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Blue Cross/Blue Shield Runs A Public Plan In North Carolina

By Igor Volsky  

"Blue Cross/Blue Shield Runs A Public Plan In North Carolina"

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bcbsncBlue Cross/Blue Shield of North Carolina’s (BCBSNC) ads that attack the public health plan as a mechanism for rationing health care are criticizing an idea, not a specific proposal. Recall that Democrats argue that a new public option should compete with private insurers for beneficiaries, but they have yet to agree on what that plan should look like. Some Democrats maintain that a new public health plan could be modeled on the experiences of state governments that currently offer their employees a choice between traditional private health insurance and a self-insured plan administered by the state.

Thus, given the company’s role in administrating the State Employee Plan in North Carolina, their ad seems all the more perplexing: BCBSNC may be attacking the very same kind of model that it now administers.

BCBSNC’s behavior has led to disaster in North Carolina. Recently, the State Health Plan “came in $137.6 million off its budget for fiscal year 2008, resulting in a $79.7 million loss.” Part of the problem was that BCBSNC’s administrative “expenses cost $200.1 million more than planned.” Its administrative expenses “have never been audited“:

The plan also underestimated administrative expenses by $36.3 million due to the fact that the consultant hired to forecast expenses did not have access to Blue Cross and Blue Shield of North Carolina’s costs to accurately predict expenses… The auditor’s report places much of the blame for the administrative expense overruns on the failure of State Health Plan officials to draft a reasonable contract with BCBSNC. The current contract does not specify what costs BCBSNC is able to charge to the plan and provides no incentives for BCBSNC to keep its costs down. In fact, according to the audit, it does the exact opposite. The plan agrees to pay BCBSNC its costs – plus a percentage of the insurer’s costs to provide a profit margin. Such a setup, however, means that BCBSNC makes more as the state’s costs rise. The audit report notes that the federal government stopped using such contracts in 1941.

Now, the North Carolina legislature is considering a “major fix” to the State Health Plan “that will cost taxpayers roughly $710 million, reduce benefits for state employees and teachers.” State employees would have to pay an average of more than “$600 per person over the next two years” and all premiums “would increase by 10 percent in each of the next two fiscal years.”

BCBSNC behavior suggests that reforms should be weary of using state-run plans as a model for the new public option (third-party private administrators dont’ have a record of lowering health care spending). But more importantly, BCBSNC’s attacks against health reform suggest that the company is afraid of being held to account.

‹ BC/BS’s Attacks: Health Insurers Fear They Have Something To Lose

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