Spurned by state for huge Medicaid contract, Aetna alleges bias favoring Blue Cross

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Insurance giant Aetna is alleging that the state of North Carolina tipped the scales in favor of Blue Cross and Blue Shield of North Carolina during the selection of five companies that will manage the state’s Medicaid insurance program for low-income recipients. Among the most startling contentions: A state employee involved in awarding the contracts that total $30 billion over six years lives with a top Blue Cross executive.

The matter involves what Hartford, Conn.-based Aetna called the biggest state contract in history, ushering a new managed-care system in which the state will pay a set monthly rate per Medicaid recipient to four companies: AmeriHealth Caritas, Blue Cross and Blue Shield of North Carolina, United Healthcare and WellCare. A fifth group, Carolina Complete Health, will serve people in the Charlotte and southeastern parts of the state. After a lengthy selection process, Aetna’s bid was rejected.

In return for the state payments, the companies will oversee the medical needs of an estimated 1.6 million recipients. The program was expected to kick off Nov. 1, but the health department has pushed back implementation until Feb. 1, blaming the legislature’s stalemate over the state budget. State lawmakers authorized the change in 2015, saying the new approach will stabilize soaring Medicad spending.

In a 40-page filing this week, Aetna provided detailed criticism of the process with particular fire aimed at state regulators and Blue Cross, the state’s dominant insurer. It contends the N.C. Department of Health and Human Services “unilaterally manipulated the scoring to ensure that its favored Offeror, Blue Cross and Blue Shield of North Carolina …. would receive an award.”

The insurer also alleged that the committee evaluating competing programs used a flawed scoring process and that committee members didn’t disclose conflicts of interest. “Even when  conflicts were disclosed, the Department simply swept them under the rug,” according to the complaint.

In response to questions about the lawsuit, the N.C. health department issued a general statement: “We are confident in the integrity and fairness of our procurement process. An administrative judge already denied a request to halt the implementation of transformation that came from entities not selected to participate as Prepaid Health Plans, finding that none were likely to succeed on the merits of their claims.” A department spokeswoman declined further comment.

Blue Cross said it “has confidence that the bid procurement process was conducted fairly and without bias, and it looks forward to continuing to serve the citizens of North Carolina.”

Aetna’s filing noted that health department employee Amanda Van Vleet, who was on the evaluation committee, “has a long-term relationship and lives with a [Blue Cross] employee who serves as the director, healthcare strategy and transformation.” That executive is J.P. Sharp, who  joined the insurer last year after working for Blue Cross CEO Patrick Conway when both were senior officials at the federal Medicare innovation office in Washington, D.C.

Another department employee and member of the evaluation committee, Sheila Platts, went to work for Blue Cross “almost immediately upon completing scoring” that selected the five winning bids, Aetna said in the filing.  Sarah Gregowski, who designed the request for proposal used to select winning bidders, also used to work for the insurer, Aetna said.

Aetna was acquired earlier this month by CVS for $68 billion, nearly two years after the transaction was announced. The American Medical Association was among the groups opposing the deal, contending it would lead to less competition and higher drug prices.

A call to Todd Brown, a Charlotte lawyer with Hunton Andrews Kurth LLP who is representing Aetna, was not immediately returned.

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