Judge upholds decision to switch to Aetna for North Carolina worker health insurance

In a legal fight involving two health insurance companies seeking to manage North Carolina's public employee benefits plan, a judge ruled Monday that the plan's board acted properly when it switched to Aetna and dropped longtime administrator Blue Cross and Blue Shield of North Carolina.

Contract costs - with health care claims included - exceed $3 billion annually.

Blue Cross has administered the State Health Plan for over 40 years. The administrator handles health care expenses for several hundred thousand state employees, teachers, their family members and retirees, ensuring claims are paid and building out a provider network. After a bid process, the plan's trustee board voted in December 2022 to award the initial three-year contract to Aetna over Blue Cross and a unit of United Healthcare, which also competed.

Blue Cross challenged the decision, arguing that the State Health Plan erred in how it decided which company would get the contract and calling the bid process oversimplified and arbitrary. But Administrative Law Judge Melissa Owens Lassiter, who heard the contested case in February, wrote Monday that Blue Cross had not met the burden of proof necessary to show that plan leaders had acted erroneously or failed to follow proper procedures.

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"The preponderance of the evidence showed that the Plan conducted the procurement carefully and thoughtfully, fairly and in good faith and that its decisions were properly within its discretion," Lassiter wrote in affirming the trustee board's decision to give the award to Aetna. It's unclear if the ruling will be appealed to Superior Court.

Blue Cross said it was disappointed in the ruling but "gratified that the court reviewed the serious questions we raised" about the State Health Plan's proposal request process. "Blue Cross NC is honored to serve our teachers, public safety officers and state employees and will continue to provide the highest level of service throughout the current contract," the company said in a written statement.

State Treasurer Dale Folwell, the trustee board chairman, praised the ruling, saying it had been clear that the State Health Plan "performed a well-reasoned, high-integrity, and correct procurement process for third-party administrative services."

Aetna North Carolina market president Jim Bostian said several hundred of its employees so far have worked on implementing the contract on time "while demonstrating in court that the transition to Aetna is in the best interests of the State Health Plan and its members."

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