Health Insurers, Coordinated Care Organizations Vie for PEBB Contract

Among the bidders eager to contract with the Public Employees Benefit Board are two insurers who’ve joined together to form a new collaboration – Regence BlueCross BlueShield and PacificSource Health Plans, while ZoomCare and Legacy Health are among the newcomers in the mix.

In just two weeks, the Public Employees Benefit Board is expected to choose the health insurance plans for more than 130,000 state employees and their dependents – contracts that are worth tens of millions of dollars. And, there’s no shortage of bidders.

In all, 11 bidders are eager to get the contract, including six health insurers, three coordinated care organizations -- all of which are fully licensed as insurance companies -- a hospital system and a for-profit clinic chain. They all aim to use quality metrics and cost containment measures to provide more effective healthcare. The new contracts start Jan, 1, 2015.

Governor John Kitzhaber has made it quite clear that he wants PEBB and, eventually the Oregon Educators Benefit Board, to follow the coordinated care approach, giving those organizations a global budget to administer physical, dental and mental health care, including management of pharmaceuticals.

Whoever walks away with contract in hand can hold onto it for three years with the option to renew on a one-year basis, according to Ali Hassoun, director of operations for PEBB.

The PEBB board has the option of choosing one statewide insurance company and/or several regional plans.

Aanya Lee, a Mercer health and benefits associate, was cautious about the board choosing multiple plans, “You can’t have too many plans because of administrative costs,” she advised them at a recent meeting.

The successful bidders must also fund a $50,000 credit for audit service performed by Mercer, a New York-based human resources and financial services consulting firm, which is helping guide the process.

The dollars at stake are enormous. Although the revenue projections for the coming year have not yet been determined, in 2013 alone, Providence Health Plan was paid $31.1 million solely in administrative fees for a self-insured contract that had $550.1 million in medical claims. And, Kaiser Permanente received $116.8 million in premium dollars for its share of public employees. Of the PEBB population, Providence covered 108,679 employees and dependents, while Kaiser insured 21,367 lives.

Providence appears to be the heavyweight contender once again for the statewide plan, according to preliminary scores from its bid proposal. Providence is followed closely by Moda Health, Regence BlueCross BlueShield and PacificSource, a joint collaboration, with LifeWise Health Plans bringing up the rear.

The competition among the four statewide plans could be fierce. When Mercer aggregated their scores, based on their bid proposals, they all came within 200 points of each other.

All of the contenders are being interviewed, and that process could determine the winner. PEBB Chairman Sean Kolmer insisted, at a recent board meeting, that everyone be given an equal chance at the contract.

However, state employees already have a relationship with physicians in the Providence and Kaiser networks, which could make it more difficult for other insurers to break their hold on the PEBB contract.

“If it’s a big disruption rate, I’m not going to be interested in that for my members,” said Stacy Chamberlain, a board member representing the American Federation of State, County and Municipal Employees union.

Regional Health Plans Compete

On the regional level, Providence once again has the lead, followed by Kaiser and Moda Health. Then comes Legacy Health, a non-profit hospital system headquartered in Portland.

Although Legacy doesn’t have an insurance license, it qualifies as a bidder after forming a relationship with UMR, a national third party administrator based in Salt Lake City, according to Hassoun.

The next three contenders are health plans tied to coordinated care organizations –- Mid-Rogue Health Plan, Trillium Community Health Plan, FamilyCare as well as Atrio Health Plans, an Oregon-based insurance company closely aligned with CCOs in Douglas, Marion and Polk counties. ZoomCare Direct, a for-profit clinic chain, brings up the rear.

PEBB board member Rob Nosse argued for culling the lowest scorers such as ZoomCare and FamilyCare to simplify the process, but was overruled by Kolmer and more senior members of the board.

“Is it fair to interview all 11 when some of these are not going to shake out? It’s about managing the workload as well,” Nosse said.

“To me the scores are close enough-- it’s close enough that an interview would overcome that difference,” said Paul McKenna, who represents SEIU Local 503.

Health Share of Oregon, the largest coordinated care organization in the state, with close to 200,000 members in the Portland metropolitan area, did not submit a bid proposal. That could be because several of the insurance companies in contention sit on its board -- Kaiser and Providence – as well as Legacy Health.

But Beth Sorensen, communication manager of Health Share, denied that was the reason, telling The Lund Report: “We believe the needs of the Oregon Health Plan population are different than those of the commercial population, and we are designed to offer services tailored to the needs of OHP members. 

"Entering the commercial insurance market would distract us from improving the outcomes for almost 200,000 low-income Oregonians, an effort which will keep us busy for many years to come. Focusing on the OHP enrollees is where we can most effectively contribute to the healthcare transformation process in Oregon.”   

Regence Lost the PEBB Contract

Back in 2009, Regence BlueCross Blue Shield lost the PEBB contract after its board decided Providence Health Plan could do a better job improving quality and patient outcomes, administering a self-insured plan compared to Regence's fully-insured offering.

Regence didn’t take the news lightly and filed a lawsuit against PEBB to stop the contract from being awarded to Providence. Its attorney at the time, Pat Ramfjord, with Stoel Rives, argued that PEBB had changed its administrative rules to apply retroactively to justify its actions. He called the process unfair, unlawful, saying it caused irreparable harm to Regence.

At the same time Dr. Bart McMullan, then Regence’s president, insisted his insurance company could save the state $10 million if it regained the contract.

Former Attorney General John Kroger also got into the fight and determined that Regence was not promoting the public’s interest, but its own.

Finally, in October of that year, Jared Short, who took over as president of Regence, announced that the insurer was dropping the lawsuit.

Up until then Regence had held the contract for more than 20 years. Its loss represented approximately $30 million in revenue. This wasn’t the only blow to Regence. A year earlier, it lost another multi-million dollar contract when the Oregon Educators Benefit Board formed and instead chose Providence and Kaiser to insure its 145,000 school teachers. In 2012, OEBB abandoned Providence for The ODS Companies (now Moda Health) while retaining its Kaiser option.

Regence is eager to get back into PEBB, and collaborating with another health plan might be its only hope. Although its spokesman, Jared Ishkanian denied that was the case, one has to wonder why Regence didn’t go it alone, and, instead, reached out to a health plan that’s well respected and seen as progressive in the community – PacificSource – to form a collaboration. When asked to comment, Regence and PacificSource gave a joint response to The Lund Report:

“This partnership arose from an opportunity to meet the unique needs of PEBB’s 130,000 Oregon state employees. PEBB is looking for an innovative approach that brings Coordinated Care models to as many people as possible. In reviewing the RFP, we each recognized that we could best achieve the level of transformation PEBB envisions through partnership. 

"This collaboration allows us to leverage our provider relationships, promote employee engagement from the first stages of enrollment, provide ample administrative support, and deliver the level of quality care, at lower costs, that will result in healthier Oregon state employees and members."

Interestingly, there’s no talk about future collaborations by the two insurance companies.

“While we wouldn’t rule out the possibility of such a partnership to meet the needs of other employers, it’s not something we’re actively pursuing beyond the PEBB proposal, ” Regence and PacificSource added.  


Here's a look at how the health insurers rated prior to the interview process.

Chris can be reached at [email protected]. Diane can be reached at [email protected]

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