Health Alliance files suit to block new state insurance contracts

DEAN OLSEN

SPRINGFIELD -- Health Alliance Medical Plans asked a judge Monday to block new state health-insurance contracts and continue Health Alliance HMO as an option for state employees, retirees and dependents.

A lawsuit filed by the Urbana-based health insurer says Julie Hamos, director of the Illinois Department of Healthcare and Family Services, is illegally expanding the state’s use of self-insured “open-access” health plans by disregarding a May 25 vote of a bipartisan legislative panel.

The open-access plans, operated by Personal Care and HealthLink, are expected to serve most of the 100,000 people statewide who are scheduled to lose Health Alliance HMO coverage July 1.

Contracts recently awarded by the state dropped Health Alliance HMO, a fully insured health plan, and expanded the state’s use of self-insured plans. The state assumes most of the risk of paying health-care claims in self-insured plans, rather than paying a fixed amount for fully insured plans such as Health Alliance HMO.

Health Alliance asked Circuit Judge John Schmidt for a temporary restraining order to block the new OAP contracts until Health Alliance’s case can receive a full review in court.

If successful, the temporary restraining order could result in Health Alliance HMO and Humana’s HMO being extended for months or years.

Schmidt is expected to rule on the TRO within a few days.

A spokesman said the state will fight the suit.

“We are absolutely confident in the process of awarding and contracting with these vendors as well as their ability to offer quality health care at a price that will save the state money,” said Mike Claffey, spokesman for Healthcare and Family Services.

The state says the new contracts will save state government more than $1 billion over the next decade.

Several lawmakers on the Commission on Government Forecasting and Accountability have said they doubt those estimates. COGFA voted 8-2 to stop the state from continuing to contract with self-insured open-access plans.

Gov Pat Quinn’s office responded by saying COGFA lacks the power to thwart the OAP contracts.

Health Alliance claims in the lawsuit that the state’s decision to award HMO contracts to Blue Cross and Blue Shield of Illinois — and turn down Health Alliance’s bid — was “arbitrary and unreasonable.”

The lawsuit creates more uncertainty for state workers and others who depend on the state’s health plans.

A bill recently passed by the General Assembly would extend the current health-plan contracts for another two years. Quinn hasn’t said whether he will sign or veto the measure.

And the American Federation of State, County and Municipal Employees has filed a grievance seeking to extend the benefit-choice period. AFSCME has advised its members to wait until closer to June 17 to make their health-plan choices.

Meanwhile, Springfield Clinic and Memorial Health System doctors have changed from Tier 2 of HealthLink’s OAP to Tier 1, which provides HMO-like benefits and carries fewer out-of-pocket charges for state-insured patients.

Dean Olsen can be reached at (217) 788-1543.

Health Alliance: No savings

Health Alliance disagrees with state officials and consultants who say new health-insurance contracts will save state government $102 million a year and more than $1 billion over the next decade.

Health Alliance’s calculations show the state’s health-care costs will rise by more than $50 million a year as a result of the state’s decision to drop Health Alliance HMO from the options.

Chief executive officer Jeff Ingrum points to a March report from the state that says the self-insured, “open-access” plan operated by HealthLink costs the state 22 percent more than the HMOs serving state employees, retirees and dependents.

The estimated average cost per participant in Health Alliance HMO and in HMOs operated by Humana, Personal Care and Blue Cross/Blue Shield of Illinois was $5,341 in the current fiscal year, according to the General Assembly’s Commission on Government Forecasting & Accountability.

The average cost was $6,534 for participants in the open-access plan operated by HealthLink, according to the COGFA report.

“Moving to the OAPs — moving away from the HMO — is just a bad deal,” said Jane Hayes, Health Alliance’s vice president of corporate communications.

But Todd Swim, a partner at Mercer Health & Benefits, the state’s consultant, said open-access plans aren’t inherently more expensive. The current OAP plan is more expensive for the state because it tends to attract older and sicker patients, Swim said.

Under the new contracts, healthier people will join the OAPs, Swim said.

Ingrum said his analysis indicates Health Alliance HMO and HealthLink OAP have about the same percentage of members who are early retirees and people 65 or older — groups that tend to incur more health-care costs.

Dean Olsen can be reached at 788-1543.