‘Fatally flawed’: RI insurance giants Blue Cross, Tufts protest $15B Medicaid contract

PROVIDENCE, R.I. (WPRI) – There’s a fight brewing over a $15 billion contract Rhode Island awarded last month to two health insurance companies to run the state’s Medicaid program.

Gov. Dan McKee announced in July his administration had awarded the so-called “Managed Care Organizations” contract to two insurers, Neighborhood Health Plan of Rhode Island and UnitedHealthcare of New England. The five-year contract is worth more than the state’s entire annual budget.

The state’s Medicaid program provides health coverage to nearly a third of Rhode Island’s population. The insurers earn a profit as part of their administrative fee.

But now, two companies that lost the bid are contesting the state’s decision, arguing the selection process was “fatally flawed” and should be revised or redone.

“Given the magnitude of the state’s Medicaid program – serving a third of Rhode Island’s population and comprising the expenditure of billions of dollars in public funds – BCBSRI believes it is critical to get this procurement process right,” said Richard Salit, spokesperson for Blue Cross & Blue Shield Rhode Island, one of the two companies.

Tufts Health Plan, a subsidiary of Point32Health, was also rejected and submitted a separate bid protest. State documents show both protests were submitted to state officials on July 29.

“The [state’s] scoring assessment did not accurately or consistently score the bidders’ submissions and failed to conduct a fair, unbiased, and member-focused procurement as required by law,” Tufts spokesperson Philip Tracey told Target 12 in a statement.

Insurance giants fighting over state Medicaid contracts is common across the country, as local media reports show similar disputes currently underway in other states, including Arizona, Kansas and Florida.

The contracts are highly lucrative. And for insurers bidding to hold onto contracts they currently maintain, getting rejected – in some instances – means losing entire lines of business.

In Tufts’ case, the insurer currently has a small share of Rhode Island’s Medicaid contract. It now stands to lose its entire Rhode Island Medicaid business when the new contract begin next year.

“We believe it’s important that our 15,000 [Rhode Island] members continue to have access to our high-quality health care services,” Tracey said.

Blue Cross and Tufts allege state officials did an abysmal job when assessing which companies to pick for the $15 billion contract, according to documents reviewed by Target 12.

Blue Cross accused state officials of giving UnitedHealthcare and Neighborhood illogically high scores in multiple areas of their bids, even though the insurer alleged its rivals failed to comply with certain procurement laws or submit required documentation in some instances.

“[The state’s] decision to simply ignore these deficiencies and to instead reward these bidders with contracts they were not lawfully eligible to receive was clearly erroneous, arbitrary, capricious, and contrary to the governing laws,” wrote a group of attorneys representing Blue Cross, including Christopher Whitney.

Blue Cross also took aim at the state officials who made up the technical panel reviewing the bids, alleging they all worked for the same agency – R.I. Executive Office of Health and Human Services – which runs contrary to state standards.

Panels are supposed to have “a diverse set of individuals across agencies that have expertise and experience that complement each other,” Whitney wrote.

Blue Cross, which doesn’t have a share of the state’s current Medicaid contract, also accused the panel members of all having professional relationships with UnitedHealth and Neighborhood. Both those companies currently help run the state’s Medicaid program, along with Tufts, “creating at least the perception of bias,” Whitney wrote.

“Moreover, upon information and belief, one of the individuals that served on the [panel] worked for one of the winning bidders within the past two years, opening the door to conflicts of interest, bias and favoritism,” Whitney added.

In its own protest, Tufts took heavy aim at the state’s scoring methodology, which its president of government markets Urcel Fields characterized as “fundamentally unsound.”

“EOHHS has a critically important task in evaluating a multibillion-dollar procurement that impacts the health care of the state’s most vulnerable residents,” Fields wrote. “Yet it failed to use a methodology that was sufficient to meet that challenge.”

For example, Fields pointed to one area of scoring for Neighborhood, which he said didn’t include an agreement letter with the state’s largest Medicaid provider, Lifespan. The state’s largest hospital system controls about 44% of acute care hospital beds in Rhode Island, and it’s a major player in Medicaid.

Despite the absence of a Lifespan agreement in its bid, Fields said Neighborhood still received high marks in its technical score, “demonstrating a failure to properly review the network submissions.”

“Critically, had EOHHS properly graded [Neighborhood] to reflect the lack of Lifespan in network, it likely would have had to reprocure the entire solicitation,” Fields wrote.

The companies all needed to score at least 85 points in their technical reviews to be considered for the $15 billion award. Neighborhood scored the highest with 88.5 points. UnitedHealthcare scored 87.9 points. State officials said Blue Cross and Tufts didn’t even qualify, scoring 63.2 points and 54.4 points, respectively.

The two losing insurers are now calling on the state to review the entire bid and take into consideration the issues raised. Blue Cross argues the state should revise the contract and award some part to them. If not, Whitney wrote, the state must cancel the contract and restart the bidding process from scratch.

“Based upon an initial assessment of the scoring results, Blue Cross noted multiple instances where compliance with the state’s procurement regulations was lacking, as well as inconsistencies in how EOHHS applied its own scoring criteria and methodology across bidders,” Salit said.

Tufts, meanwhile, is calling on the state to cancel the award to Neighborhood and UnitedHealthcare, restart the bidding process and maintain the current contract under its existing terms until a new one can be awarded.

R.I. Department of Administration spokesperson Karen Greco said “the matters are currently under review” by DOA, which oversees contract procurements in Rhode Island.

“When completed, we will issue a written determination,” she added.

This isn’t the first time the massive Medicaid contract has come under scrutiny. A similar effort to award the deal in 2022 was riddled with unforced errors , leading the state to eventually cancel the bid process and start again.

Eli Sherman ( esherman@wpri.com ) is a Target 12 investigative reporter for 12 News. Connect with him on Twitter and on Facebook .

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