allowed bidding companies and the state to negotiate after bids are submitted. 

In 2019, the Idaho Legislature approved rules to allow the new invitation to negotiate process. Idaho awarded about 16 contracts using the new process, which state contract officials say saved on costs.

Blue Cross argued in its lawsuit that Idaho’s new contracting method was unlawful, referencing the Idaho Legislature this year revoking the process — which the Idaho Department of Administration doesn’t use anymore.

But Borton wrote in his ruling that Blue Cross didn’t challenge the new contracting process in the years before Idaho sought bids for the new contract, or when Blue Cross was a prospective bidder for the new contract. 

The judge wrote that Blue Cross “entered the game at the beginning, knew the rules when it entered the game, played the entire game, and did not object until it lost.”

Rumbeck, Blue Cross’s spokesperson, told the Sun that after Idaho gathered responses for bidders on the contract for a year, “the state disregarded the results and changed the rules.”

“The highest level of trust and transparency should exist when it comes to a bid of this importance by our state government,” he said.

Determining standing — or whether someone has a right to sue — is a question that must be addressed “before reaching the merits of the case,” the judge wrote.

Borton ruled Blue Cross did not show the “challenged rule interferes with, impairs, or threatens to interfere with or impair” its “legal rights and privileges.”

ANOTHER LAWSUIT BY BLUE CROSS REMAINS ON HOLD 

Blue Cross’s lawsuit challenging the contract came months after the insurer separately sued Idaho to release information — concealed under trade secret protections — about how outside analysts at Alera Group crunched numbers on the state employee insurance contract bids. 

State officials used Alera’s figures to award Regence the contract. Early numbers — which state officials say were too flawed to use — suggested Blue Cross had the cheapest contract bid, the Sun reported.

In January, an Idaho district court judge ordered Idaho release additional information in the deal. Alera appealed to the Idaho Supreme Court, where the case remains on hold while awaiting the outcome of litigation on another contract, court spokesperson Nate Poppino told the Sun.

Blue Cross still has a contract to provide dental insurance to Idaho government employees, which has been in place since 2009, Idaho Department of Administration spokesperson Kim Rau told the Sun.