Health Plan Weekly

Health Care Deals May Slow in 2020, but Government Markets Remain Hot

January 9, 2020

The pace of health care mergers and acquisitions likely will cool slightly in 2020, some industry experts tell AIS Health. Still, insurers are likely to seek out companies with assets such as care management or information technology solutions, while provider consolidation will continue in certain markets.

By Jane Anderson

The pace of health care mergers and acquisitions likely will cool slightly in 2020, some industry experts tell AIS Health. Still, insurers are likely to seek out companies with assets such as care management or information technology solutions, while provider consolidation will continue in certain markets.

“We expect that payer M&A will continue into 2020, with a bias toward vertical rather than horizontal deals,” says Michael Abrams, managing partner of Numerof & Associates, Inc. “Payers will use such deals to expand into adjacent market spaces to differentiate their offerings as integrated platforms that can deliver superior value, customer experience and innovation.”

Joe Paduda, a principal with Health Strategy Associates, says he expects less M&A generally in 2020, for several reasons. “There aren’t as many assets to buy after the multiple deals done over the last few years; buyers are waiting to see results of the elections, which will drive their future strategy; and asset prices have edged even higher, making transactions more expensive and leaving less margin for error.”

Dan Mendelson, the founder of consulting firm Avalere Health, says he still sees plenty of potential targets for horizontal mergers, along with more targets for vertical deals.

“Health plans are in a transformative phase right now. There are three major areas of focus: government markets, care management, and the information technology needed to support quality improvement and cost reduction,” says Mendelson.

“In government markets, there are a range of quality assets that the larger plans could still acquire,” he adds. “There are also some non-profits that could engage in collaboration with for-profit organizations to expand their scope and reach.”

Medicare Advantage plans will be “a very strong target for M&A” in 2020, says Ashraf Shehata, KPMG’s national sector leader for health care and life sciences.

Shehata says he also expects insurers to “amass capabilities around their PBMs.” This, he says, could include bolstering their specialty pharmacy capabilities and building out technology.

Red States to Push for Medicaid Waivers in 2020

January 8, 2020

Conservative states are likely to push hard in 2020 for CMS approval of Medicaid waivers that will allow them to implement policies such as work requirements, while voters in some of the 14 states that have not yet expanded Medicaid could tee up referendums that would require expansion, Medicaid observers say.

By Jane Anderson

Conservative states are likely to push hard in 2020 for CMS approval of Medicaid waivers that will allow them to implement policies such as work requirements, while voters in some of the 14 states that have not yet expanded Medicaid could tee up referendums that would require expansion, Medicaid observers say.

“With the clock ticking on the [Trump] administration, they will want to get through as many waivers as possible with conservative principles [such as] work requirements and copayments, and things that discourage folks from staying on the rolls,” Jerry Vitti, founder and CEO of Healthcare Financial, Inc., says of red states.

Meanwhile, Medicaid expansion efforts in state legislatures may slow as the country approaches the 2020 election, notes Patricia Boozang, senior managing director at Manatt Health. Several states — such as Idaho, Utah and Nebraska — are in the process of expanding Medicaid in 2020 following successful ballot initiatives in the previous midterm elections.

States also are holding off on implementation of already-approved Medicaid work requirements as litigation surrounding those requirements works through the court system.

“I do think the litigation around work requirements is something that states and the administration are watching really closely,” Boozang says. “While we may see additional states seek approval, we may not see any implemented.”

Vitti adds: “If the courts say work requirements are fine, you’ll see the red states adopt them.”

Meanwhile, more than a dozen states are looking at conducting Medicaid managed care contract procurement in 2020, Boozang says. These states include: Georgia, Iowa, Indiana, Kentucky, Michigan, Missouri, Mississippi, Pennsylvania, Tennessee, Virginia, Washington, Wisconsin and West Virginia.

As states move through procurement, Boozang says she expects to see more value-based payment systems implemented, with health plans’ help. Plus, states increasingly are turning to Medicaid managed care programs to help them implement policy priorities, such as those surrounding social determinants of health, according to Boozang.

HealthCare.gov Enrollment Plateau Signals Stability for Insurers

January 7, 2020

Now that the open enrollment period has ended for the 38 states that use HealthCare.gov to enroll people in Affordable Care Act (ACA) marketplace plans, the preliminary sign-up numbers offer relatively reassuring news for the insurers that operate in the individual market.

From Nov. 1 to Dec. 17, 8.3 million people chose or were automatically re-enrolled in health plans on the federal exchange, CMS said on Dec. 20. That’s down just slightly compared with 2019, when total HealthCare.gov enrollment was 8.5 million.

By Leslie Small

Now that the open enrollment period has ended for the 38 states that use HealthCare.gov to enroll people in Affordable Care Act (ACA) marketplace plans, the preliminary sign-up numbers offer relatively reassuring news for the insurers that operate in the individual market.

From Nov. 1 to Dec. 17, 8.3 million people chose or were automatically re-enrolled in health plans on the federal exchange, CMS said on Dec. 20. That’s down just slightly compared with 2019, when total HealthCare.gov enrollment was 8.5 million.

Deep Banerjee, a health care sector analyst at Standard & Poor’s, tells AIS Health that the preliminary 2020 enrollment figures from HealthCare.gov didn’t come as a surprise.

One major reason is that the exchanges have become a heavily subsidized market, and for those receiving subsidies, “it’s highly likely they’ll sign up every year,” he says.

“On the other side, this is kind of the positive [effect] of continuous economic growth in the country — if less people are unemployed, which means they are getting their insurance from the group side, [they’re] less likely to sign up on the individual market,” Banerjee adds.

For insurers, the fact that ACA exchange enrollment has plateaued “is not necessarily positive,” he says, given that carriers would like the market to be growing. However, “flat is definitely better than declining,” Banerjee points out.

Cynthia Cox, vice president at the Kaiser Family Foundation and director for its program on the ACA, says “the Trump administration has had a mix of policies — some that were harmful and some that were helpful for the market.” In general, moves that some worried would have a large negative impact, such as the repeal of the individual mandate penalty, do not appear to have led to a huge decline in enrollment, she notes.

“People being priced out who don’t get a subsidy is still a concern, but generally speaking, the market has been pretty stable for the last couple of years, and it looks like it will continue to be going forward for at least another year,” she adds.

Navajo Nation, Molina Partner on Medicaid Managed Care in New Mexico

January 6, 2020

The business arm of the Navajo Nation plans to contract with Molina Healthcare, Inc., to offer Medicaid managed care as part of a partnership between New Mexico, tribal officials and the insurer.

The program would be the first-ever Medicaid managed care program dedicated solely to the health care, cultural needs and geographic needs of native populations living in the Navajo Nation, according to Molina.
The new managed care plan — which Navajo Nation-owned Naat’aanii Development Corporation hopes to launch in 2020 — could cover up to 75,000 Navajos who live in New Mexico.

By Jane Anderson

The business arm of the Navajo Nation plans to contract with Molina Healthcare, Inc., to offer Medicaid managed care as part of a partnership between New Mexico, tribal officials and the insurer.

The program would be the first-ever Medicaid managed care program dedicated solely to the health care, cultural needs and geographic needs of native populations living in the Navajo Nation, according to Molina.

The new managed care plan — which Navajo Nation-owned Naat’aanii Development Corporation hopes to launch in 2020 — could cover up to 75,000 Navajos who live in New Mexico.

“This is very much led by the Navajo Nation,” says Sandeep Wadhwa, M.D., chief health officer and senior vice president of government programs for Solera Health.

The deal appears to be the first between a managed care company and an organization that is owned by a Native entity, Wadhwa, who is not affiliated with Molina, tells AIS Health. “There is a dimension of self-determination by the tribe and by American Indians that hadn’t been realized previously,” he says.

Under Medicaid, state-contracted managed care plans may be an option for American Indians and Alaska Natives, but this is the first time a tribal nation has contracted with a state Medicaid program, Wadhwa adds.

Approximately 100,000 Navajos live in New Mexico, and around three-quarters of them are eligible for Medicaid, according to the New Mexico Human Services Department (HSD). Navajos experience a heavy disease burden, with a mortality rate that’s 31% higher than the overall U.S. rate, HSD figures show.

If this arrangement with Molina and the Navajo Nation helps to improve health outcomes and reduce costs, there may be other tribes and tribal nations that consider similar initiatives, Wadhwa says.

Health Insurers Receive Multiple Gifts In Year-End Spending Package

December 26, 2019

For health insurers, there’s a lot to like in a spending package passed by Congress to avoid a government shutdown.

One of the two measures that make up the $1.4 trillion spending package will completely repeal the long-reviled health insurer fee (HIF) starting in 2021, which will especially help insurers in the Medicare Advantage business. The legilslation also includes two provisions to that could stabilize the Affordable Care Act exchanges by thwarting any attempts to ban silver loading or auto-reenrollment.

By Leslie Small

For health insurers, there’s a lot to like in a spending package passed by Congress to avoid a government shutdown.

One of the two measures that make up the $1.4 trillion spending package will completely repeal the long-reviled health insurer fee (HIF) starting in 2021, which will especially help insurers in the Medicare Advantage business. The legilslation also includes two provisions to that could stabilize the Affordable Care Act exchanges by thwarting any attempts to ban silver loading or auto-reenrollment.

And portions of the Lower Health Care Costs Act of 2019 — including new transparency requirements for contracts between providers and health plans, and a solution to surprise medical billing that involved arbitration — neither passed on their own nor made it into the spending package.

President Donald Trump signed the spending package into law on Dec. 20 after both the House and Senate passed the legislation.

The HIF repeal, effective starting in 2021, is the most significant portion of the spending package for the managed care industry.

“This legislation is an early Christmas gift for healthcare stocks across the board,” Evercore ISI analyst Michael Newshel advised investors in a Dec. 16 research note. “We had been anticipating HIF relief for 2021 and maybe 2022 too, but permanent repeal is of course better and removes any future uncertainty about the fee’s possible return [after 2020],” he wrote.

Citi Research analyst Ralph Giacobbe added that the HIF’s repeal is “a major win for the MCOs, particularly those with significant Medicare Advantage exposure like [Humana] given the dynamics of that end market and the inability to pass through the tax.”

In the commercial insurance market, carriers have largely passed the cost of the HIF onto their members, “so eliminating it would have the impact of reducing premiums for consumers, which would be politically expedient,” Credit Suisse analyst A.J. Rice wrote in a Dec. 16 note.