PROVIDENCE – The City of Providence today is expected to ask the R.I. Supreme Court to overturn the restraining order blocking its planned switch in health-benefit administrators for about 5,000 city workers, 4,500 retirees and their families.
Providence recently became the first to take advantage of a deal UnitedHealthcare of New England has been offering since it took over as the state’s health-benefits administrator in 2005: To sell its services to any Rhode Island city, town or school district at the same rates as it offers the state, plus an extra discount for every new entity that joins.
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In this case, the city chose UnitedHealthcare to administer the health care benefits and CVS Caremark Corp. (NYSE: CVS) to administer its prescription-drug benefits.
Providence is self-insured, so it pays all actual health care costs incurred by the people it covers. But it hires an outside agency to provide administrative services and give it access to the lower reimbursement rates that insurers and pharmacy-benefits managers already have negotiated with providers.
Until now, Blue Cross & Blue Shield of Rhode Island has handled those functions for all Providence municipal and school workers, but the contracts with all but one of the city’s unions allow it to switch to a new administrator so long as it offers “equivalent services.” The firefighters’ contract, which has not been renewed in years and is the subject of a bitter dispute, does not allow such a change from Blue Cross.
This October – after UnitedHealthcare, a unit of the Minnesota-based UnitedHealth Group (NYSE: UNH), filed a lower bid than Blue Cross in response to the city’s request for proposals (RFP) – Mayor David N. Cicilline signed three-year deals with United and Caremark. (READ MORE)
City labor unions, however, contend that the new administrators aren’t offering “equivalent” benefits, so the city would have to go to binding arbitration with the unions to negotiate the change.
Yesterday, R.I. Superior Court Associate Justice Mark A. Pfeiffer agreed, and the judge issued a temporary restraining order against the city.
Cicilline vowed to appeal that order to the state Supreme Court immediately, saying that every week the implementation of the deal is delayed will cost taxpayers $58,000.
“This is just the company that processes payment and paperwork, and the plans themselves will remain unchanged,” the mayor said in a statement. “It is disappointing that the court’s action enabled their strategy to undermine an open and competitive bidding process that will result in an $11 million savings for our taxpayers.”
UnitedHealthcare spokeswoman Debora Spano said that, since the agreement was signed in October, the insurer has been working “almost around the clock” with city officials to prepare for the transition.
In the process, she said, the insurer discovered that BCBSRI had never implemented certain changes that had been negotiated into labor contracts over the years. Those changes, combined with savings from UnitedHealthcare’s network discounts, brought the city’s total expected savings to $11 million, Spano said.
But in a statement late yesterday, Blue Cross President and CEO James E. Purcell asserted that those savings aren’t real, adding that the deal would inflict city workers, retirees and their families with “an inferior health insurance product with inferior service” to boot.
“Assuming that the injunction includes the entire unionized work force of the city,” Purcell said, “effective Jan. 1, 2009, BCBSRI will prove that we can provide the city with tangible savings by providing health insurance services on an interim basis to city employees under the terms of our recent bid.
“Since the BCBSRI bid is a better economic deal for the city, the city will actually save money,” the BCBSRI chief continued. “Given these challenging economic times, it’s the right thing to do.”
News and information from the City of Providence are available at www.ProvidenceRI.com. Information about the R.I. Supreme Court, the R.I. Superior Courts and their actions is available from the R.I. Administrative Office of State Courts at www.courts.ri.gov.
Blue Cross & Blue Shield of Rhode Island, based in Providence, covers more than 670,000 members. BCBSRI is an independent licensee of the Blue Cross and Blue Shield Association. To learn more, go to www.bcbsri.com.
CVS Caremark Corp. (NYSE: CVS) – the nation’s largest provider of prescription medications – operates the CVS/pharmacy stores; the CVS.com online pharmacy; Caremark Pharmacy Services; and the MinuteClinic retail-based health care subsidiary. To learn more, go to investor.cvs.com.
UnitedHealth Group (NYSE: UNH) is a diversified health and well-being company serving about 70 million people via six operating businesses: UnitedHealthcare (parent of UnitedHealthcare of New England), Ovations, AmeriChoice, Uniprise, Specialized Care Services and Ingenix. To learn more, go to www.UnitedHealthGroup.com.
