Featured in Health Business Daily, Nov. 14, 2017

As RFPs Roll Out, Competition Is Healthy Among Medicaid MCOs

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care. Subscribe today!

By Lauren Flynn Kelly, Managing Editor
August 24, 2017Volume 23Issue 16

Despite issues with starting up new contracts in some states and an increasing reliance on Medicare Advantage to lift earnings, publicly traded insurers reporting financials for the second quarter of 2017 continued to express interest in vying for numerous Medicaid RFP opportunities.

For the quarter ending June 30, Aetna Inc. said Medicaid premiums were stable year-over-year despite an exit from Missouri that lowered its overall Medicaid membership by approximately 250,000 lives to 2.1 million enrollees. And although individual MA products continued to be the primary driver of growth for Aetna, executives during an Aug. 3 conference call to discuss quarterly earnings said the company remains interested in Medicaid as part of its diversified growth strategy and is choosing to be more selective in its bidding.

“Specifically, we would only participate in state programs where we can achieve enough membership to support the level of service our Medicaid members deserve and we can earn a reasonable return for our shareholders,” stated Chairman and CEO Mark Bertolini. However, the company failed to gain enough members to “achieve a long-term viable presence” in its Nevada Medicaid contract that began on July 1, and thus opted to exit that pact on Aug. 31, said Bertolini. “While disappointed in this particular outcome, we remain confident in Aetna’s ability to continue to grow in Medicaid,” he added.

Of the 20 or so RFP opportunities that Aetna and others are monitoring, North Carolina may be the biggest. Both Aetna and Centene Corp. have already formed pacts with existing providers in the state as it prepares to transition from fee-for-service Medicaid to managed care. According to a recent report from the North Carolina Dept. of Health and Human Services, an RFP is anticipated in the first half of 2018 for the implementation of about 1.5 million enrollees coming on in the first half of 2019. Additionally, 1.8 million enrollees from special populations such as dual-eligible and developmentally disabled individuals would be enrolled by 2023. In an Aug. 9 research note from Credit Suisse securities analyst Scott Fidel, the firm estimated that North Carolina is one of the larger Medicaid markets with approximately $13.5 billion in annualized spending and predicted that the RFP is expected to garner “high interest” from the publicly traded MCOs.

Medicare Advantage News

Mo., Nev. Pacts Lifted WellCare Membership

WellCare Health Plans, Inc., in addition to membership and premium gains in its MA business partly brought on by the acquisition of Universal American Corp., reported strong performance in its Medicaid Health Plans segment, with year-over-year membership growth of nearly 17% to 2.8 million members as of June 30. This growth was largely due to a win in Missouri, where it began serving Medicaid enrollees on a statewide basis on May 1, as well as the January launch of its Nebraska Medicaid contract and the acquisition of Care1st Arizona and Phoenix Health Plan assets. The insurer’s Medicaid medical loss ratio for the quarter was 87.7%, which Chief Financial Officer Drew Asher noted was “a little bit better than our expectations, resulting in an improved view for the year.”

The good news for Molina Healthcare, Inc., which reported second-quarter results that new CFO and interim CEO Joseph White characterized as “disappointing and unacceptable,” may be the award of new contracts in Idaho and Illinois. Starting Jan. 1, 2018, Molina will offer a Medicare Medicaid Coordinated Plan for the Idaho Medicaid program, which has an “any-willing” approach to contracting for the MMCP, according to Open Minds. Established in 2015, the MMCP features one set of comprehensive benefits, one accountable entity to coordinate the navigation and delivery of services, and one care management team to develop care plans and coordinate benefits. Blue Cross of Idaho is currently the only health plan that administers the MMCP. Meanwhile, Molina was one of six incumbents recommended for the state’s managed Medicaid reboot (see story, p. 3).

Molina on Aug. 2 reported a net loss per diluted share of $4.10, compared to net income per diluted share of 58 cents for the same quarter last year, which it said was in large part due to high medical costs (MAN 8/10/17, p. 7). The company also unveiled a major “restructuring plan” that involves management changes at three health plans and a 10% workforce reduction. Despite the challenges Molina has faced in the exchanges, White said the company is taking “extra care” to ensure that its restructuring efforts do not interfere with its ability to retain or capture new Medicaid business.

Outside of its troubled contract to serve Iowa Medicaid, Anthem, Inc. on July 26 said financial performance in its Medicaid business was largely in line with expectations. Operating revenue for the government business grew 4.5% year-over-year to $11.9 billion. Overall medical enrollment rose by 1.6% from the prior-year quarter to a total of 40.4 million members, including a 3% boost in Medicaid enrollment.

During a July 26 conference call to discuss second-quarter earnings, executives confirmed that Anthem had not finalized a rate increase with Iowa retroactive to July 1. The Anthem unit Amerigroup Iowa, along with Ameri- Health Caritas Iowa and UnitedHealthcare of the River Valley, has been locked in back-and-forth discussions with the state for months as the plans seek actuarially sound rates to continue to serve IA Health Link (MAN 7/13/17, p. 1). The company received a partial payment intended to cover a “portion of the 2016 losses into the 2017 period,” disclosed Anthem CFO John Gallina. During the call, President and CEO Joseph Swedish declined to provide any further detail when asked by Cowen & Co. securities analyst Christine Arnold about Anthem’s “options” and whether it can exit the state.

Meanwhile, the company said it is tracking 15 to 20 Medicaid RFPs slated for release over the next year and a half. “We do see it as a growth area for the company, even without Medicaid expansion in the future with all the other various long-term support services; aged, blind and disabled; and various other things that are all part of the future pipeline,” added Gallina. “So, Medicaid clearly is continuing to be a growth area for us in the future.”

When discussing second-quarter earnings on July 18, UnitedHealth Group executives made no mention of the Iowa contract and highlighted new state awards in California, Missouri, Nebraska and Virginia. Additionally, the insurer noted that revenue from its dual eligible Special Needs Plans (D-SNPs) was up 33% from the prior-year quarter. Medicaid membership grew 11% to nearly 6.4 million members.

For the quarter ending June 30, Centene Corp.’s total managed care membership reached 12.2 million, up nearly 790,000 lives year-over-year, including more than 400,000 additional Medicaid beneficiaries. The company attributed the second-quarter membership growth to the May implementation of a contract to serve Missouri on a statewide basis and a new contract in Nevada that began on July 1, as well as highlighted recent reprocurements in Georgia, Mississippi and Washington. Total quarterly revenues climbed 10% year over year to $12 billion, primarily driven by growth in Centene’s exchange business in 2017.

As Chairman and CEO Michael Neidorff during a July 25 earnings call highlighted plans to grow Centene’s exchange business when others are scaling back, he said the company expects its MA products to drive more than 20% off annual growth over the long term. The insurer served nearly 328,000 Medicare and dually eligible beneficiaries as of June 30, and is filing for new MA contracts in six markets for 2018 as well as bids in additional markets focused on D-SNP products. Neidorff reiterated previous statements that those products are focused on “providing high-quality affordable Medicare Advantage products to low-income beneficiaries,” and noted that the low-income Medicare opportunity across Centene’s existing states exceeds $150 billion.

Lastly, Puerto Rico-based Triple-S Management Corp. on Aug. 8 posted quarterly consolidated revenues of $745.9 million and net income of $12.7 million, or 52 cents per share, compared with net income of $3.9 million, or 16 cents per share, last year. Additionally, Medicaid premiums rose 5.8% from the prior-year quarter to $191.8 million. That increase primarily reflects last year’s $14.6 million 2.5% excess profit sharing accrual, which reduced 2016 premiums, and $11.6 million in additional premiums related to compliance with the program’s quality incentive metrics.

Offsetting this increase was a membership decline, lower average premium rates that went into effect on July 1, 2016, and $2.6 million associated with the 2017 health insurer fee suspension. Triple-S in July said it reached a three-month contract extension with the Puerto Rico Health Insurance Administration to continue providing Medicaid services in the Metro North and West regions as it concluded negotiations on the 2017-2018 fiscal year ending June 30, 2018 (MAN 7/13/17, p. 8). President and CEO Roberto García-Rodríguez said the administration has agreed to “new rates that incorporate cost and utilization trends” from the most recent fiscal year and that the increase should “lead to a better second-half showing, further aided by cost-saving initiatives implemented by both parties.”

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