The state Health Care Authority says it is scrapping a contract with insurer Aetna, which had planned to take over administration of the popular Uniform Medical Plan for state employees in 2010.

The move had been expected to save the state unspecified millions of dollars, but the change was controversial and an administrative law judge threw out the contract last week, saying the bid process was defective and violated state rules. About 180,000 people are insured under the Uniform Medical Plan.

Insurers, led by United HealthCare, formally challenged the bid award. And Olympia-area psychotherapists, including family therapist Brian Kennedy, complained that they would see reimbursement rates cut nearly in half next year – from about $125 an hour to $66 in some cases – if they wanted to be in Aetna’s preferred network.

But now that shift to a new list of lower-paid preferred providers in Uniform Medical is not going to happen, at least not in 2010, state Health Care Authority spokesman Dave Wasser said this week.

Fees and providers should remain the same as before through 2010, and the state will try to draw up a temporary contract for interim administration of the program, he said. But how the state would be able to get such an agreement is unclear, Wasser said.

The reason for the sudden change is that administrative law judge Todd Gay ruled Sept. 11 that the state’s procurement of Aetna was a flawed process. In effect, Gay upheld rival bidder United HealthCare’s challenge.

The judge found numerous defects in the health agency’s bidding process, including letting Aetna and other bidders change bid terms after bids were opened. United HealthCare also disputed that its bid had been judged not qualified. Its subsidiary, UMR/Harrington Health, already handles third-party administrative work for claims and customer service for the Uniform Medical Plan.

To remedy the situation, Gay wrote that “HCA should start the bidding process over with all the deficiencies corrected.” And that is what HCA plans to do, said Wasser, who added that his agency also plans to secure an interim contract with a provider for administration of UMP during 2010. It also will restart the bidding process for a new administrator in 2011.

Aetna’s regional spokeswoman, Anjie Coplin, said in Dallas that Aetna does not plan to argue the decision and intends to follow whatever course the health authority sets for a new bid process for 2011.

Aetna also released a formal statement from Jay Sheehy, its president of government and public sector business, that said: “Aetna is disappointed with the decision of the Administrative Law Judge.”

Aetna continues to believe that the Washington State Health Care Authority acted properly in its decision to award the UMP contract to Aetna and that decision was in the best interests of the members of the UMP and the taxpayers of the State of Washington.”

Brad Shannon: 360-753-1688

bshannon@theolympian.com