ERS contract is sweet deal for Perry insiders
Sun February 26, 2012 8:44 pm

On Thursday, February 23, I wrote this brief post about the Employees Retirement System's decision to award the health insurance contract for state employees and retirees to UnitedHealthcare:

The Perry gravy train is back on the track. UnitedHealthCare is a client of ... Mike Toomey. What a remarkable coincidence.

I went on to quote from the release:

Chris Cronn, a former Perry staffer, will become Vice-President for state affairs for UnitedHealthCare, and other former Perry staffers are on the gravy train. Their names appear below, following the text of an email that went out on Wednesday: UnitedHealthcare was selected by the Employees Retirement System of Texas (ERS) to be the third party administrator of the HealthSelect of Texas health insurance plan. As the administrator, UnitedHealthcare will process claims, provide customer service and manage the HealthSelect network starting September 1, 2012.  We will be working with ERS, and the current administrator, Blue Cross and Blue Shield of Texas, to make the transition as easy as possible for all HealthSelect members.

The names that followed included Cronn (as the new vice president for state affairs for UHC); Toomey; Laura Keel; Louis Saenz, a former senior adviser for Perry; and Victoria Ford, a former Perry health care staffer.

* * * *

What follows is information that I have picked up from various sources, including interviews and web sites. Some of this information has come from sources who are familiar with the terms of the new contract and are critical of certain aspects of the contract.

-----First, UnitedHealthcare's competitors are not going to go quietly into that good night. I am told that ERS will meet tomorrow, and that representatives of the speaker's office and the lieutenant governor's office will be present. The switch from Blue Cross to UHC is going to have huge implications, both financial and personal. (Full disclosure: I am covered by Blue Cross through TEXAS MONTHLY's parent company.) The UHC plan will cause major disruptions in patient care, at least in the beginning, as well as considerable cost-shifting to state employees and retirees.

-----ERS estimates that 16,000 members will pay an aggregate amount of $10 million annually over four years in extra billings, known as "balance billings." This amounts to $40 million -- nearly the identical amount to the alleged $41 million in "savings" contemplated by the contract, or 0.5% of the value of the contract. In other words, there are NO savings. It all comes out of the wallets of ERS members in the form of balance billings. If they do not use a UHC network provider, they will be hit with a balance bill for going outside of the network. (This is generally true of all health plans.) For members who remain "in network," their payments are contractually predetermined. (My co-pay is $25 per office visit.) The actual cost of services may be considerably higher, but, so long as I stay "in network," I am not billed for the higher cost. If members go "out of network," the billing entity is allowed to seek payment of the balance--that is, the full cost of the services. As long as I am "in network," I cannot be subjected to balanced billing.

-----ERS members will be balanced billed, however, in or out of network, because they no longer have access to the Blue Cross Blue Shield safety net, known as the Par Plan, which limits the damage done by balanced billing. The Blue Cross Par (short for "participating") Plan has contracts with out of network providers who agree to bear some of the burden of balanced billing. UnitedHealthcare does not have such a safety net plan.

-----ERS also estimates that an additional 10,000 members will be required to change their primary care physician and their network. Contemplate the misery that this will cause. Nobody who is satisfied with his or her doctor wants to be forced to find another one.

For more about balanced billing, here is information from an Aetna web site:

Balance billing occurs when physicians bill their patients more than what the insurer
pays for their services. Since contract and state law generally prohibit participating
(par) physicians from balance billing members, it often occurs in situations involving
non-participating (non-par) physicians who do not participate with a health plan, and therefore do not accept pre-negotiated health plan rates. Usually members understand they must use
par physicians to minimize out-of-pocket expenses. But even a savvy consumer can
end up being treated by a non-par physician and receive a large bill for the
difference between the physician’s charge and the amount paid by the health plan.This typically occurs when a member faces an emergency and selects the nearest hospital without knowing whether the hospital participates with his or her plan.

* * * *

I don't want to rush to judgment here. I haven't read the contract. I don't pretend to understand the nuances of health insurance. I haven't seen a comparison of the two plans. But the combination of possible influence peddling by the governor and his former staffers turned lobbyists, and the potential impact of the plan on thousands of state employees, should motivate the state's leadership (excluding Perry) to determine whether state employees are getting the best possible deal here. The integrity of TRS has already been compromised by Perry's appointments--remember the Michael Green whistle-blowing letter--and now ERS is likely to come under scrutiny. Dewhurst and Straus should seek a thorough airing of the differences between the new UnitedHealthcare plan and the Blue Cross Blue Shield plan that is no longer in force and determine whether state employees are well served by the new contract.

And what about ERS's lawyer -- Greg Abbott? He is widely  believed to be planning a race for governor. He would benefit significantly if Perry were to step aside. But would Abbott risk a fight with Perry by questioning the process that led to the awarding of a contract to Perry's friends? Unlikely. This is really ugly, and it is going to get worse before it gets better.

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