Contract Awards

A bipartisan group of politicians wrote a letter on April 15 to UnitedHealth Group CEO Andrew Witty seeking information about the cyberattack on Change Healthcare, a UnitedHealth subsidiary since 2022. They wrote that they were interested in UnitedHealth’s “efforts to secure Change Healthcare’s systems since it was acquired by your company and the efforts you are taking to restore systemic functionality and support patients and providers affected by the attack.” The letter noted that Change’s systems process about 15 billion transactions each year and are linked to about 900,000 physicians, 118,000 dentists, 33,000 pharmacies and 5,500 hospitals. House Energy and Commerce Committee Chair Cathy McMorris Rodgers (R-Wash.) and Ranking Member Frank Pallone, Jr. (D-N.J.), Subcommittee on Health Chair Brett Guthrie (R-Ky.) and Ranking Member Anna G. Eshoo (D-Calif.) and Subcommittee on Oversight and Investigations Chair Morgan Griffith (R-Va.) and Ranking Member Kathy Castor (D-Fla.) signed the letter.

Although the cyberattack on its Change Healthcare subsidiary cost the company about $870 million, or 74 cents per share, in the first quarter of 2024, UnitedHealth Group on April 16 reaffirmed its full-year adjusted earnings per share (EPS) guidance of $27.50 to $28.00. Reporting financial results for the quarter ending March 31, the company said its Medicare Advantage business saw heightened outpatient care utilization that was consistent with what it experienced in the first half of 2023 and planned for in 2024. Winter seasonal activity that included vaccinations, higher incidents of respiratory illness and related physician office visits have subsided, management said. “If other MCOs had the same experience, it would be most positive” for Humana, “given its guidance for persistent, elevated utilization and investors’ likely preference for a 50%+ EPS recovery story (HUM) over slightly better revenue/EPS growth,” wrote Jefferies analysts on April 17. Revenue for the UnitedHealthcare segment grew 7% from the prior-year quarter to $75.4 billion, reflecting enrollment growth in its commercial and senior segments that was offset by expected declines in Medicaid due to ongoing eligibility redeterminations. UnitedHealthcare highlighted major managed Medicaid wins in Michigan, Texas and Virginia but expressed disappointment in the recent Florida selections.

Blue Shield of California’s plan to replace its traditional pharmacy benefit arrangement with what it hopes will be a more transparent assemblage of services won’t go into full effect until 2025, but it has already generated a lot of hope and criticism across the healthcare landscape. The insurer, though, is aiming to inspire as much at it aiming to succeed on its own.

“It’s going to take more than just one plan, or one employer group or one manufacturer. It’s going to take all of us to look at our business model and think about how it can be simpler, more sustainable, more affordable, with higher quality care,” Alison Lum, Blue Shield of California’s VP-Pharmacy Services, said in an interview with the Pink Sheet on 6 February.

As part of new actions to lower health care and prescription drug costs by promoting competition, the Biden administration on Dec. 7 said it aims to further improve Medicare Advantage transparency. Noting that the MA program now serves roughly half of Medicare-eligible beneficiaries, the Biden administration in a fact sheet said it is committed to ensuring that MA plans “best meet the needs of people with Medicare, there is timely access to care, and the market has healthy competition.” Therefore, early next year HHS will solicit from the public “programmatic data” to better understand “the effects of market shifts on consumers and care outcomes.” When asked during a Dec. 6 press call for more details on this effort, a senior administration official responded: “We’ll be seeking additional information that will allow the agency to explore new policies and learn more about this really important program for seniors and people with disabilities.” Additionally, the administration said it will build on recent steps “[c]racking down on anticompetitive and anti-consumer practices” in MA and continue to implement updates to MA payment “that improve payment accuracy, address gaming, and recover overpayments.”

In 2024, managed care organizations will have to manage more complex care coordination requirements and compliance with ambitious equity goals in many states — even as Medicaid programs have been forced to step up reimbursement rates across many care categories. That’s according to the 2023 edition of KFF's annual survey of state Medicaid officials, which was released on Nov. 14.

The overwhelming majority of states are increasing Medicaid reimbursement rates across many care categories. Forty-eight states increased rates for at least one care category in 2023, and 47 will do the same in 2024. Only 21 states implemented at least one rate restriction in 2023, and 19 expect to do so in 2024.

That means total state spending for the safety net health insurance program is likely to increase, despite the ongoing reduction in total enrollment due to the return of eligibility redeterminations. Medicaid spending per enrollee is likely to increase in 2024, KFF found, while total Medicaid spending growth in the surveyed states will likely be 8.3% in 2023, down from 9.8% in 2022.

With more than 78% of Medicaid beneficiaries enrolled in managed care plans as of the latest update to AIS’s Directory of Health Plans (DHP), winning and maintaining state contracts is crucial to MCOs that serve the Medicaid population. Six states have pending requests for proposals (RFPs) that serve about 11 million lives combined, while four states recently awarded new contracts. 

In recent years, new Medicaid RFPs have emphasized population health, asking payers to focus on health equity and social determinants of health while integrating services such as behavioral health, managed long-term services and supports (MLTSS), and pharmacy services into acute care. For example, Georgia will shift its aged, blind and disabled Medicaid population from fee-for-service care delivery to managed care when its new contracts begin, and Virginia plans to combine its MLTSS and managed Medicaid plans into one program. States also want improved analytics capabilities to track member outcomes and simplify claims and appeals processes.  

The Big Three PBMs — The Cigna Group’s Express Scripts, UnitedHealth Group’s Optum Rx and CVS Health Corp.’s Caremark — all delivered positive results during the third quarter of 2023, and in some ways helped offset underperformance for the firms’ health benefits businesses.

Wall Street analysts were generally positive about the performance of the firms’ PBM subsidiaries, but they had questions about the way each firm plans to manage the cost of glucagon-like peptide 1 (GLP-1) agonists for their clients.

In what is only the latest sign that PBM clients are growing increasingly disillusioned with the status quo, Minnesota-based insurer UCare recently chose Navitus Health Solutions, LLC as its new PBM partner — ending a relationship with The Cigna Group’s Express Scripts that had been in place since 2010.

“I think that there is a growing desire amongst employer groups and health plans to look at alternative options besides what we consider to be the big PBMs,” Patrick Mitsch, vice president of pharmacy at UCare, tells AIS Health, a division of MMIT. “There’s different value propositions that a PBM like Navitus can bring to the market that the Big Three just can’t,” he adds, referring to Express Scripts, CVS Health Group’s Caremark, and UnitedHealth Group’s Optum Rx, which control roughly 80% of the pharmacy benefits market.

Mark Cuban Cost Plus Drug Co. and Select Health, the managed care arm of Utah-based nonprofit health system Intermountain Health, on Sept. 19 struck a deal to provide Select Health members with what a press release called “direct access” to Cost Plus’ online generics pharmacy. Select Health tells AIS Health, a division of MMIT, that members’ level of access to Cost Plus depends on their plan design and plan sponsor: Some members may be able to count any purchases made through Cost Plus toward their annual deductible and out-of-pocket maximum.

Intermountain, which owns its own PBM, Scripius, is just the latest notable regional player to partner with Cost Plus on generics. The deal comes shortly after the much discussed move by Blue Shield of California to unbundle its PBM contracts. (As part of Blue Shield’s new strategy, Cost Plus will manage retail pharmacy pricing and payment for the insurer.)

The CEOs of CVS Health Corp. and The Cigna Group on Sept. 12 downplayed the potential for PBM market disruption that could result from Blue Shield of California’s recent deal to unbundle its pharmacy benefit contracts. But both executives hedged by emphasizing their PBMs’ flexibility, and Cigna’s boss suggested that its Express Scripts subsidiary has an a la carte PBM menu.

CVS and Cigna leaders also said, during presentations at the Morgan Stanley Health Care Conference, that they are confident that their Medicare Advantage Star Ratings will improve, and they promised further MA growth. Both firms assured investors that their recent, multibillion-dollar provider transactions will lead to future growth. And both firms, which own two of the “Big Three” PBMs, said that biosimilars will be a boon to payers — with CVS promising as much as 80% savings on its forthcoming Humira (adalimumab) biosimilar line.