Anthem, Passport to protest $7B Kentucky Medicaid contract loss

By | December 4, 2019

Dive Brief:

  • Anthem and Passport Health Plan intend to appeal Kentucky’s decision to award Medicaid managed care contracts statewide to five other insurers, leaving them out of the lucrative bid. Both companies confirmed to Healthcare Dive they will proceed to the formal bid protest process.
  • Aetna, Humana, Molina, UnitedHealthcare and WellCare were the winners in the Kentucky contract awarded last week. They will provide coverage to about 1.3 million Medicaid members beginning July 1. The contract is worth about $ 7 billion each year, according to analyst David Windley with Jefferies.
  • Kentucky has yet to receive any formal appeals from either Anthem or Passport, a state official told Healthcare Dive. However, there is still time to file.

Dive Insight:

The contract was a big win for UnitedHealthcare and Molina, which beat out incumbents Anthem and Passport, a nonprofit Louisville-based insurer.

Throughout the past year, there has been tension between outgoing Kentucky Gov. Matt Bevin and Passport. It started with rate cuts the company said violated its contract with the state but also threatened the solvency of the company, according to previous reports from the Louisville Courier-Journal. Then in March, Bevin called the company “poorly run,” according to the newspaper, sparking outrage from previous Passport CEO Mark Carter.

The Kentucky bid is especially important for Molina, as it lost some of the counties it previously served in a $ 10 billion Texas Medicaid contract awarded in October. Anthem was dealt another blow in Kentucky after losing out on the Texas contract as well.

The win in Kentucky is most accretive for Molina’s earnings, Windley said in a recent note. WellCare, Humana and Aetna will continue to serve Medicaid beneficiaries in the state. 

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“Among those three, the award was most important to [WellCare] from an EPS exposure standpoint as the contract contributed 5% to EPS. That’s a positive read-through for [Centene] given the pending acquisition,” Windley said.

WellCare is the largest Medicaid managed care provider in the state in terms of enrollment and Passport is the second largest. WellCare, which is in the process of being acquired by Centene, covers about 426,000 members, or 32% of the market.

As of Nov. 4, Anthem covers about 128,000 beneficiaries, or 10% of the market, and Passport covers nearly 300,000, or 22% of the market, according to figures with the Kentucky Cabinet for Health and Family Services.

It’s not uncommon for insurers to file protests after losing out on contracts. In August, Centene and Aetna filed protests in Louisiana after they were not selected to provide Medicaid beneficiaries with coverage.

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