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Bid protest holds up HMO contracts for state workers

A battle is brewing over the right to offer HMO coverage to state employees. Three insurance companies set to lose contracts under a new plan for providing coverage have filed a formal bid protest against the Department of Management Services, saying the agency inappropriately awarded the contracts for state workers, their dependents and retirees. A hearing is set for Sept. 12.

United HealthCare, Florida Health Care and Coventry Health Care argue the department miscalculated the costs of the competing proposals and that AvMed, which emerged as the big winner in the bid process, isn’t capable of delivering the services promised.

After opening the contracts for bid in June, DMS chose AvMed in late July to serve 38 counties, up from 30 under the previous plan. They include Hillsborough, Pinellas, Pasco, Miami-Dade and Broward counties. United HealthCare was awarded contracts for only 18 counties, down from 67. Coventry’s coverage area is dropping from 26 to four counties. And Florida Health Care is dropping from two counties to zero.

The change is part of the department's efforts to rein in state health care costs. The new policy requires awarding HMOs contracts to the lowest single bidder in each of the state’s 67 counties instead of allowing employees to pick from two or three companies.

More than 177,000 employees and retirees are enrolled in state health care plans. Of those, just under 85,000 are in HMOs. The changes mean about 26,000 employees will have to switch to a new company under the new proposal, but the state is working to make sure they won’t have to switch doctors, said DMS spokesman Kris Purcell.

“We think the impact is going to be fairly small in terms of the ability to see the same doctor they had,” Purcell said.

But the complainants say that instead of saving the state an estimated $400 million over two years, the proposal will cost taxpayers nearly $500 million over two years.

“The Department did not achieve a rational and meaningful price analysis,” said Elizabeth Calzadilla-Fiallo, a spokeswoman for United. “It was impossible for the Department to have determined whether the intended award constitutes best value,”  

Purcell said United’s analysis is not accurate, noting the company is only looking at discounts offered by providers to certain companies.

“That is just one piece of a much bigger cost equation,” Purcell said. “They may have better discounts, but they have higher overall costs.”

Bid protest documents also say AvMed is rated “F” by the Better Business Bureau of South Florida  and has experienced operating losses for several years.

“It is expected that additional information demonstrating AvMed’s lack of fitness to be considered a ‘responsible’ vendor will surface,” read the court documents.

A spokeswoman for AvMed said the bid protest is simply a case of sour grapes.

"The protests are coming from plans that did not have a favorable result,” said Conchita Ruiz-Topinka, director of communications for AvMed Health Plans. “The state asked the competing HMO's to provide their best possible rates and that's what we did.”

Purcell said DMS is trying to reach a settlement with United, but the company seems to only want to be the sole provider for the state or to be offered in every county.

“If they were offered in every county it would cost an additional $50 million to $70 million per year,” he said.

Meanwhile, open enrollment for state employee health care has been postponed  from late September until early November.