URBANA — When the Illinois Department of Healthcare and Family Services announced new health insurance choices for state workers and retirees last month, the agency said the new choices that exclude dominant downstate HMOs would save the state a lot of money.

So one of those rejected HMOs, Health Alliance Medical Plans, and some downstate legislators are now wondering why the agency said recently that projected cost savings weren't considered in the insurance selection process.

"If cost savings weren't part of the process, then the process is more flawed than I previously stated," said State Rep. Chad Hays, R-Danville.

Hays co-sponsored a House resolution filed Friday with the Legislative Audit Commission calling for the Auditor General to conduct an audit of the process used to select insurance plans for state workers.

Lawmakers want the audit to include whether the procurement process followed the law, whether the insurers that were selected demonstrated the capacity to provide "quality, adequate and timely" health services for state employees at the time of the award, whether projected cost savings to the state are reasonable and fully supported and if the potential cost impact on state members was considered.

Health Alliance learned cost savings weren't part of the insurance bid analysis or considered in the final selections when the Department of Healthcare and Family Services replied recently to its information request. Health Alliance sought the information in connection with the protest it has filed to the insurance selection process.

That protest, along with one filed by Humana — another rejected HMO — is still pending, though state employees have already begun enrolling in new health plans taking effect July 1.

Health Alliance asked Healthcare and Family Services for detailed calculations supporting the projected savings of $102 million the first year. The agency replied "projected cost savings were not part of the evaluation process and were not considered in the determination" of the health plans recommended.

Some other information requested by Health Alliance that the agency said was not used in the bid scoring and analysis or considered in the evaluation process:

— Calculations demonstrating that the new Open Access Plans selected for state members are less expensive than the current HMO offerings.

— Projections showing how many state members in each county would change from existing plans to the new proposed plans.

— Cost, liability and financial information data for the managed care plans for fiscal year 2011 and budget projections regarding estimated managed care plan liabilities for fiscal 2012.

Healthcare and Family Services spokeswoman Stacey Solano said the agency never said cost savings were the only reason for the selections, because cost savings were not a factor in evaluating the bids. All bids were evaluated on two factors, price and technical responsiveness, she said.

"The cost savings are a result of the awards," Solano said.

Health Alliance CEO Jeff Ingrum said Health Alliance found the agency's response to its inquiry "very disturbing."

"Their first press release back on April 7 said this decision is going to save the state $102 million, and now they're saying this wasn't part of the decision-making process," he said.

Ingrum said the agency provided a one-page summary of the first year's $102 million savings, but a lot of the numbers don't appear to be correct. Arriving at that total requires an assumption that people exiting the Health Alliance HMO will sign up for the new PersonalCare and HealthLink Open Access Plans, and those members will spend 30 percent less on medical care, he said.

Another thing that troubled Ingrum was that the agency talks about price, but, he said, "in this kind of request for proposals, you can't look at price alone without looking at coverage."

Insurers based their prices on the areas they plan to serve and the reimbursement rates they negotiated with health care providers in those areas, he said.

HMOs get good prices because they don't contract with all the providers in an area, and can guarantee their contracted providers patient volume. Open Access Plans can't guarantee the same volume because their members can move in and out of different networks, Ingrum said.

Plus, he said, the state selected Blue Cross and Blue Shield to offer HMO coverage to the entire state, but none of the managed care plans bidding for state business could provide statewide coverage. Blue Cross serves only 38 counties in Illinois.

"So their whole process is flawed, because it looked like they were taking an approach to buying health care like they were buying pencils," Ingrum said.

State Sen. Mike Frerichs, D-Champaign, said he remains eager for the agency to start sharing some information with legislators about the insurance contract decisions.

It's one thing to say price was a factor, he said, and another to be able to demonstrate actual cost savings.

"I haven't seen that, and I'm not convinced that they will be able to show it to me," he said.

Hays said he also plans to file a resolution calling for the insurance enrollment period for state members to be extended because they're being asked to make choices based on "this extraordinarily poor recommendation."

To read the state's full response to Health Alliance's request for information, see the online version of this story at http://www.news-gazette.com.