TennCare orders largest insurer to stay

TennCare averts a crisis by getting the Blues to remain involved, but the program's long-term funding problems haven't yet been solved.

By Leigh Page, amednews staff. April 24, 2000.

Two months before BlueCross BlueShield of Tennessee's scheduled departure from the beleaguered TennCare program, Tennessee officials announced they would require the insurer to stay for another year.

On March 30, the state invoked a stipulation in BlueCross' TennCare contract that forced the insurer to stay. But also under that stipulation, BlueCross will be able to transfer losses of $1 million a month or more on the program to the state.

BlueCross, TennCare's largest insurer, will no longer be a TennCare HMO after June 30 and will become an administrator of services for its 630,000 TennCare recipients, while the state assumes insurance risk.

With assurances that BlueCross will stay for another year, the state once again snatched TennCare from the jaws of death. But there is no clear plan for the future of TennCare, the 6-year-old program for low-income people that covers one in four Tennesseans.

The state can ill afford taking on BlueCross' losses. It still hasn't found the necessary funds to keep the $4.4 billion program going. Also, an independent study ordered by the Legislature and to be released soon reportedly asks for $246 million more to make the program actuarially sound.

Gov. Don Sundquist and legislative leaders said in February that they would provide the necessary funds for TennCare, but no action has been taken, and time is running out.

Legislators did not raise taxes or take money from other programs before an April 6 filing deadline for the November election. Critics said they wanted to determine if they would have opponents who would make an issue of the new funding. But the session is supposed to be wrapped up by June 1 so they can campaign.

TennCare has been in a perpetual state of crisis because "the state flies by the seat of its pants," said an exasperated Don Alexander, executive director of the Tennessee Medical Assn.

Waiting for a "gentleman caller"

But Tennessee Finance Commissioner John D. Ferguson insists the state is taking steps to make the program sound and is compiling a reform plan that must be submitted to the Health Care Financing Administration by the end of the year.

When BlueCross announced last December that it would leave TennCare, Ferguson said the program would survive the loss, even though BlueCross covers almost half of all program recipients.

He said he was negotiating with several unnamed insurers to take BlueCross' place. But like the "gentlemen callers" in the Tennessee Williams play "The Glass Menagerie," none of these plans has come forward in the past three months. "There aren't any [who are serious]," Alexander contended. "If TennCare was such a good deal, they'd have people knocking down their doors to get in."

As the temporary order against BlueCross takes effect, the state will continue to negotiate with the company for a long-term solution.

BlueCross wants the state to assume its losses until the program is stabilized. But Ferguson said the arrangement would remove fiscal restraints from the insurer; he added that the state was still negotiating with seven insurers to take over BlueCross' business.

BlueCross was one of the only TennCare HMOs to make money in 1998, but it lost millions in 1999 and expected to lose $70 million if it remained a TennCare HMO next year.

The company blamed its rising losses on scanty financing and management problems beyond its control. Although it posted a healthy TennCare profit in 1998, it lost millions in 1999 after Xantus Healthcare, TennCare's third-largest HMO, went into state receivership and that plan's most costly patients went to BlueCross.

Most of the seven TennCare HMOs are losing money and expect finances to get worse in the next contract year.