MTA’s $634M health insurance bidding process comes under fire

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ANNAPOLIS — The bidding process for a lucrative health insurance contract for Maryland Transit Administration employees is being called bad for businesses and uncompetitive by one state official and a lobbyist for an insurance company that did not get the contract.

The Board of Public Works Wednesday voted 2-1 to approve a five-year health and dental insurance contract with two, one-year renewals with CareFirst of Maryland, valued at $634.1 million. CareFirst, which was essentially the only bidder, has held the contract for at least 15 years. Comptroller Peter V.R. Franchot said predecessors of the Maryland company have held the contract for more than 40 years.

Franchot was the lone vote on the board against the contract.

Cigna initially won the bid on the MTA last year only to have it pulled back for an undisclosed “fatal flaw” in the procurement process. The nature of the flaw was not disclosed at the time the deal was canceled and a second bidding process scheduled. Cigna lost an appeal of the decision before the state Board of Contract Appeals in April, two days before new bids on the contract were due.

A lobbyist for Cigna said his client declined to compete on the re-bid because it considered the process unfair.

“They didn’t believe they were going to get a fair shot,” said Bruce Bereano. “They thought if they bid again it would be the same old, same old.”

“This is the son of the original procurement and can’t be looked at in a vacuum,”  Bereano told the Board of Public Works.

Bereano called it “a facacta process,” a Yiddish term for rubbish. He asked the state to merely extend the current contract with CareFirst for one year to allow time for new bids.

“It’s wrong,” Bereano said. “Signals have to be sent to show (Maryland is) doing things differently.”

Comptroller Peter V.R. Franchot agreed and questioned why only CareFirst bid on the deal.

“It’s a lucrative contract. Maryland always pays its bills. Maybe because it’s not a level playing field.” Franchot said. “It’s highly irregular. That’s what this is. Highly irregular.”

Franchot asked the board to delay a decision on the contract for two weeks. State officials, including Transportation Secretary Pete K. Rahn, opposed it, saying a delay would prevent employees from participating in open enrollment and receiving insurance cards by Jan. 1.

Rahn declared the bidding process “clean as a whistle” and said an independent consultant hired by the department agreed.

Anna Lansaw, director of the transit administration, agreed with Rahn.

“I would not be able to give you a better, cleaner procurement,” Lansaw told Franchot and the board.

The two other members of the Board of Public Works, Treasurer Nancy Kopp and Lt. Gov. Boyd Ferguson, voted to approve the contract. Ferguson was sitting in for Gov. Larry Hogan.

“It’s the same old song,” Franchot said before losing the vote. “We are in favor of procurement reform. We are not in favor of business as usual. Get a new consultant. How can you hold Maryland out as a state with a good business reputation if you allow those kinds of shenanigans to go on?”

Employees of the state Maryland Transit Administration are covered by separate health care and pension systems than are all other state employees. The plans, which are part of the collective bargaining agreement with the union representing those employees, date back to when the state absorbed the former city of Baltimore department.