A Superior Court judge has ordered Blue Cross & Blue Shield of Rhode Island to pay the state $310,600 to cover the cost of outside lawyers, stenographers’ fees, and other expenses incurred in connection with the insurer’s appeal of the award of the state health insurance contract.
Judge Netti C. Vogel, who had found merit in Blue Cross’s appeal and ordered the contract rebid, but was overruled by the state Supreme Court, did not issue a written ruling, but ordered the payment from the bench on Tuesday.
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According to Brian Stern, executive director for the state Department of Administration, Vogel said she was following the precedent set by Truk Away of Rhode Island, Inc. v. Macera Bros. of Cranston, in the mid-1990s, in which the Supreme Court ruled that it was within the court’s inherent power to grant attorneys’ fees in unsuccessful bid protest cases.
Vogel had laid the groundwork for Tuesday’s ruling in December, when she ordered Blue Cross to post bonds – for about $700,000 and $300,000 – to cover the state’s fees as well as those of UnitedHealthcare of New England, the winning bidder.
United has not sought reimbursement for its cost. Stern noted that the state had chosen to seek reimbursement just for outside costs, not for its staff lawyers’ work, but officials had been confident that they’d win.
“As we see it, the law was on our side,” Stern said.
Blue Cross spokeswoman Kim Keough, however, said her company had been “very shocked, very surprised” by Vogel’s interpretation of the law – “to the degree that we’re going to appeal her decision.”
The contract in dispute made United the exclusive health plan administrator for about 52,000 state workers, retirees and their dependents for three years. It’s valued at about $674 million, though the bulk of that amount would go directly to claims payments.
Blue Cross argued that the state had botched the bidding process and favored United. Vogel agreed, finding that there was “overwhelming evidence that the procurement process was characterized by both a palpable abuse and a clearly unwarranted exercise of discretion,” and that United had been favored while Blue Cross “was denied fair consideration of its bid.”
But in January, the Supreme Court reversed her ruling, saying that while there was “little doubt” that the officials in charge “were, to a large extent, uninformed, overworked and ill-prepared” for the “mountainous” task, they had acted in good faith.
In a statement celebrating Vogel’s award of legal costs, Governor Donald L. Carcieri made no mention of the criticism that even the high court had offered.
“This is a case that should have never gone to court in the first place,” Carcieri said. “I am pleased that the State of Rhode Island will be reimbursed for the legal fees that it was forced to pay in order to defend itself in court.”
“Judge Vogel’s decision is further vindication that the state conducted an extraordinarily fair, open and transparent bidding process that resulted in the state employee health contract being awarded to UnitedHealthcare,” he added. “This contract is saving Rhode Island taxpayers $25 million over the next three years.”
