By keeping the contract through 2012, Providence promises to invest $1 million in a health improvement fund
July 14, 2010 -- While officials from Regence BlueCross BlueShield sat on the sidelines, anticipating they’d have the chance to bid on a multi-million contract they lost last year to their arch competitor, Providence Health Plans, they walked away empty-handed.
The Public Employees Benefit Board, which negotiates health benefits for state employees, decided to extend Providence’s contract through 2012 at a recent meeting. Had the board chosen to move ahead with a bidding process, it would have faced a grueling timeframe to meet an October deadline.
“This gives us time to deliberate to make plan design changes,” said Barney Speight, director of purchasing for the Oregon Health Authority. “It would have been controversial to do the RFP simultaneously.”
In previous meetings, the board has deadlocked over plan design changes despite rising medical costs which have exceeded budget projections. One troubling issue is the composition of the board – labor and management have equal power. Now they’ll have more time to negotiate over controversial issues such as whether state employees will have to pay more for medical procedures not considered as effective.
Before the board made its decision, Providence, which outbid Regence for the self-insurance contract last year, actually sweetened the deal. Earlier it had offered to invest $750,000 in a health improvement fund and not raise its administrative fees -- in return for keeping the PEBB contract through 2012 – but the board turned down the offer. Originally, Providence had only been awarded the contract through 2011.
Then, in a July 6 letter, Providence raised the ante to $1 million, according to Jack Friedman, its CEO, and still promised to keep a lid on its administrative fees.
By holding onto the contract for a third year, Providence has the opportunity to analyze paid claims data and find ways to mellow the cost trend, according to Friedman. “Regence had the contract for 24 years; we hope to have it more than two years,” he said.
No decision has been made on how to appropriate the $1 million gift from Providence, according to Ingrid Norberg, communications coordinator for PEBB. Eventually the board will review various options.
Currently Providence receives $52 per employee per month to administer the statewide plan, which had 38,985 members on March 15. That number includes active employees, retirees, COBRA and self-pay participants, but not dependents, spouses and domestic partners. Providence does not receive a fee for those 59,024 people.
On a monthly basis, Providence is paid slightly more than $2 million for those 38,895 members, which translates into $24.3 million per year.
Providence receives a much higher rate -- $93.56 for its Providence Choice Plan, which had 3,816 members on March 15 – and brings home $357,025 or $4.3 million annually.
There are another 5,076 dependents, spouses and domestic partners in that plan.
Combined, both plans give Providence $28.6 million a year – and its three-year contract is worth $85.8 million.
Here’s how those plans differ, according to Norberg:
“The Providence Choice Plan is designed on the medical home model. Members choose a medical home in clinics staffed by Providence Medical Group. Members may enroll in this plan if they live or work (at least 50 percent of the time) in the plan’s service area (Portland metropolitan area). Their medical home coordinates their care; if they choose care that is not coordinated through their medical home, they have higher out-of-pocket costs for covered services.
“PEBB’s statewide plan is a PPO (preferred provider organization) with a large panel of in-network providers throughout the state and country. Members may enroll in this plan no matter where they live or work. Members may choose care from any provider; if they see providers not in the network they have higher out-of-pocket costs for covered services.”
The number of state employees participating in the Providence Choice Plan could increase sharply during open enrollment in October with the expansion of its provider network, according to Friedman.
“We’ve received very favorable reaction to our RFP to medical groups around the state that would like to participate in the ProvChoice network,” he wrote to Joan Kapowich, administrator of PEBB, on July 6. “And we are confident we can expand that network significantly for open enrollment this year.”
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For more details about PEBB, including its recent decision about extending the Providence contract click here,