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HELENA – Montana health officials have signed a contract making Blue Cross and Blue Shield of Montana the first commercial insurance provider to administer a state's Medicaid expansion program under President Barack Obama's Affordable Care Act.

Department of Public Health and Human Services Director Richard Opper and Blue Cross President Mike Frank signed the two-year contract Wednesday, and it was released to the Associated Press on Thursday. The contract can be renewed for up to seven years.

In November, Montana became the 30th state to expand Medicaid to the working poor under the health-care law when federal health officials approved a waiver for features that include requiring beneficiaries to pay premiums and copayments. Another feature that required federal approval was the state's decision to use a private insurer to run the expansion program, the first third-party administrator in the nation.

Blue Cross won the contract after four companies made bids. Though the contract was only recently signed, Blue Cross is already developing a provider network, a customer center and information technology services to administer the delivery and payment of health services.

State officials estimate as many as 70,000 people are eligible for Medicaid coverage under the expansion program, which begins Jan. 1. People who make 138 percent of the federal poverty level, or about $16,000 a year for one person, are eligible to enroll.

Blue Cross will handle the enrollment, claims and grievances of most people who sign up through the program. However, Native Americans and people with exceptional medical needs will be served directly by the state's Medicaid program.

Blue Cross will be paid by the number of members. For the first six months of the program, that will amount to $26.39 per member, per month. After July 1, that administrative fee will vary from $25.39 per member, per month for up to 25,000 enrollees, to $25 per patient per month, for 40,000 or more enrollees.

That means if the state hits its goal of 70,000 members, Blue Cross could be paid $21 million a year. That does not include a $3.75 million reimbursement for Blue Cross' information technology costs.

The contract includes penalties if Blue Cross doesn't live up to the contract. The company can be fined daily for not entering claims into its database within 24 hours, or for failing to process claims within a certain amount of time.

More egregious problems can cause the contract to be terminated, such as price-fixing or colluding with other contractors.

The contract also requires Blue Cross to create safeguards to prevent employees or board members from conflicts of interest and from seeking any personal gain through the deal with the state. The company also must keep its records for 10 years after the contract ends.

The company provided a $3.2 million letter of credit to the state health department as a security against any breach of contract.

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