Contract Awards

After an administrative law judge (ALJ) agreed with protesters that the Arizona Health Care Cost Containment System (AHCCCS) used an “arbitrary and flawed procurement process” that involved the use of undisclosed scoring criteria when awarding new contracts for the Arizona Long Term Care System (ALTCS), the implementation of the new pacts is on hold. AHCCCS on Aug. 13 said it is “pausing member transition activities” related to the new contracts that were scheduled to begin Oct. 1 and initially awarded to subsidiaries of Centene Corp. and UnitedHealthcare (UHC).

AHCCCS has 30 days to accept, modify or reject the ALJ’s decision, which was issued Aug. 9. The agency said it is “currently in the process of reviewing” the decision.

As evidenced by hotly contested Medicaid contract awards in Florida, Kansas and Texas this year, local and regional health plans are increasingly being shut out of opportunities to serve enrollees in their communities. And though a recent administrative law judge decision in Arizona suggests the winds could be changing, community plans need to become more strategic about their approach to procurements, says one industry expert.

Beyond the headlines, “so much more has happened in the Medicaid space than the eligibility redetermination process,” says Clay Farris, founder and practice lead of client solutions at Mostly Medicaid, which offers advisory services to community plans and other stakeholders across the Medicaid continuum. He is referring to the so-called unwinding of policies that were in place during the COVID-19 public health emergency, when a yearslong pause on routine eligibility checks led Medicaid and Children’s Health Insurance Program (CHIP) enrollment to hit an unprecedented 94 million in March 2023. As of Aug. 1, at least 24.8 million people had been disenrolled from Medicaid because of redeterminations, KFF reports.

During recent conference calls to discuss second-quarter 2024 earnings, Centene Corp., Elevance Health, Inc. and Molina Healthcare Inc. all discussed the long-term Medicaid growth opportunity despite declining membership resulting from redeterminations and increasing medical costs — scenarios that they expect to stabilize next year. And while Centene may be scaling back its Medicare Advantage footprint and Elevance pursued a “disciplined approach” to 2025 bids, all three emphasized their continued focus on serving dual eligible Medicare-Medicaid beneficiaries.

For the quarter ending June 30, Centene on July 26 posted adjusted earnings per share of $2.42 and said it is on track to deliver adjusted EPS of at least $6.80 for the full year. The company ended the quarter with more than 13.1 million Medicaid members, down from just over 16 million a year ago. However, its total membership increased slightly to nearly 28.5 million members, with growth in the Affordable Care Act exchanges and Medicare Prescription Drug Plan (PDP) businesses offsetting Medicaid losses. Its overall medical loss ratio for the quarter was a higher-than-expected 87.6%, as cost pressures in Medicaid led to a segment MLR of 92.8% (compared with 88.9% in the prior year quarter).

As publicly traded insurers vie for contracts in an increasingly competitive Medicaid environment, this year has seen a considerable uptick in bid protests and legal challenges with billions of dollars at stake. Dayton, Ohio’s CareSource, one of the largest not-for-profit Medicaid insurers in the U.S., has participated in at least five such protests after embarking on an aggressive market expansion. And while its approach involving strategic partnerships with local providers has had mixed results, the insurer is intent on pursuing states where it believes it can best serve enrollees, whether that be through Medicaid or other product lines.

CareSource currently serves 2.1 million enrollees in Medicaid, Affordable Care Act exchange and dual eligible plans. According to AIS’s Directory of Health Plans (DHP), nearly 1.8 million (or about 85%) of those lives are in Medicaid or duals plans in Georgia, Indiana, Michigan and Ohio. Its home state of Ohio is its largest Medicaid market, where it serves approximately 1.2 million individuals.

Blue Shield of California caught the attention of the industry last August when it announced a switch to a pharmacy benefits model using five vendors. While some insurers and plan sponsors have considered a similar move following Blue Shield’s revelation, benefits consultants tell AIS Health, a division of MMIT, that most payers continue to have a traditional arrangement where one PBM handles all pharmacy-related activities. They add that Blue Shield’s so-called unbundled approach could be difficult to manage and may not achieve significant cost savings.

A survey released last month from the Pharmaceutical Strategies Group (PSG) found that 72% of health plan respondents had heard about Blue Shield of California’s change. Morgan Lee, Ph.D., PSG’s senior director of research and strategy and one of the report’s authors, noted during a June 18 webinar that the survey was conducted in February and March. As such, “we’ll probably continue to see [awareness of unbundling] increase over time,” Lee said.

After the Improving Seniors’ Timely Access to Care Act unanimously passed in the House of Representatives last year but failed to make it through the Senate, leadership from both chambers have reintroduced the bill. The legislation, which aims to streamline the prior authorization process in Medicare Advantage, was reintroduced on June 12 by U.S. Senators Roger Marshall, M.D., (R-Kan.), Kyrsten Sinema (I-Ariz.), John Thune (R-S.D.), Sherrod Brown (D-Ohio), and U.S. Reps. Mike Kelly (R-Pa.), Suzan DelBene (D-Wash.), Larry Bucshon, M.D. (R-Ind.) and Ami Bera, M.D. (D-Calif.). The bill would, among other things, establish an electronic prior authorization process for MA plans including a standard process for transactions and clinical attachments; increase transparency around MA prior authorization requirements and its use; and clarify CMS’s authority to establish timeframes for e-PA requests including expedited determinations and real-time decisions for routinely approved items and services. It would also codify and enhance elements of the Advancing Interoperability and Improving Prior Authorization Processes rule that was finalized by CMS in January, according to the Regulatory Relief Coalition (RRC), which has been advocating for the so-called Seniors’ Act since it was first introduced in 2019. RRC, the American Medical Association, the American Hospital Association, and hundreds of other groups are urging passage of the legislation.

Ousting CVS Health Corp.’s Aetna from the current roster of Medicaid managed care organizations serving the Kansas Medicaid program, Elevance Health, Inc.’s Healthy Blue was chosen as the third insurer for new KanCare contracts starting Jan. 1, 2025. Incumbents Sunflower Health Plan (Centene Corp.) and UnitedHealthcare Community Plan held onto their spots. The awards mark the latest in a string of wins for Centene and Elevance and another disappointment for Aetna.

According to results posted by the Kansas Dept. of Health and Environment on May 14, seven MCOs responded to the request for proposals (RFP) process that began in October 2023 after a delay. Serving nearly 154,000 enrollees, UnitedHealthcare currently has the biggest share of the Kansas Medicaid market, per AIS’s Directory of Health Plans. Aetna, meanwhile, serves nearly 133,000, or about 31% of KanCare enrollees.

Walmart Inc. announced on April 30 that it is closing its 51 health centers in five states as well as its virtual care offering. The company said in a press release that it had determined “there is not a sustainable business model for us to continue” with its Walmart Health and Walmart Health Virtual Care centers and added that “the challenging reimbursement environment and escalating operating costs create a lack of profitability that makes the care business unsustainable for us at this time.” Walmart launched the clinics in 2019. The company will continue to operate its nearly 4,600 pharmacies and more than 3,000 vision centers.

UnitedHealth Group CEO Andrew Witty testified before the Senate Finance Committee and House Energy & Commerce Committe on May 1 about the cyberattack on Change Healthcare, a UnitedHealth subsidiary. Fierce Healthcare reported that Witty said much of Change’s data was stored in data centers rather than on the cloud and that hackers accessed a server that did not have two-factor authentication. Fierce also noted that several politicians criticized UnitedHealth for its massive vertical integration, noting it owns a PBM and is a major player in health care delivery. Axios reported that UnitedHealth “could face more regulation or even calls to divest some of its businesses in the fallout from the hack.” Last month, a bipartisan group of politicians wrote a letter to Witty seeking information about the cyberattack and 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.

For Medicaid-focused insurers facing the headwinds of the post-pandemic disenrollment backlog, a contract win can cause a major sigh of relief. That’s particularly true for Centene Corp., the largest managed Medicaid insurer in the U.S., which held onto three state contracts in Michigan, New Hampshire and Florida in recent months. Shares of Centene were up 3.5% following its April 12 win in Florida, where it currently serves 1.46 million members, according to AIS’s Directory of Health Plans (DHP).

Awards from Kansas and Georgia — where Centene is an incumbent — are expected to be announced in the coming weeks. Texas, meanwhile, is in the middle of a procurement process that could mean a plan switch for about 1.8 million beneficiaries. And it could spell the end of Centene’s winning streak. CEO Sarah London at the Barclays Global Healthcare Conference, held in March, said the company was “disappointed” in the scoring of its most recent Texas proposal, and planned to protest any contract loss. “I would say the biggest concern for the program overall is the idea that the results are going to force 1.8 million Medicaid members in Texas, which is a state that has a very high choice rate, to choose a different place,” London continued.

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.