Saturday, June 22, 2024

State Health Plan scrap fires up

A hearing to decide who will administer the $4 billion in medical and pharmacy claims flowing through the North Carolina State Health Plan starts Tuesday in north Raleigh.

Administrative Law Judge Melissa Owens Lassiter is presiding over what is expected to involve as many as 10 days of testimony. In January 2023, State Treasurer Dale Folwell announced that CVS Health’s Aetna unit would replace Blue Cross Blue Shield of North Carolina as the third-party administrator for the plan, which covers about 750,000 state employees, retirees and dependents. Folwell said 600 Aetna employees would work on the account.

Blue Cross promptly appealed the ruling. More than a year later, after depositions and reports by expert witnesses, Blue Cross will try to convince Lassiter that the health plan officials erred in selecting Aetna. Her decision is expected to follow within a few weeks after the hearing.

Blue Cross, which had managed the state account for about 40 years, contends that the health plan’s methodology in picking the administrator was faulty. Lassister has rejected the insurer’s request to block testimony from an Aetna expert witness, Gregory Russo, who is a managing director of Berkeley Research Group, a California-based consulting firm.

Lassister also denied motions from the health plan and Aetna calling for summary judgements in the matter.

“It is unfortunate that the other party in the case has chosen an ill-considered approach of `sue till you’re blue’ whose costs will be borne by those who teach, protect and serve, and taxpayers like them,” Folwell said in a statement.

Blue Cross says “a full hearing is warranted in light of the evidence about the Plan’s errors, its distorted scoring and its failure to compare the networks of providers in any detail,” according to a statement. “Our proposal would save tens of millions of dollars and provide the strongest network with more providers, especially in our rural communities.”

Aetna takes a different view. “The evidence presented in court will demonstrate that the bid process was fair, and that there is no basis (legal or otherwise) to overturn the unanimous decision of the State Health Plan Board of Trustees to award the third-party administrator contract to Aetna,” according to its statement.

Aetna has invested “tens of millions of dollars” to get ready to serving plan members on Jan. 1, the company said. Enrollment is scheduled to start later this year.The state plan has spent about $144 million annually on administrative expenses over the past four fiscal years. It has reported a cumulative profit of about $100 million during that period, essentially breaking even on a multi-billion dollar enterprise.

Blue Cross is the state’s largest healthcare insurer and a not-for-profit institution led by a board made up of business and civic leaders. Woonsocket, Rhode Island-based CVS Health is the second-largest U.S. healthcare company with revenue of $358 billion last year, including its retail pharmacies.

Lassiter has been an administrative law judge since 1998. She has a bachelor’s degree from UNC Chapel Hill and a J.D. from Campbell University School of Law.

David Mildenberg
David Mildenberg
David Mildenberg is editor of Business North Carolina. Reach him at

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