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Blue Cross profits anger advocates

Blue Cross Blue Shield is under fire from advocacy groups over its contract to administer the state health plan for employees. A week ago, the state revealed it paid Blue Cross more than $97 million last year to administer the health plan for state employees and process 9.4 million claims. That breaks down to $10 per claim, compared to an average of 41 cents the state paid another firm to process Medicaid claims in 2007. 

This week, Blue Cross revealed its CEO received a $700,000 pay raise last year for total compensation of $3.98 million. Six of the company's top executives made more than $1 million last year. Now the State Employees Association and the NC Justice Center are crying foul.

"When you have it come out that Blue Cross is charging 18 times what the state pays other private companies to process medical claims, it just seems like we know where some of that money's going," says Adam Searing, with the NC Justice Center. "And it's not going to help people get health care. It's going to executive compensation."

The advocacy groups want an independent audit of the state's contract with Blue Cross, and they want the deal opened to other bidders. Blue Cross spokesman Lew Borman says the executive pay raises are reasonable because they were based on the company's strong growth between 2005 and 2007.

He also says the $10 per-claim figure is inaccurate because Blue Cross tallies claims differently than the state's Medicaid administrator, and also offers more services. "If you're really comparing administrative costs to administrative costs, Blue Cross is well within industry standards," says Borman. "And again, we have disclosed something that we usually don't disclose, which is the profit margin on this contract is less than one percent."

Borman won't give the exact charge per-claim. He says Blue Cross first needs permission from the state to disclose details of the contract. However, he says the company would welcome an open bidding process.