Youngkin seeks new bids on state employee health plans

Virginia Gov. Glenn Youngkin is asking for competitive bids to potentially hire a new administrator for health plans that the state self-insures for about 200,000 state employees, and state lawmakers want to know why.

The Department of Human Resource Management informed the General Assembly budget committees last week that it is proceeding with a plan to "re-solicit" its contracts with the Anthem and Aetna insurance companies, which currently administer two Virginia health plans for state employees. The request for proposals does not affect regional health plans that the department oversees for local governments.

The initiative comes in the sixth year of contracts that extend up to 10 years, with a five-year term and five one-year extensions.

"We deemed that the current contract term is too long," said Janet Lawson, the department's director, in a contentious presentation to the Senate Finance & Appropriations Committee on Tuesday.

"We believe it's in our employees' best interest to remain market competitive by going out for bid," Lawson said.

Youngkin spokesman Christian Martinez said the administration is soliciting proposals to "ensure the state's health plan is providing our valued employees with the best possible coverage."

"The insurance marketplace has changed drastically since the current 10-year contract was issued and by soliciting new proposals we can evaluate new and better options for employees," Martinez said in a statement. "Seeking new proposals does not necessarily mean the state will end the current contract."

But Democratic lawmakers aren't convinced. They raised a series of questions about the sudden push to rebid the contracts, as well as a sole-source contract issued by the administration of then-Gov. Ralph Northam five years ago to a digital health analytics company. The company, 4C Digital Health, has been reviewing claims and costs under the contract, which pays the firm a contingency of 20% of any overpayments that the state recovers.

"It just seems that there's a lot going on with this that hasn't received a lot of sunlight," said Senate Majority Leader Scott Surovell, a Fairfax County Democrat, who grilled department officials over the request for bids, protection of health benefits and choices for state employees and the reasoning behind the sole-source contract awarded to 4C.

The state's primary health plans, COVA Care and COVA HealthAware, cover more than 200,000 state employees, non-Medicare retirees and their dependents. Health and retirement benefits have helped the state attract and keep employees who might be able to earn higher salaries in comparable private sector jobs.

Dylan Bishop, lobbyist for the Virginia Governmental Employees Association, said state employees are open to potential improvements to the plans.

"I think it's prudent that they are exploring this," Bishop told the Richmond Times-Dispatch Wednesday. "Whatever we can do to improve the bottom line for health coverage for state retirees and employees, we're going to support."

He added, "It's certainly something I'm going to be watching closely."

The Youngkin administration first notified the budget committees in mid-July that it was considering rebidding the contracts and informed them on Sept. 11 that it was proceeding with the request for proposals.

Lawson said reopening the contract now would allow the state to take advantage of changes in the industry and adopt "new, innovation solutions," including reference-based pricing, an idea endorsed by the conservative Heritage Foundation's Project 25 blueprint for the next presidential administration if former President Donald Trump is elected in November. The pricing model offers lower-cost options for health care by linking reimbursement to the lowest reference point, such as Medicare.

"You know the saying, 'You buy cheap, you get cheap'?" state Sen. Adam Ebbin, an Alexandria Democrat, said. "It could discourage people from choosing the health care that is most needed for their particular circumstances."

State Sen. Barbara Favola, an Arlington Democrat, also cautioned against relying on "cost containment models," such as reference-based pricing.

"It would be, I think, in the commonwealth's best interest to ensure that our employees have choices," Favola said.

Lawson said the department included those pricing models as options in the bid proposal, but she added: "We just want to see all available options."

She also said the state would examine any potential disruption to employees' health care and choice of providers in deciding whether to change plan administrators. "We would look before making a decision," she said.

Part of the motivation for the bid solicitation is what Lawson called a "cutting edge" review of claims and policies under the Anthem and Aetna contracts that she said "could save the state plan millions of dollars."

She said the review had been initiated by its Office of Health Benefits, but the office's director, Gary Johnston, said he was not involved in the sole-source contract to 4C. He said the Department of General Services had issued the contract after referral by the Office of the Attorney General, led then by Democrat Mark Herring.

Surovell questioned the administration on why the state would issue a sole-source contract and included a contingency for the vendor to receive 20% of whatever money it recovers for the state.

Johnston, who acknowledged appearing on conference panels sponsored by the company, said its proprietary software already has provided "opportunities for savings" for the state.

"They have provided us a lot of excellent data to use," he said.

Johnston estimated that the review had identified up to $200 million in potential over-charges, which the department had narrowed to $55 million.

"Unless they save us money, they don't get paid," he said.

The administration also sees the request for proposals as an opportunity to set what Lawson called "definitive expectations" for the companies that administer the state health plans.

Johnston said, "We can hold companies accountable."

Surovell wanted to know why the department had not told the budget committees about the identification of potential over-charges, since they are responsible for reappropriating any savings as part of the budget process.

"Why haven't we been told?" he asked.