Olivia Webb

Richmond County Daily Journal

The controversial financial shortcomings of the North Carolina State Health Plan were recently detailed in an April 30 performance audit report by State Auditor Beth Wood.

The plan, which provides health insurance for state employees and teachers, projected a $57.9 million net income for fiscal year 2009, according to the report, but ended with a loss of $79.7 million because the plan “underestimated claims and administrative expenses.”

Wood made several recommendations, including executive oversight, for improved function of the plan, which is currently administered by Blue Cross Blue Shield of North Carolina and overseen by the legislature’s Committee on Employee Hospital and Medical Benefits.

“By moving (the plan) under the executive branch, not only will we get full and complete disclosure of all documents, but we’ll also have a much better picture of what’s coming in and what’s going out,” said State Representative Melanie Wade Goodwin (D-Montgomery/Richmond).

The audit cited the original plan’s lack of transparency as one of the reasons that projecting costs was so difficult. It allowed BCBSNC to deny access to information it deemed proprietary.

“The contract is a cost-plus-percentage-of-cost contract that provides no incentive to control costs and results in increased revenue to BCBSNC as the state’s cost increase,” read the report. “In an interview with the state auditors, the plan’s former chief operating officer said that on more than one occasion the former executive administrator stated that the former executive administrator of the plan said no information is to go to the legislators or fiscal research committee without his express permission.”

“I think there’s a lot of discussion now, a lot of interest in putting (the plan) under the governor’s office,” said Senator Bill Purcell. (D-Anson/Richmond/Scotland/Stanly) “I could support that.”

The state had to use $250 million in reserves to bail out the plan until June, the end of this fiscal year. That action - as well as an increase in most deductibles and co-pays, and benefit cuts for participants who are obese or smoke — was provided for in a bill signed into law by Gov. Bev Perdue on April 23.

“We want to try to provide incentives for younger, healthier people to take advantage of the plan,” said Goodwin.

“The problem is that we have a situation that no other insurance company has had that I know of,” said Purcell. “If you have a family member that has a terrific health problem, get a state job because they will insure them. What’s ended up happening is we’ve got a lot of people who have a lot of (health) problems, and the younger, healthier people have found that they could buy insurance cheaper elsewhere.

“A lot of state employees may not appreciate (benefit cuts for obese individuals and smokers), but that’s a major player in the reason costs got so out of hand.”

Wood also recommended that contracts like the one with BCBSNC be reviewed by an attorney or contract professional before getting signed - something that didn’t happen the first time around.

According to Goodwin, administration of the plan was simply given to BCBSNC. No proposals were solicited. The audit

“I can’t believe it’s a no-bid contract, and I can’t believe the terms of the contract,” said Goodwin. “It’s a disservice to our teachers and state employees.”

Purcell said he “didn’t see where Blue Cross Blue Shield was out of line.”

“We are self-insured,” said Purcell. “All Blue Cross Blue Shield was doing was managing the plan.”

According to a March report by the Durham-based watchdog group Democracy North Carolina, a total of $759,990 in campaign contributions from both the Blue Cross Political Action Committee and top BCBS executives were made to various state candidates and officials between 2000 and 2008.

Purcell was listed as a recipient, which he confirmed. He added that campaign funding information is all public record —meaning he has nothing to hide — and it doesn’t influence his opinion on the state health plan.

“I don’t make any commitment to anybody when I receive a campaign contribution,” said Purcell. “I never have and I never will.”

And as for other public officials being influenced by BCBSNC contributions, “I don’t think that has a thing to do with it,” he said.

According to Goodwin, the auditor's recommendations can't be considered in the legislative session unless they are introduced as bills during the legislative short session beginning in May 2010.

She said the best part of the recently-enacted State Health Plan law is the formation of the Rlue Ribbon Study Commission.

“The Blue Ribbon Study Commission will study the existing structure of the State Health Plan and make recommendations for long-term changes to improve the Plan for our state employees,” said Goodwin. “The amendment was added during the floor debate on the bill to make Members more comfortable with supporting the bill in its current form.”