THE MISSISSIPPI LEGISLATURE

Introduction

One benefit currently provided to Mississippi's state and public school employees is major medical health insurance fully paid by the state, with dependent coverage available at reasonable premiums. Such a benefit provides much-needed insurance coverage to employees and reduces the burden on the employees' personal financial resources to cope with rising health care costs. However, the value of the insurance benefit is diminished if employees' medical claims are not adjudicated properly or if their medical expenses are not reimbursed in a timely manner.

Background

The Legislature, in 1971 and 1991, respectively, established the State Employees' Life and Health Insurance Plan and Public School Employees' Health Insurance Plan. The Plans constitute a state-funded insurance program which provides major medical insurance coverage to state and public school employees. As of December 1, 1994, the Plans provided insurance coverage to 171,680 covered lives (enrolled employees and their dependents).

State law authorizes the Department of Finance and Administration (DFA) to administer the Plans. State law also establishes advisory councils to advise the department in the formulation of the Plans. Currently, DFA, through its Office of Insurance, manages the Plans in a similar manner, while technically maintaining each as a separate plan with separate fund reserves. On a day-to-day basis, the Plans are administered by DFA, a claims administrator, a utilization review organization, and a network contractor. DFA currently contracts with CENTRA Benefit Services, Inc., to serve as the claims administrator for the Plans. Prior to July 1, 1994, BlueCross BlueShield of Mississippi (hereafter referred to as "Blue Cross") served DFA for ten years as its claims administrator and was the actual insurer of the School Plan.

Recent Complaints Relative to the Administration of the Plans

CENTRA began serving as the third-party administrator for the State and Public School Employees' Health Plans effective July 1, 1994. Plan participants and health care providers initially noticed few changes as Blue Cross relinquished its role as administrator and CENTRA assumed that role and began processing claims.

During the latter part of July and early August of 1994, Plan participants and health care providers began experiencing difficulties, primarily with claims processing and receipt of reimbursement checks. Participants' and health care providers' complaints regarding CENTRA and administration of the Plans escalated during late summer and early fall. CENTRA and DFA were inundated with telephone calls from participants and health care providers seeking information relative to their claims and/or Plan status. In addition, the Department of Insurance and legislators have received complaints from participants and health care providers regarding untimely processing of health claims.

Overview

Inarguably, there have been delays, disruptions, and difficulties as Blue Cross relinquished its role as DFA's third-party administrator and CENTRA assumed that role and began processing claims. With the advent of complaints from participants and health care providers regarding claims processing delays, all of the parties involved-DFA, CENTRA, and Blue Cross-have attempted to focus the blame for the problems on each other. The reality is that all three parties must bear responsibility for causing and also for resolving the problems which have plagued administration of the Plans.

DFA, with its statutory responsibility for administration of the Plans, failed to plan and coordinate properly the transition and implementation process to ensure that its current and former third-party administrators effected a smooth transition. DFA's passive and reactive role in the transition process allowed many avoidable and correctable situations to escalate beyond reasonable resolution and prevented literally hundreds of participants and health care providers from receiving timely processing of claims.

CENTRA, as DFA's new third-party administrator, apparently underestimated the magnitude and complexities of the transition and implementation process. The new third-party administrator should have drawn on its past experiences and quickly assessed the transition situation to realize that implementation of DFA's account, CENTRA's largest, required extraordinary efforts steeped in precision and analytical rigor.

Blue Cross, as DFA's former third-party administrator, should have realized that its demands upon the new claims administrator, such as indemnification and internal repricing, would create problems well beyond those expected during a transition of short duration.

Findings

Due to the number of employees covered by the State and Public School Employees' Health Insurance Plans, legislators and others have a keen interest in knowing whether certain aspects of the Plans have been administered properly. This report contains answers to two specific questions which can be used to make such a determination.

Was the selection process used by DFA in compliance with state law and adequate to ensure that the selected third-party administrator was capable of administering the Plans?

• DFA solicited competitive bids for a third-party administrator for the Plans in compliance with state law (page 12).
• DFA's process for selecting a third-party administrator was not adequate to ensure that the selected third-party administrator was capable of administering the Plans. The process did not effectively utilize the time available, did not produce a request for proposals containing sufficient information for proposers to compile informed responses, and did not require DFA's consultant, Coopers & Lybrand, to evaluate uniformly the three finalist proposers and document such evaluation (page 13).

What problems have contributed to recently experienced delays in CENTRA's processing of state and public school employees' health insurance claims?

• Neither DFA nor CENTRA developed a comprehensive plan to manage the transition/implementation process and coordinate efforts of all parties involved (page 24).
• During the transition period, CENTRA did not perform in accordance with its response to DFA's request for proposals document because it did not assign a dedicated transition team for the duration of the implementation process and establish and adequately staff a Jackson office to perform all services on DFA's account (page 26).
• Certain aspects of the transition process did not progress in a timely manner because CENTRA and Blue Cross could not come to agreement over an indemnification from errors issue and the use of computerized data integrity edits (page 29).
• CENTRA's agreement to process run-out claims (hard-copy claims for services rendered prior to the end of a contract but processed after expiration of the contract) created an immediate backlog of approximately 10,000 health claims and contributed directly to future claims processing delays. The agreement also resulted in the Plans bearing an additional expense of approximately $66,000 which, in effect, was a double payment and could have been avoided (page 32).
• CENTRA did not develop a master data conversion plan to guide its transition process. As a result, CENTRA and Blue Cross did not resolve major data transmission and claims processing problems prior to July 1, the effective date of DFA's contract with CENTRA, and are continuing to attempt to resolve such problems (page 34).
• CENTRA's and DFA's lack of communication regarding plan benefits/coverage and DFA's failure to address public school employees' carryover deductible credit properly have slowed claims processing and created confusion among plan participants (page 36).
• DFA's decision to have CENTRA handle telephone calls regarding provider networks (and CENTRA's agreement to handle such calls) congested the third-party administrator's telephone system and detracted from claims processing during a critical transition period (page 39).

Recommendations

The complete text of these recommendations begins on page 42 of the report. Appendix B, page 46, contains proposed legislation to accomplish these recommendations.

1. The Legislature should adopt a joint resolution creating a legislative oversight committee to meet with the Governor, DFA Executive Director, and relevant parties to effect resolution of the claims processing delays within thirty days. The resolution should require the joint committee to determine whether the Legislature should enact an assignment clause for assignments of benefits to a health-care provider which would be binding on the insurer; whether state law should exempt Blue Cross Blue Shield from Mississippi's laws regulating the insurance industry; and whether the state has a reasonable alternative to using the Blue Cross network for repricing.

Specifically, the Joint Committee should determine if Blue Cross should sign an agreement with CENTRA to provide CENTRA with proprietary repricing information which CENTRA would agree to keep confidential.

The Joint Committee should further determine whether CENTRA is aggressively pursuing resolution and payment of pending insurance claims and whether the Department of Finance and Administration should continue its contract with CENTRA as State Plan Administrator.

(See Appendix C, page 59 of the report, for a proposed joint resolution for a legislative oversight committee to seek resolution of claims processing delays.)

2. The Legislature should require the Department of Finance and Administration to contract with a third-party administrator on a calendar-year basis (January 1-December 31) notwithstanding terminations which may be necessary during the calendar year.

3. The Legislature should require the Department of Finance and Administration to disclose proposed health plan changes fully and to educate state and public school employees on the changes.

4. The Legislature should require DFA to prepare for a minimum of six months' transition time between third-party administrator contracts. The transition period should be defined as the period beginning at the date of the award and ending at the effective date of the new contract.

5. The Legislature should require DFA to develop a comprehensive transition plan when preparing for transition to a new third-party administrator.

6. The Legislature should require DFA's Office of Insurance to follow a specific process for contracting out third-party administrator services and other professional services. In the event of a documented emergency, the Legislature should allow DFA to retain the services of a third-party administrator without using a competitive bid process.

7. The Legislature should require the PEER Committee to hire, from funds specifically appropriated by the Legislature for this purpose, an independent contractor to audit and review on an annual basis the third-party administrator's compliance with performance standards contained in the contract.

8. The Legislature should require the Department of Finance and Administration to develop a strategic plan for the State and Public School Employees' Health Plans.

9. The Legislature should require DFA to include performance standards regarding pended claims in its third-party administrator contracts.

10. The Legislature should review the provisions common to the two health insurance plans and consolidate the two plans in law by January 1, 1997.

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