Florida Issues Medicaid Managed Care Awards Booting Out UnitedHealth, CVS And Molina

Dive Brief:

• Florida released long-awaited Medicaid contract awards on Friday, retaining Centene, Elevance and Humana as sole holders of market share in every state region while slicing UnitedHealth, CVS and Molina out of the state.
• Analysts said the awards were particularly beneficial for Medicaid giant Centene, which currently has the largest market share in Florida and was seen to be at risk of losing penetration.
• The contract loss isn’t expected to materially affect the earnings of UnitedHealth, CVS and Molina, though the insurers could still challenge the results. Florida’s contract runs six years and is expected to begin in October.

Dive Insight:

Stakeholders were watching the Sunshine State closely, given the size of its Medicaid program: Florida is the fourth-largest state by Medicaid enrollment, with the contracts issued Friday covering more than 3.4 million people.

As such, Florida is an important source of revenue for insurers participating in its managed care program, wherein states contract with payers to oversee the care of their Medicaid beneficiaries.

As of last year, Florida’s spending on managed care Medicaid accounted for almost $18.6 billion of its $28.1 billion Medicaid budget, according to health policy research firm KFF.

Going into the contract awards, Centene, Elevance, Humana and Florida Community Care, a plan owned by a Miami-based health services company, held the only contracts with a presence in each of Florida’s nine Medicaid regions, according to J.P. Morgan analyst Calvin Sternick.

CVS, Molina and UnitedHealth, along with 13-state insurer Amerihealth Caritas and hospital-owned plan Community Care Plan, held contracts covering five or fewer regions.

On Friday, Florida elected to consolidate that coverage, issuing an intent to award Centene, Elevance and Humana statewide contracts once again.

Community Care Plan and Florida Community Care also received awards, to cover Florida’s south and the state’s north and southern tip, respectively. UnitedHealth, CVS, Molina and Amerihealth Caritas did not retain contracts.

Centene especially emerged a winner, according to analysts. The payer holds 41% of Florida’s Medicaid market, and was at the largest risk of losing share after its acquisition of WellCare four years ago more than doubled its footprint in the state, according to TD Cowen analyst Gary Taylor.

The Florida awards also came soon after Centene said it would protest how Texas scored its bid for Medicaid contracts expected to be awarded this summer, which also lowered investor expectations.

It’s the “best possible outcome” for Centene, and should improve investors’ confidence in the insurer’s ability to reprocure contracts, J.P. Morgan’s Sternick wrote in a note on the Florida awards. Florida represents an estimated 5% of Centene’s adjusted earnings per share, Sternick said.

Centene’s stock was up more than 7% in premarket trade Monday.

As for the insurers that lost contracts, Florida’s Medicaid program represented an estimated 1.1% of Molina’s adjusted earnings per share, along with 0.2% and 0.1% of expected adjusted earnings per share in 2025 for CVS and UnitedHealth, respectively, according to Sternick.

Contract schedules vary by state, but a number of recent procurements have repositioned Medicaid market share in the U.S.

Earlier this year, New Hampshire and Virginia reprocured bids, 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.

More recently, Michigan divvied out Medicaid contracts that essentially preserved the status quo in the state, with Centene, CVS, Molina and UnitedHealth reprocuring their contracts with minor changes.

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.

In Florida, Medicaid managed care plans late last year returned $1 billion in excessive profits to the state that they had generated from 2019 to 2022, according to Florida Politics.

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, according to a government watchdog.