New insurance contracts said to save Vt. $10 million
By Peter Hirschfeld
Vermont Press Bureau | August 22,2013
MONTPELIER — Gov. Peter Shumlin is hailing three new insurance contracts that he says will save the state an estimated $10 million in employee health care costs in 2014.
A competitive bidding process to administer the state’s self-insured medical plans saw Vermont end its long-running relationship with Cigna in favor of an offer submitted by Blue Cross and Blue Shield of Vermont.
Commissioner of Human Resources Kate Duffy said Thursday that the Blue Cross bid contained more favorable provider rates than the ones negotiated on the state’s behalf by Cigna. Duffy said the state paid out $119 million in medical claims last year; under rates negotiated by Blue Cross, she said, those costs would have been $5 million less.
“The way to save on costs on a plan like this is primarily on discounts you can get from providers that are negotiated by these (insurance) companies,” Duffy said.
The state also put out to bid contracts to administer its prescription and dental plans. And while Vermont has selected the same carriers it’s used in the past — Express Scripts and Delta Dental, respectively — Duffy says the companies will deliver increased savings.
Lower pharmaceutical costs negotiated by Express Scripts, according to Duffy, will save the state a projected $5 million in 2014.
The state of Vermont is self-insured, paying out of pocket to settle the medical claims amassed by the 23,000 current and retired state employees as well as family members covered by the plan. But the state contracts with private carriers to administer the plan, and negotiate rates with providers, a task Duffy said the state is ill-suited to handle itself.
“We don’t have the capacity to do that, and I don’t think we have expertise or the technology that the companies who were bidding on this have,” Duffy said.
Duffy said the savings do not in any way derive from changes to the employee benefit plan, the terms of which are negotiated between the administration and state workers union during contract talks. But under the Blue Cross bid employees will also gain access to the insurance carrier’s wellness program.
“I am confident Blue Cross’ new Accountable Blue program will help us save costs and, more importantly, improve the health of our state employees and their families,” Shumlin said in a statement.