State switches health insurance group

Change to Blue Cross Blue Shield to save state $10.9 million

Posted: Wednesday, March 08, 2006

Premera Blue Cross Blue Shield of Alaska will replace Aetna as the state's health care administrator for employees and retirees.

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Coverage will not change for the state's 68,000 beneficiaries, as the new provider will run the current plans as written, Administration Commissioner Scott Nordstrand said Tuesday.

The state expects to save $10.9 million over the three-year term of the contract by switching to Blue Cross Blue Shield.

The department is trying to reduce health care costs for public employees and retirees as a $5.7 billion shortfall continues to grow in the state's retirement system, Nordstrand said. Rising health care costs have contributed to the unfunded liability, along with retirees living longer and poor investments in the stock market.

The state's contract with Aetna was set to expire this year and the state is required to seek bids from competitors, Nordstrand said. The company's proposal totals $30.9 million for the three-year term, which starts July 1.

"We're not buying insurance from them. We're buying a service," Nordstrand said. "We pay a certain amount of money every month per employee or retiree for (Blue Cross Blue Shield) to do our health care administration."

In fiscal year 2005, total claims of all beneficiaries equaled $305 million.

The department also will pay $50 million from the retirement fund toward the future debt of the system. At the end of the last fiscal year, the fund's reserve had a balance of $126 million, an increase from $83 million a year before. Nordstrand said the reserve fund would still be above the industry standard for funding.

The plan covers 5,646 nonunion employees, their 9,004 dependents, 28,439 retirees and their 25,062 dependents.

• Andrew Petty can be reached at

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