Editor’s Note: Managed care contracts are closely guarded secrets. Try getting your hands on one and you will understand the difficulties involved in learning the truth behind managed care contracts. We have succeeded in obtaining copies of contracts, including the Holy Grail, a Blue Cross hospital contract, but that is another story to be told some other time. The following article provides the reader clues about what Blue Cross pays on their North Carolina providers contracts and the difficulty in obtaining pricing information from major health insurance carriers.
The Segal Company, according to this article, has determined that on average Blue Cross pays 130% of Medicare towards professional services (physicians), 216% for out-patient hospital services and 129% for in-patient hospital services.
(Be sure to read comments at end of article)
Details About State Health Plan Blue Cross Blue Shield of North Carolina
By Travis Fain travis.fain@news-record.com Contact Travis Fain at (336) 373-4476, and follow @travisfain on Twitter. | Updated
How other states do it
Redactions are common in insurance contracts for health plans in other states, based on a News & Record analysis of contracts.
For instance, public versions of South Carolina’s contract with Blue Cross Blue Shield of South Carolina are heavily redacted, perhaps as much as North Carolina counterparts.
Like in North Carolina, the company was allowed to make its own redactions, a state spokesman said. It redacted its entire cover letter on the contract, as well as acronyms used. Those are “confidential in their entirety,” according to a notation.
Georgia and Virginia also let vendors make redactions. Georgia’s contracts with Cigna and UnitedHealthcare aren’t redacted nearly as heavily as North Carolina’s with BCBSNC is, but some of the same information is targeted.
Administrative fees, down to what each company charges to process paperwork, are blacked out. So are the costs for procedures that Cigna negotiated with hospitals and drug discounts negotiated by both companies.
BCBSNC redacts more
Blue Cross Blue Shield of North Carolina has administered the State Health Plan since 1986, but its contract was re-bid last year and the company beat UnitedHealthcare to win it.
BCBSNC attorneys have argued it’s appropriate to heavily redact the new 2,600-page contract because the document consists largely of the company’s answers to questions the state posed during the bidding process. Some of the answers reflected business strategies and aren’t part of the contract per se, they argued.
The format makes it simple to compare BCBSNC’s redactions to those UHC made to its submissions.
UHC made far fewer redactions, even though its paperwork was just a bid and not a final contract.
UHC did redact key business information, though, including information about arrangements with hospitals and administrative fee proposals, much as BCBSNC did. Even a UHC leadership organizational chart is labeled confidential.
But UHC’s bid details online tools available to members, the company’s staff-to-member ratio, data on claim appeal and accuracy rates, and the results of fraud prevention efforts.
All of that information is blacked out in the BCBSNC contract.
BCBSNC’s is the largest State Health Plan contract by far, but it remains to be seen how heavily redacted other vendor contracts are. The News & Record requested copies in late June and attorneys in the treasurer’s office still are processing that request.
New contract, new fees
The State Health Plan once had a murky “cost-plus” arrangement with BCBSNC on administrative fees, which left unclear just what services the company could tack on fees for performing. Contract amendments addressed this in 2010, but BCBSNC’s administrative payments continued to rise. The company made $118 million in administrative fees from the plan in fiscal 2012, nearly an 8 percent increase over the year before.
Those fees decreased nearly $10 million the next year, after the Department of the State Treasurer took over plan management. The treasurer’s office also shelved the old contract, split it into parts and put new contracts out for bids last year. The new contracts took effect July 1, and BCBSNC retained the largest one. It now charges a flat $15.04 per-month administrative fee for every plan subscriber — a term that includes employees and retirees but not their dependents.
That figure was blacked out in the contract until the News & Record hired an attorney and pushed the company to release it. More detailed information, showing how BCBSNC arrived at that figure, remains protected. But altogether, BCBSNC will make an estimated $89.6 million this fiscal year in plan administrative fees, according to the treasurer’s office.
It’s difficult to compare that to fees charges in the past because BCBSNC has less responsibility now. Lumping BCBSNC’s administrative costs with other vendors on the plan, administrative costs are slated to increase nearly 13 percent this year under the new contracts.
However, data from past years shows these costs have been over-estimated in the past as a precaution. The treasurer’s office said it expects actual administrative costs to decrease compared to last year, once final numbers come in next year.
Detailed costs unclear
We know how much taxpayers spend on health care for state employees and retirees: An average of about $2.2 billion a year for the last five years.
We don’t know how much individual procedures — colonoscopies, surgeries, etc. — cost the state. BCBSNC negotiates those rates with hospitals and keeps them secret, as do other insurers.
The company provides an online cost-estimator tool, but it’s available to only plan members, not the public, and includes a limited number of procedures.
Outside of that, we can ballpark rates based on an analysis the State Health Plan published earlier this year to compare its costs to Medicare reimbursement rates, which are available online from the federal government.
That report, by a national consulting group called The Segal Company, says the plan pays an average of 148 percent of Medicare rates for services.
Segal broke that down a bit, saying the plan pays 130 percent of Medicare rates for “professional services,” such as surgery and child deliveries.
Outpatient services cost the plan 216 percent of what Medicare pays, while inpatient services cost 129 percent, the report states.
But since the rates for specific procedures vary widely, it’s difficult to translate that information into per-procedure costs, which is a common way for insurance-plan managers to look at data and determine whether they’re getting a good deal.
That’s the sort of information the State Employees Association of North Carolina has been after for years. Without it, “they’re still not showing us what we’re paying,” said Ardis Watkins, SEANC’s legislative affairs director.
Disc sent by mistake
For months, the News & Record pushed the State Health Plan and BCBSNC to make public more information about the company’s contract to manage the multibillion-dollar plan that provides health insurance to nearly 670,000 teachers, employees, retirees and their families.
Although State Health Plan officials said they have the information they need to oversee the plan and to judge BCBSNC’s administration, public versions of the company’s contract are so heavily redacted that it’s impossible for the public to understand important details.
The treasurer’s office, which houses the State Health Plan, allowed
BCBSNC to take the lead in negotiating with the News & Record over the contract, most of which the newspaper believes should be available to the public.
Something unusual complicated those talks: A health plan employee copied an unredacted version of the contract onto a computer disc by accident and mailed it to the News & Record in an effort to comply with an open records request.
The unredacted files are password protected, and the News & Record has not opened them. BCBSNC
initially rebuffed the News & Record’s interview
requests for this article, demanded the disc be
returned, and strongly hinted at legal action.
Both sides hired outside attorneys. Eventually, the company agreed to
unredact all or part of 48 contract pages — far less than the News & Record considers appropriate under state open-records law.
The matter of the disc remains unresolved.
COMMENTS FROM READERS OF THIS BLOG
From a Texas physician:
Reimbursements at 100% of Medicare do not cover most physicians’ cost of doing business. Even 105-110% will barely do it. So, BCBS is below Medicare for many providers. I don’t understand the rationale of a provider who will take reimbursements at this level. But apparently there are some – b/c BCBS uses their predatory power to get people to sign up. And it will work – until it doesn’t. You can’t stay in business taking a loss on every patient, and hope to make it up in volume. BCBS is, purely and simply, a predatory pricer. And this from a company that moved into a beautiful new multistory OB in Dallas a few years ago. They are sucking more money out of the system than anyone. Doctors are providing the service and are getting screwed; employers are paying for the services and getting screwed. Wonder who is making all the money? In a normal industry, efficiencies would come into play and remove the middle man. But then again, this is health care where the normal laws of supply and demand don’t work very well. We’ll see. As more and more employers go self insured, and bypass the PPO networks by setting up their own networks, the Blues and others will (hopefully) eventually find themselves on the outside.
That’s my story and I’m sticking to it.
From a California physician:
As a provider, here’s my answer: For a 99213 Medicare pays me $82 and Blue Cross pays me $77. If fact All of the private insurance companies have paid less than Medicare for an office visit for several years now.
From a health care audit firm:
