Audit of state's health-insurance bidding process is likely

A controversial bidding process that forced health plans to compete for state business — which among other things ousted UCare from the state's Medicaid program next year and will compel thousands of low-income Minnesotans to switch health insurance — appears set for a state legislative audit.

Several state senators suggested such an audit earlier this week, and on Wednesday Human Services Commissioner Lucinda Jesson formally requested one, saying she believes it will uphold the way her department conducted the bidding and chose the winners.

"I have confidence the process was fair and executed in both the spirit and letter of the law," Jesson said in a letter to legislative auditor James Nobles.

In an interview, Nobles said he is "inching" toward a review, because the selection and elimination of managed care plans has "significant human impact." First, however, he must address the fact that his staff is fully engaged in other investigations and that the bidding is already under legal challenge in a lawsuit by UCare against the state Department of Human Services.

At issue is the application of regulations, created in 2011 legislation and approved by Gov. Mark Dayton, that require health plans such as Medica and Blue Cross to submit competitive bids to provide state-subsidized health insurance to approximately 800,000 low-income residents through the state's Medical Assistance and MinnesotaCare programs.

The Dayton administration has cited the bidding process as a major efficiency achievement for state government, and Jesson said bidding will have already saved the state $1.65 billion by 2016. "It's a good, solid procurement process, and it's achieved good results," Jesson said in an interview Wednesday.

Jesson's letter to Nobles came a day after 11 state senators sent a letter to Gov. Mark Dayton calling on him to delay implementation of the managed health care contracts over concern that the bidding process may have been flawed and could "harshly impact the state's most vulnerable people." The senators also questioned the perceived savings and asked the governor "to be certain that the cost of change does not outweigh the claimed savings to the state."

"The Legislature would like at least one set of eyes to have a second look, to see if there are any untoward consequences that we might be able to mitigate before signing the contracts," Sheran said. "We don't have to take the first reassurances from the Department [of Human Services] that all was good."

In a statement, UCare said it welcomed the proposed audit as "another perspective," but said it needs to be conducted in an "expedited" manner. Open enrollment for Medical Assistance and MinnesotaCare recipients for 2016 starts later this month, leaving UCare little time to jump back into the market.

Most of UCare's business line consists of Medicaid and federal Medicare programs, meaning that half of its $3 billion in annual revenue is at stake. Officials for the insurer said as many as half of its 900 workers will lose their jobs if it loses the Medical Assistance business.

UCare's lawsuit asks a Ramsey County District Court judge to enjoin DHS from dropping it from the state's managed care programs next year. The suit accuses the state of providing an unfair advantage to competitors by giving them county-specific cost data, including cost data from more than a dozen counties in which UCare was the only managed care provider.

A division of Blue Cross and Blue Shield of Minnesota was one of the winning bidders, along with Medica, HealthPartners and smaller county-based groups.

Nobles said he will talk to state officials in the next few days to determine how much access he will have to the bidding information, as well as to legal documents in the ongoing court case.

A ruling on UCare's request for an injunction could come as soon as this week.