State taxpayers need a new contract with Blue Cross Blue Shield of North Carolina because the current arrangement for servicing the state health plan is open to abuse.
Blue Cross administers the health-insurance plan for teachers and state employees. It has bragged that it makes a profit of less than 1 percent on the contract, or less than $500,000 a year.
The insurer did not boast, however, about a wide-open contract clause for charging overhead expenses to the state. Almost any charge is probably legal, so once those costs are figured in, the company's real profits are much higher.
Under the contract, Blue Cross could charge almost any of its expenses -- not just those directly related to state health-plan service -- back to the taxpayers. This would be a concern if it can be shown that the state is paying either for Blue Cross costs that are unrelated to the state business or paying a disproportionate share of partially related expenses.
A recent report by an outside auditor has health-care advocates screaming foul. The auditor said that Blue Cross has been charging the state for questionable overhead expenses. The auditor -- who said that the charges were legal -- listed food for meetings of the company's board of trustees, the salary of the company's chief executive, travel expenses for company employees and data-networking hardware.
If these costs are charged proportionately, Blue Cross is justified. If, for example, the board spent one day of a three-day retreat on state health-plan issues, then the food costs for that one day may be fair. But not the costs for all three days. If a Blue Cross employee travels on state health-plan business, that is a legitimate state overhead expense. If that employee is traveling for another of the insurer's clients, however, it is not.
The State Employees Association of North Carolina and the N.C. Justice Center both reacted strongly to the auditor's report. They say that state taxpayers and workers are getting a raw deal.
Mona Moon, the chief operating officer of the state health plan, told The Associated Press that her staff is negotiating with Blue Cross to limit what can be charged to the state as an operating expense. The current contract runs through 2013.
"We need to work very hard on the next contract," Rep. Hugh Holliman, D-Davidson, the N.C. House majority leader and a co-chairman of the health-plan oversight committee, told the AP. "Everything's on the table."
Everything better be on the table, including an investigation into how Blue Cross got an open checkbook in the current contract.
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