MANAGED CARE State input on Blue Cross poses potential complications BY BRIAN C. JONES

At one of his recent "town meetings" to discuss state issues with constituents, Governor Donald L. Carcieri enthusiastically described a plan to limit the money taxpayers spend on health insurance for the state’s 15,000 workers. "I inherited a terrible Blue Cross plan" negotiated by aides to his predecessor, fellow Republican Lincoln C. Almond, Carcieri told a crowd of mostly municipal officials at an auditorium on the Bristol campus of Roger Williams University.

"We are in the process of restructuring the whole plan — we are going to come up with different plan designs," Carcieri said at the May 5 forum. "I know when we go out to bid, we are going to get it much cheaper than it is right now."

Welcome as the prospect of taming insurance costs is — state government spent $161 million last year for employee health benefits — Carcieri’s plan for the state to be a more cost-conscious health-care consumer underscores the complications of a related issue: state government’s efforts to reform its dominant health insurance company, Blue Cross & Blue Shield of Rhode Island.

This is because the state actually has two major roles when it comes to health insurance: the state is the chief regulator of insurance companies — including Blue Cross — and it is also the largest potential Rhode Island customer of the same companies.

Meanwhile, a series of proposals made by General Assembly leaders last week to tame scandal-ridden Blue Cross include a provision that the governor be empowered to appoint nearly half of Blue Cross’s directors. Should this happen, it would appear that the state’s relationship with Blue Cross would be further complicated: not only would it regulate the insurance company’s business and possibly continue as its major customer, but now the state would also be running the nonprofit company.

The prospect suggests a number of potential conflicts:

If Carcieri or his successor virtually controls the men and women who set policy for Blue Cross, would the company feel an obligation to offer contracts for state workers that are cheaper than they should be, in terms of market conditions? And if the state gets too good a deal, would that drive up Blue Cross costs for private companies and their workers, to make up the difference? Or, if the governor appointed Blue Cross directors, would the state Department of Business Regulation — already regarded by reformers as a weak regulator of Blue Cross — be tempted to further pull its punches, since the DBR director is appointed by the governor?

These potentially conflicting roles caught the attention of Attorney General Patrick C. Lynch, a Democrat who has sometimes been at odds with the GOP governor. "I think there is a question of propriety of that," Lynch says of the proposed board appointments, "based upon what the governor represents, when his employees — 15,000 or whatever — make up a large percentage of Blue Cross’s business."

In a telephone interview, the AG says he thinks there’s plenty of time for the issues to be debated, since the General Assembly reform package for Blue Cross has only just been introduced and hearings have yet to be held.

Meanwhile, Jeff Neal, Carcieri’s spokesman, tells the Phoenix that the "governor has not made a determination on, one way or another, whether he believes that [enabling the governor to appoint a large part of the Blue Cross board] would be a good idea. There certainly are upsides to it and certainly, as you point out, complicating factors."

Later, the Providence Sunday Journal of May 9 quoted Carcieri as being cool to the idea, saying that he would prefer to see the state become involved in Blue Cross’ operations only if the company fails to improve its performance.

What makes the debate intriguing is how when it comes to health-care, everyone is a customer — and everyone wants the state to look out for their financial interests as both consumers and as taxpayers.