The state has awarded contracts to Health Alliance HMO and Coventry Health Care HMO to provide health-care coverage to state employees, retirees and their dependents.

The new contracts have an initial term of 3 1/2 years, but the state has the option of an additional five, one-year renewals. The new contracts are set to begin Jan. 1.

Awarding the contracts essentially resolves a controversy that erupted in 2011 when the state rebid health insurance contracts and did not select Health Alliance or Humana, two longtime providers of state health insurance to thousands of employees and retirees.

Instead, the state awarded HMO contracts to Blue Cross and Blue Shield, even though the company didnt contract with health-care providers in some downstate counties. The Department of Healthcare and Family Services said the switch would save the state $1 billion over 10 years.

The change sparked a legislative and legal battle over the states decision. The state eventually agreed to rebid the contracts.

It resolves the issue of the rebidding of the group insurance contracts for state employees and retirees, said DHFS spokesman Mike Claffey. Were happy to move forward.

Blue Cross and Blue Shield will continue to provide HMO coverage for people in the Chicago area.

Claffey did not provide costs for the new contracts, but said the state no longer expects to save the $1 billion over 10 years that it previously expected.

Health Alliance HMO covers 43,141 members and 43,504 dependents, DHFS said. Coventry HMO (formerly Personal Care) covers 5,408 members and 4,608 dependents.

We are pleased to continue our longstanding relationship with the state of Illinois and our service to more than 94,000 members who live in our service areas, Health Alliance CEO Jeff Ingrum said in a statement. We applaud the state for taking steps to ensure that members can continue important relationships with their healthcare providers.

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State awards new health insurance contracts