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Diving brief:
- Kansas has awarded new contracts under its more than $4 billion Medicaid managed care program to plans run by incumbents UnitedHealth and Centene. CVS, however, was replaced by newcomer Healthy Blue, a plan majority owned by Elevance.
- Kansas' Medicaid program, called KanCare, announced the prices on Tuesday to care for its 458,000 beneficiaries. The contracts begin in January 2025 and will continue until 2027, with the possibility of renewing them for up to two one-year extensions.
- The impact of the changes on the plans' profits will be relatively small, analysts say, although the loss of the contract represents a slight challenge for CVS, which could challenge decision. On the other hand, the price suggests renewal momentum for Medicaid giant Centene, which just won recent contracts in a number of states.
Dive overview:
KanCare awarded contracts to Centene's Sunflower Health Plan, UnitedHealth's UnitedHealth Community Plan and Healthy Blue. Healthy Blue is a collaboration of Blue Cross and Blue Shield of Kansas, Blue Cross and Blue Shield of Kansas City and Anthem Partnership Holding Company, a subsidiary of Elevance.
The troika launched Healthy Blue in 2021 trying to win the Kansas Medicaid contract – an attempt that proved successful.
KanCare, however, dropped CVS's Better Health of Kansas, a plan run by its health insurance company Aetna. KanCare did not say why Better Health was not selected for the contract. However, Aetna was censored by the State for failing to respect the terms of its contract and providing inadequate service in 2019.
Aetna also has the highest claim denial rate of Kansas' three managed care organizations, according to KanCare's annual report to CMS in 2022, the most recent year for which the report is available.
A CVS spokesperson said the company was “disappointed” with the decision “given the strength of our proposition and the excellent support we provide to our members in the state.”
“We are currently reviewing our options,” the spokesperson said.
KanCare selected UnitedHealth, Centene and Healthy Blue from among seven bidders, including CVS. It's unclear who the other three bidders were – Kansas officials said not yet published documents on the process of soliciting contracts from the Department of State Administration or KanCare websites.
Currently, Kansas' Medicaid market share is split roughly one-third among contract holders, while UnitedHealthcare has a slight advantage with about 160,000 beneficiaries, according to JP Morgan analyst Cal Sternick . Centene has approximately 151,000 members and CVS has 147,000.
If Kansas awards the contracts as expected, CVS lives will likely be awarded to Elevate, wrote Sternick in a note Tuesday.
Centene and UnitedHealth have been involved in managed care in Kansas since the state privatized its Medicaid program in 2013.
Medicaid managed care, in which states pay private health insurers a flat rate per person. registeredhas has become the dominant Medicaid delivery system in the United States. Contracts can be very lucrative – KanCare spent $4.6 billion on capitation payments to managed care organizations in fiscal year 2023.
Replenishments are therefore highly contested among health insurers, who frequently protest any loss.
Florida issued Medicaid awards in Aprilrenewing contracts with Centene, Elevance and Humana but removing UnitedHealth, CVS and Molina from the state. Molina has already announced his intention to contest against the decision, while UnitedHealth indicated it would also protest. Molina is also challenging a recent Medicaid contract loss in Virginia.
New Hampshire and Michigan also reiterated their offers earlier this year, with Centene renews its contract in New Hampshire. Michigan Awards Essentially Preserved the status quo in the state, with Centene, CVS, Molina and UnitedHealth replicating contracts with minor membership changes.
Nearly all states have implemented some form of managed care, viewing these provisions as a way to ensure greater fiscal predictability while implementing plans to control their members' medical costs.
However, the distribution of capitation payments also creates an incentive to MCO deny or limit medical services to pocket a larger share of the health care budget.
This incentive has underpinned recent concerns about the adequacy of Medicaid managed care plans. MCO face growing criticism for the quality of their coverage, with research revealing high refusal rates triggering a investigation by senior congressional Democrats Last year.