In filing a 77-point complaint, the state’s largest insurer says the contract awarded to UnitedHealth violates existing state law
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Blue Cross & Blue Shield of Rhode Island has filed a lawsuit in Superior
Court alleging that Director of Administration Beverly A. Najarian violated
the state procurement law and regulations in her handling of bids for the state
workers’ 2005-07 health care contract, awarded to UnitedHealthcare of New England
last month.
The suit seeks an injunction to stop the state from signing a contract with United, with whom it’s still working out the details for the Jan. 1. switchover.
“Unless a restraining order is issued, Blue Cross will suffer irreparable harm from the loss of nearly 52,000 members and from a loss of business reputation as a result of the loss of this contract,” the complaint, signed by Vice President Thomas A. Boyd, says.
Blue Cross is also asking the court to award it the state contract, arguing that United’s bid was actually “nonresponsive” to the state’s request for proposals, to Blue Cross is the only qualifying bidder. As an alternative, the insurer is asking the court to compel Najarian to let both companies share the contract, which state officials have valued at $674 million, including $23.5 million in administrative fees.
Blue Cross is wrapping up a three-year exclusive contract with the state that was awarded under then-Gov. Lincoln Almond. Before that deal, workers had a choice among Blue Cross, United and other insurers, though Blue Cross has by far the longest history covering state employees.
When Gov. Donald L. Carcieri, a vocal critic of Blue Cross and its current contract, announced that United had won this time around, he said the new contract would save the state $25 million over the current setup, and about $8 million compared to Blue Cross’ latest offering.
After reviewing United’s offer, however, Blue Cross contended that its bid was actually lower by about $2 million, and that the package offered by United was inferior. The company made its case in an Oct. 15 letter to Carcieri, then in a formal bid protest. On both fronts, it was rebuffed by Carcieri and Najarian.
The 77-point complaint filed by Blue Cross on Wednesday builds on the arguments it’s been making since that first letter: That Najarian wrongly changed the basis for the insurers’ fee calculations for the first year of the contract; that she let United apply a $4.50 credit per subscriber to its monthly fees in connection with pharmacy rebates, while not giving Blue Cross credit for its superior rebates; that she allowed United to offer reduced services to seniors; and that she let United fudge the issue of whether it would charge extra for handling Medicare gap claims.
Both Najarian and United have denied all but one of those allegations; on the pharmacy rebate point, Najarian has said Blue Cross never quantified the amount it proposed to save the state, which the insurer says is over $2 million per year.
Asked for comment on the lawsuit, in which it’s not – at least yet – a party, United expressed confidence that it would prevail.
“The issue is that to go to court, as we found out three years ago, you have to prove intentional fraud and abuse, and I just don’t think whatever they come up with will stand up to that high standard,” said United spokeswoman Debora M. Spano.
Blue Cross spokesman Scott A. Fraser, however, said the company’s lawyers believe the actual burden they need to meet is much lower. All they need, he said, is to prove one of seven allegations listed in the complaint: That the United bid award is “in violation of statutory provisions; that it’s in excess of Najarian’s authority; that it was “made upon unlawful procedure; that it’s affected by error of law; that it’s “clearly erroneous in light of the reliable, probative and substantial evidence on the whole record; that it’s arbitrary or capricious, or that it’s “characterized by an abuse of discretion” or a clearly unwarranted exercise of discretion.
Those points, Fraser said, Blue Cross does believe it can prove.
Carcieri, for his part, issued a strongly worded response through his spokesman Jeff Neal: “This lawsuit is nothing more than sour grapes,” he said.
“The Department of Administration has already reviewed the Blue Cross claims and determined they are without merit.
“Governor Carcieri is very confident that the state will prevail in court. This lawsuit is a waste of taxpayer dollars and subscriber resources.”
Spano said United would provide information to the state, if needed, to support its defense, but for now it’s staying out of the fray and focusing on getting ready for Jan. 1.
“We’re meeting with all sorts of folks within the state,” she said. “We’re preparing for open enrollment, which will happen this month.”
