Contract Awards

After much delay, the City of New York appears to be moving forward with a plan to transition its retiree health care coverage to a group Medicare Advantage plan, having recently chosen CVS Health Corp.’s Aetna to administer a PPO plan starting Sept. 1. The contract is valued at $15 billion over the first five years and four months of the term agreement.

The city’s plan to transition some 250,000 retirees and their eligible dependents away from fee-for-service (FFS) Medicare coverage was initially supposed to begin on April 1, 2022, and be managed by Elevance Health, Inc. (in partnership with EmblemHealth). Retirees petitioned to block the move, and state Supreme Court Judge Lyle Frank in March 2022 ruled that the proposal violated city law by requiring retirees who opted out of the switch to pay $191 per month to maintain their FFS coverage. That July, Elevance backed out of the deal.

Although it’s been more than 10 years since antitrust litigation was first filed against Blue Cross Blue Shield plans, an objection to a settlement reached with one group of plaintiffs has delayed the conclusion of a case that carries significant implications for the health insurance industry. Legal and health policy experts say it could be another year or more before the litigation is finalized — but in the meantime, they suggest that the settlement’s rewriting of Blues plan rules is already sparking consolidation in the market.

In the circa-2012 litigation, a group of health insurance subscribers (health plans and employers) and a cohort of health care providers allege that certain long-held Blues plan practices violate federal and state antitrust laws. Those practices include allocating geographic markets through license agreements and limiting the percentage of non-Blue revenue each plan can earn, among others. Although the subscriber class and the defendants reached a tentative settlement in 2020, and an Alabama district court judge approved it in 2022, a small group of employers including the Home Depot filed appeals last fall that effectively put the settlement on hold.

Centene Corp. had a tough fourth quarter in 2022, with the insurer posting a $282 million loss for the period. The company’s executives attributed the rough ride to high administrative costs and lower-than-expected enrollment in Medicare Advantage. However, the firm posted solid results over the whole of 2022. Wall Street seems wary of Centene’s prospects over the next year, with analysts identifying notable challenges during 2023.

Centene took in $35.6 billion in revenue in the fourth quarter, up 9% year-over-year from 2021; total revenues in 2022 were $144.54 billion, up 15% from 2021. Net earnings for 2022 were $1.2 billion, or $2.07 in diluted earnings per share (EPS). The firm posted a loss of $0.38 per share during the fourth quarter of 2022. Medical loss ratio (MLR) was 87.7% in 2022, down from 87.8% in 2021. However, full-year earnings were dampened by selling, general and administrative expenses (SG&A), which increased from 7.9% in 2021 to 8.4% on an adjusted basis.

The U.S. Dept. of Defense recently awarded $136 billion in contracts for its TRICARE program that provides health care benefits to military service members, retirees and their families. The contract award for the West region went to TriWest Healthcare Alliance of Phoenix, which is partnering with Regence health plans and Health Care Service Corp. to administer the program. Humana Government Business Inc. will continue to serve the East region when the next contracts begin in 2024. Currently, Health Net Federal Services LLC, a subsidiary of Centene Corp., covers the West region with about 2.8 million beneficiaries, and Humana covers the East region with more than 6.8 million enrollees. In 2024, six states in the East region — Arkansas, Illinois, Louisiana, Oklahoma, Texas and Wisconsin, with a total of 1.5 million beneficiaries — will transfer to the West region in order to balance out the number of beneficiaries served by the two regions.

Reporting financial results for the quarter and year ending Dec. 31, 2022, UnitedHealth Group on Jan. 13 said full-year revenues grew 13% year over year to $324.2 billion, and earnings from operations rose 19% to $28.4 billion. The company ended the year with an 82.0% medical loss ratio, which was consistent with projections provided at its annual Investor Day. The UnitedHealthcare segment reported full-year revenues of $249.7 billion, up 12% from the prior year, and operating earnings of $14.4 billion, up 20% from 2021. Those results were largely driven by growth in the number of people served, including an additional 615,000 in Medicare Advantage; overall MA enrollment exceeded 7.1 million at the end of 2022. UnitedHealth also reported adjusted earnings per share of $22.19 for full-year 2022 and maintained guidance of adjusted EPS between $24.40 and $24.90 for 2023.

UnitedHealth Group kicked off the managed care sector’s latest round of financial results on Jan. 13 by reporting fourth-quarter and full-year 2022 adjusted earnings per share (EPS) of $5.34 and $22.19, respectively. The company’s adjusted EPS for the prior quarter beat the Wall Street consensus estimate of $5.17, and its medical loss ratio of 82.8% was just a hair higher (worse) than the consensus projection of 82.7%. The firm also reported that its full-year revenues of $324.2 billion grew 13% compared to 2021, “with double-digit growth at both Optum and UnitedHealthcare.”

Nearly 15.9 million people have signed up for Affordable Care Act exchange coverage since the start of open enrollment on Nov. 1, CMS reported on Jan. 11. “This record-breaking enrollment represents a 13% increase over last year, including over 3 million people new to the Marketplaces,” the agency said in a press release. As in prior enrollment snapshots, the 15.9 million enrollment figure includes signup data from both the federal and state-based marketplaces. In the 33 states using the HealthCare.gov platform, there were 11.9 million plan selections through Jan. 7, 2023, while the 18 state-based exchanges reported 4 million plan selections through Dec. 31, 2022. Americans in most states have until Jan. 15 to sign up for marketplace coverage for 2023, unless they qualify for a special enrollment period.

Right before the holidays, the U.S. Dept. of Defense (DOD) offered a gift to Humana Inc., renewing its contract to manage health care services for TRICARE beneficiaries via a new $70.9 billion pact that begins in 2024. Yet Centene Corp. received an unwelcome surprise when it learned that its current TRICARE contract will expire at the end of 2023 and then move to a company called TriWest Healthcare Alliance.

Meanwhile, the new contracts appear aimed at addressing troubles that have dogged the military health care program in the past, such as rocky contractor transitions and concerns about continuity of care for families that change locations much more often than their civilian counterparts. In addition to active-duty service members and their families, TRICARE serves retirees and their families, survivors, and certain former spouses.

The U.S. Dept. of Defense recently awarded $136 billion in contracts for its TRICARE program that provides health care benefits to military service members, retirees and their families. The contract award for the West region went to TriWest Healthcare Alliance of Phoenix, which is partnering with Regence health plans and Health Care Service Corp. to administer the program. Humana Government Business Inc. will continue to serve the East region when the next contracts begin in 2024. Currently, Health Net Federal Services LLC, a subsidiary of Centene Corp., covers the West region with about 2.8 million beneficiaries, and Humana covers the East region with more than 6.8 million enrollees. In 2024, six states in the East region — Arkansas, Illinois, Louisiana, Oklahoma, Texas and Wisconsin, with a total of 1.5 million beneficiaries — will transfer to the West region in order to balance out the number of beneficiaries served by the two regions.

Nearly 5.5 million people have selected health plans since the Affordable Care Act open enrollment period began on Nov. 1, CMS said in its latest marketplace enrollment update. That total captures signups on HealthCare.gov through Dec. 3 and through Nov. 26 for the state-based marketplaces, and it represents an 18% increase compared to the same time period last year. So far 22% of total plan selections have been from individuals who are new to the marketplaces, while 78% are returning customers, CMS said. The open enrollment period lasts through Jan. 15 for HealthCare.gov states and most state-based marketplaces.

Blue Shield of California — which lost its bid to continue to serve California’s Medicaid managed care program — plans to lay off 373 employees by Jan. 25, Modern Healthcare reported. The decision from California’s Dept. of Health Care Services came in August after the state held its first competitive bidding process for Medi-Cal contracts. Blue Shield was not chosen — prompting the insurer to later sue the state — while Elevance Health’s Anthem Blue Cross Partnership Plan, Centene Corp.’s Health Net and Molina Health Care were selected to participate in varying service areas across 21 counties. The layoffs represent a small portion of Blue Shield’s total workforce of 7,800, Modern Healthcare noted, and the cuts are mostly concentrated at the insurer’s Sacramento-area offices.

The latest round of current and upcoming state requests for proposals (RFPs) is continuing a sea change toward integrated care and greater health equity in managed Medicaid programs. Several states are redesigning their programs altogether, with a focus on integrating physical and behavioral health, as well as addressing social determinants of health. New Mexico’s new Turquoise Care program will combine physical health, behavioral health and long-term care services, while Oklahoma will incorporate managed care into its Medicaid program for the first time in 2023. Notably, the state is soliciting bids from both MCOs and provider-led entities to integrate physical health, behavioral health and prescription drug services. Moreover, Georgia and Virginia both hinted at upcoming program changes as they prepare to release RFPs within the next year, with Georgia recently asking stakeholders how it could improve health care in underserved communities. Texas, meanwhile, in the second quarter of 2023 will unveil what’s sure to be a hotly contested RFP — its managed care plans currently serve more than 5 million people. See an overview of key RFPs that are expected to be issued or awarded in the coming months in the table below.