QualChoice, Blue Cross Battle Shaping Up in State Court

by Jim Harris  on Monday, May. 11, 1998 12:00 am  

Its consultant has advised a subcommittee of the Arkansas State Employees and Public School Personnel Insurance Board that QualChoice of Arkansas Inc.'s point-of-service plan is the best option for the state, which will award health insurance contracts in the coming weeks.

The subcommittee discussed its options but did not act Wednesday in a meeting at St. Vincent Infirmary Medical Center. Another meeting of the group is scheduled for May 14.

The subcommittee will recommend a preferred provider organization (PPO), a point-of-service plan (POS) and a number of health maintenance organizations (HMO) as options for state and public school employees. The contracts are up for renewal at the end of this year.

The POS appears to be the strongest point of contention, and the subcommittee chaired by Dr. Andrew Kumpuris seemed well-aware of that Wednesday.

William H. Mercer Inc., the St. Louis based firm hired as the consultant for the Insurance Board, took bids and evaluated all the players in the various categories. While the current contract calls for four point-of-service plans, the committee was seeking to award the contract to one POS this year.

"There are three major reasons for wanting one point-of-service plan," Arkansas Insurance Deptartment Commissioner Mike Pickens says. "We ultimately answer to the governor and to legislative oversight [the Insurance and Commerce Committee]. So, we're wanting to keep costs as low as possible. The governor would like us to reduce a deficit. And we want to increase overall competition. In essence, it's a cost-control mechanism."

Rising health care costs are crimping the budgets of many state employees, says Kay Durnett of the Arkansas State Employees Association. "Many state employees have seen their health care expenditure rise as much as 96 percent in the past two years," she says.

The Mercer firm determined that QualChoice was the best choice for the POS. Arkansas Blue Cross and Blue Shield, which owns Health Advantage in part with USAble Corp. and Baptist Health, contends that choosing only QualChoice would violate a law passed in the 1997 General Assembly. Health Advantage currently is among the four companies offering the POS.

Blue Cross officials at the meeting said that under Act 1295, a statewide health insurance network is entitled to offer the point-of-service option. Health Advantage is the only POS licensed in all 75 counties. QualChoice is not licensed in seven counties on the outer edges of the state. The law calls for offering "statewide" access, and QualChoice officials contend that even employees in the counties where QualChoice isn't offered have nearby access.

There are hints of Blue Cross going to court if the Insurance Board stays solely with QualChoice as the POS.

Prudential Health Plans of Arkansas Inc. and United HealthCare of Arkansas also currently offer the POS option to state and public school employees.

But QualChoice might not to be able to afford its low, winning bid if the POS option were opened up to more than one firm. QualChoice COO Steve Schafer admitted as much in the meeting. As the lone option, QualChoice can spread the risk across its plan; as one of two options, the fear is that one of the two plans would absorb too much adverse risk, making the effort far more costly than anticipated.

QualChoice bid $102.6 million (without pharmacy) on the public school employees side and $91 million for the state employees. The state, through the Department of Finance and Administration, pays a portion of the employees' insurance.

Health Advantage bid $112.7 million for the public school portion and $102 million for the state employee portion.

QualChoice is owned by the University of Arkansas for Medical Sciences and Tenet Healthcare Corp. Tenet is in partnership with St. Vincent in NovaSys, creating a network with QualChoice of 2,000-plus physicians and more than 70 hospitals.

The POS combines the best of an HMO (a closed network panel of providers and doctors) and a PPO (the ability to go out of network).

Mercer recommended Arkansas Blue Cross over CIGNA Health Care for the PPO option. CIGNA owns Health-source of Arkansas.

The St. Louis firm recommended all six firms that bid for the HMO option, but discussion arose about Prudential Health Plan of Arkansas' bid — the company bid for the fully insured public school section but did not bid on the self-insured state employees part.

— Jim Harris



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