Dive Brief:
- Kansas has awarded new contracts in its more than $4 billion Medicaid managed care program to plans operated by incumbents UnitedHealth and Centene. CVS, however, was displaced by newcomer Healthy Blue, a plan majority owned by Elevance.
- Kansas’ Medicaid program, called KanCare, announced the awards Tuesday to provide care for its 458,000 beneficiaries. The contracts begin January 2025 and run through 2027, with the option to renew for up to two one-year extensions.
- The earnings impact on plans from the changes will be relatively small, according to analysts, though the contract loss represents a slight challenge for CVS, which could dispute the decision. On the flip side, the award suggests reprocurement momentum for Medicaid giant Centene, which is coming off recent contract wins in a number of states.
Dive Insight:
KanCare has granted contracts to Centene’s Sunflower Health Plan, UnitedHealth’s United Healthcare 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 to make a run at Kansas’ Medicaid contract — a run that has now proved successful.
KanCare, however, jilted CVS’ Better Health of Kansas, a plan run by its health insurance business Aetna. KanCare did not specify why Better Health was not selected for the contract. However, Aetna was censured by the state for not complying with the terms of its contract and providing inadequate service in 2019.
Aetna also has the highest rate of claims denials out of Kansas’ three managed care organizations, according to KanCare’s annual report to the CMS in 2022, the most recent year the report is available.
A CVS spokesperson said the company is “disappointed” with the decision “given the strength of our proposal and the excellent support we provide to our members in the state.”
“We’re currently reviewing our options,” the spokesperson said.
KanCare selected UnitedHealth, Centene and Healthy Blue out of seven bidders, including CVS. It’s unclear who the other three bidders were — Kansas officials have yet to post documents on the contract solicitation process on the state’s Department of Administration or KanCare websites.
Currently, Kansas’ Medicaid market share is roughly split with a third each to contract holders, through UnitedHealthcare has a slight edge with roughly 160,000 beneficiaries, according to J.P. Morgan analyst Cal Sternick. Centene has an estimated 151,000 members and CVS has 147,000.
If Kansas awards the contracts as intended, CVS’ lives will likely be allocated to Elevance, Sternick wrote in a note Tuesday.
Centene and UnitedHealth have participated in Kansas managed care since the state privatized its Medicaid program in 2013.
Medicaid managed care, wherein states pay private health insurers a flat rate per enrollee, has grown to become the dominant Medicaid delivery system in the U.S. The contracts can be quite lucrative — KanCare spent $4.6 billion in capitation payments to managed care organizations in the 2023 fiscal year.
As such, reprocurements are highly contested among health insurers, which frequently protest any losses.
Florida issued Medicaid awards in April, renewing contracts with Centene, Elevance and Humana but removing UnitedHealth, CVS and Molina from the state. Molina has already said it plans to challenge the decision, while UnitedHealth signaled it would move to protest as well. Molina is also challenging a recent Medicaid contract loss in Virginia.
New Hampshire and Michigan also reprocured bids earlier this year, with Centene renewing its contract in New Hampshire. The Michigan awards essentially preserved the status quo in the state, with Centene, CVS, Molina and UnitedHealth reprocuring contracts with minor membership changes.
Nearly all states have some form of managed care in place, viewing the arrangements as a way to ensure more budget predictability, while putting plans on the hook for controlling the medical costs of their members.
However, divvying out capitated payments also creates an incentive for MCOs to deny or limit medical services to pocket a larger portion of the healthcare dollar.
That incentive has underpinned recent concerns about the adequacy of Medicaid managed care plans. MCOs are facing rising criticism for quality of their coverage, with research finding high rates of denials sparking an investigation by top Democrats in Congress last year.
