Michigan Divvies Out Medicaid Contracts, With Centene, Molina Seeing Minor Losses

An article from

Dive Brief:

• Michigan on Monday released Medicaid contract award recommendations, keeping health insurers’ share of the state’s managed care program generally the same.
• Incumbents Centene, CVS, Molina and UnitedHealth reprocured their Medicaid contracts with minor changes in membership, according to the Michigan Department of Health and Human Services.
• Centene and Molina each lost three regions, but impacts on total membership, revenue and earnings “are relatively minor,” wrote JP Morgan analysts in a Monday note on the contract awards. The companies could protest Michigan’s decision, potentially mitigating the losses.

Dive Insight:

Nearly all states have some form of managed care in place and contract with risk-based managed care organizations to provide care for certain Medicaid populations. Payers are paid a set per-member per-month amount for their services.

Contract schedules vary by state, but Michigan is the latest to recently issue a new multi-year deal with insurers. Earlier this year, New Hampshire and Virginia reprocured bids that shook up the Medicaid market share of major publicly traded insurers, with Centene renewing its contract with New Hampshire and Molina failing to do so in Virginia. Molina also lost a contract with Indiana late last year.

Now, both insurers are facing a small setback for membership growth plans in Michigan.

Michigan’s Medicaid plans cover almost 2 million people in the state. The new five-year contracts, which include three one-year optional extensions and go into effect this October, are awarded based on 10 state regions, each including multiple counties.

Centene lost three regions accounting for an estimated 41,000 members, while Molina lost three regions accounting for an estimated 24,000 members, according to the JP Morgan analysts.

Nine health plans submitted proposals to Michigan and were awarded contracts.

Along with Molina Healthcare of Michigan and Centene-owned Meridian Health Plan of Michigan, United Healthcare Community Plan, Aetna Better Health of Michigan, McLaren Health Plan, Upper Peninsula Health Plan, Blue Cross Complete of Michigan, Priority Health Choice and HAP CareSource received awards.

Michigan’s spending on Medicaid managed care has been growing as more beneficiaries enroll into the plans.

Managed care accounts for 66% of the state’s $23.8 billion in Medicaid expenditures, making its contracts worth upwards of $15.7 billion.

Proponents of Medicaid managed care argue the arrangement lowers costs by giving payers an incentive to restrict unnecessary high-cost services, while creating more predictability for state budgets. However, evidence about managed care’s efficacy is mixed, and concerns are growing that insurers are denying Medicaid members’ care more than they should to retain more government reimbursement as profits.

Last fall, congressional Democrats launched an investigation into large managed care organizations over coverage denials. It’s an area where federal regulators currently have very little oversight, a government watchdog said in March.

Michigan’s contracts were awarded days before Florida is expected to announce the managed care plans that have won six-year contracts with the state. Florida’s health department has said the contracts will be issued by this Friday. Insurers are watching closely, given Florida’s large Medicaid footprint of 3.5 million individuals.