An appellate court in Baton Rouge has validated a contract that the state awarded to Blue Cross and Blue Shield of Louisiana in 2010 to administer the HMO plan for state workers, retirees and their dependants.
State District Judge Mike Caldwell invalidated the contract in late 2010, agreeing with Humana and UnitedHealthcare that the contract awarded to Blue Cross was not the contract that was bid upon.
A three-judge panel of the state 1st Circuit Court of Appeal reversed Caldwell’s ruling Friday. Circuit Judges Burrell Carter, Randolph Parro and Toni Higginbotham said the state Office of Group Benefits did not abuse its discretion.
“We have always believed that OGB acted appropriately in awarding the contract to Blue Cross and Blue Shield of Louisiana, and we are happy with the appellate court’s decision,” Mike Reitz, the company’s president and chief executive officer, said Monday.
OGB has traditionally offered a statewide health maintenance organization plan, or HMO, and a nationwide exclusive provider organization plan, or EPO, to eligible state employees, retirees and their dependents.
Humana had held the HMO contract for 20 years. The HMO covers more than 114,000 employees, retirees and their dependents.
UnitedHealthcare previously held a contract with the state to administer the EPO. The EPO covers 37,000-plus workers, retirees and dependents.
OGB sought proposals in the fall of 2009 from companies interested in administering the HMO and EPO plans.
Humana and UnitedHealthcare claim in lawsuits that Group Benefits specifically stated it was seeking someone to administer the HMO “on a statewide basis.” The suits contend nationwide networks were not sought.
When Blue Cross was awarded the HMO contract over Humana and UnitedHealthcare, the suits allege, OGB sent a letter stating the office had decided to withdraw the EPO. Because Blue Cross was offering a nationwide network as part of its HMO proposal, the letter stated, it was unnecessary to offer the EPO plan to OGB’s members, the suits say.
OGB officials testified in Caldwell’s court that OGB was folding the EPO plan into the HMO plan.
Attorneys for Humana and UnitedHealthcare argued bidders were deprived of the opportunity to bid on a consolidated HMO/EPO contract.
The 1st Circuit panel said the HMO notice of intent to contract “clearly requires proposers to provide access to out-of-state health care providers in their HMO proposals.”
“OGB recognized that, although most HMO plan members would seek health care within the state, some members would need care while outside the state and some would be referred to out-of-state health care providers for specialized care,” Parro wrote for the panel.
The Blue Cross HMO proposal received the highest score for the quality of its statewide network and for the lowest cost of coverage in repricing both in-state and out-of-state claims, the panel noted.
OGB also received three proposals — from Blue Cross, UnitedHealthcare and FARA — in response to the EPO notice of intent to contract. Proposers were to submit their best statewide network in Louisiana and their best out-of-state network, offering discounted rates outside of Louisiana, the panel stated.
The Blue Cross EPO also received the top score, the panel said.
“OGB concluded that either one of Blue Cross’s proposals eliminated the need to maintain two separate health benefit plans. Since maintaining two plans would cause the state to incur significantly higher administrative costs, OGB decided that it was in the best interest of the state to award only one contract,” Parro wrote.