State of Montana reopening bids for employee health insurance plan

Posted at 6:59 PM, Feb 05, 2024

HELENA — Last month, the Montana Department of Administration announced it was reopening a bid for companies wanting to manage health insurance for thousands of state employees. It’s an unusual move that leaders said came about because of questions over whether all the bidders had the same understanding of the requirements.

DOA contracts with a company called a “third-party administrator” to run the state health plan, which provides health benefits for about 28,000 members – including state workers, their family members, retirees and legislators. In 2022, the department announced Blue Cross Blue Shield of Montana would take over the plan, in a three-year contract that leaders estimated would save $28 million.

However, in January, DOA said they were ending the contract a year early and starting a new bid, for a contract beginning in 2025. Their release said, “Recent findings have brought into question whether all vendors had the same understanding of requirements during the RFP process.”

“The department’s goal in every RFP is to provide a fair and equitable process for all vendors,” DOA Director Misty Ann Giles said in a statement. “We look forward to initiating a new bid for the state health plan this spring and securing coverage that best serves state employees, health plan members, and Montana taxpayers.”

After the state announced BCBS as the winning bid, Allegiance Benefit Plan Management – the company that had been administering the state health plan since 2016 – filed a protest against the decision. In in, they made a number of allegations, including that the state’s evaluators hadn’t scored all companies consistently and that the state had changed the bid requirements during the process and should have had to open a new RFP.

In a statement to MTN, a DOA spokesperson said the department denied Allegiance’s protest, and the company asked for a contested case hearing.

“However, before the hearing took place and before any findings were made or a determination was reached by the hearing examiner, DOA became uncertain that all offerors had the same understanding of the requirements at the time of the RFP,” the spokesperson said. “In light of this uncertainty, regardless of the specific assertions made by Allegiance, DOA decided to rebid the TPA contract to ensure all parties would have access to the same information when submitting bids to become the state health plan third party administrator.”

They again said the department’s decision wasn’t based on any evidentiary rulings or on Allegiance’s specific allegations.

“The only relation to the protest was procedural, in the sense that the protest initiated the process that led to DOA’s decision to rebid the health plan,” they said.

MTN made a request for public records supporting the department’s decision, to get a better picture of what led up to this point. The state released dozens of individual documents, dating back to the start of the original RFP process.

State Health Plan Documents

The state made its initial request for proposals in March 2022. Six companies, including Blue Cross and Allegiance submitted bids. In June, DOA went back to bidders and asked them for additional clarification on their responses. In some cases, the questions were about specific parts of the companies’ bid proposals, but all the bidders also got a document asking for general clarifications.

“This clarification is being sought to allow the State to better determine cost considerations to the benefit plan,” it said.

That document included updated language for several sections of the original RFP. Many of those updates dealt with targets for what the plan would pay for medical services. The RFP said, since 2016, the state and its administrator have been using a “reference-based pricing” model, in which they determine a maximum amount they will reimburse a health care facility or provider, using Medicare rates as a baseline. It pointed to a report that found, from 2016 to 2020, the state was generally paying 245% of what Medicare would have paid for the same services.

The original RFP document said the state wanted bidders to show they could keep reimbursement levels below the current mark of 245% of Medicare rates, and as close as possible to 195%. The updated document made several adjustments to those targets – breaking down to separate rates for facilities and for providers, and updating the current reimbursement rate for facilities from 245% to 230%. The state said the current reimbursement level for providers was 154%, and their target was as close as possible to 145%.

In August, the state asked Allegiance and BCBS for a “best and final offer” on the administrative fees they would charge for managing the plan. Both companies submitted updated proposals.

In September, DOA announced that their evaluation committee had scored all the applicants, and that BCBS had received the highest score and would receive the third-party administrator contract. The contract, which began on Jan. 1, 2023, originally ran for three years and could have been extended for up to ten.

Now, the state is terminating BCBS’ contract on Dec. 31, 2024. DOA leaders said they will open a new RFP from March 11 to April 19, and they plan to select the winning bidder over the summer. The new contract will begin Jan. 1, 2025, and the department says no health plan members should see a lapse in coverage.

John Doran, divisional vice president of external affairs for Blue Cross Blue Shield of Montana, said in a statement to MTN that BCBS won the contract for the state health plan based on a superior bid.

“Our innovative strategy to improve health outcomes and lower the total cost of care earned the highest score among all bidders,” he said. “We won the bid outright. The State’s decision to reopen the bid process was based upon the State’s determination that portions of the solicitation and process may have been flawed. We acted with integrity in every step of the process and followed all requirements in submitting our winning bid. Since assuming responsibility for the State Employee Health Plan, we have performed well and have met and exceeded the State’s expectations, and we will proudly continue to serve the State over the balance of this year. We look forward to again submitting a superior bid. We are confident that we will, once again, demonstrate to the State that we are the strongest partner, now and into the future, to enhance State employee access to quality, affordable health care.”

MTN attempted to reach Allegiance for comment, but was not able to establish contact before this article was published.