Some of the major competitors in for-profit Medicaid managed care have experienced unexpected losses, but they expect to remain profitable. Recently, Kentucky Spirit, owned by Centene, notified Kentucky Medicaid officials that it intended to terminate the contract effective July 5, 2013, one year before it expires. A company spokesperson stated that it had lost $120 million on the contract, claiming that its low bid was based on “bad information from the state.”
Governor Steve Bashear and Audrey Tayse Haynes, Secretary of the state’s Cabinet of Health and Family Services, responded that they intended to hold the company to its contract. So Kentucky Spirit has sued, seeking a declaration that it may terminate the contract. The company claims that the other two Medicaid managed care organizations (MCOs), Coventry Cares and WellCare, also have lost substantial sums because of mistakes made in the alleged rush to implement the program. Kentucky Spirit’s bid was significantly lower than the other MCOs—$311 per member per month, compared to Coventry Care’s $341 and WellCare’s $360.
As we reported earlier this year, Coventry Cares gave notice of termination to several hospitals and health systems, including Appalachian Regional Healthcare (ARH). A court ordered Coventry to continue with ARH until at least November 1, 2012. KentuckyOne Health, which formed in 2012 to operate St. Joseph Health System, Jewish Hospital, and St. Mary’s Healthcare, terminated its contracts with Coventry Cares. But Coventry must have decided to stay with Kentucky’s Medicaid program. It was one of the four successful bidders on the Medicaid managed care contract for the Louisville area, along with Humana, Passport, and WellCare. On October 26, 2012, Coventry announced that profits were down, but revenue was up; it has both cut costs and raised premiums in Kentucky. And its government business was enough to attract Aetna, which has agreed to acquire Coventry.
WellCare also is profitable, though not as much as originally projected. On October 31, 2012, WellCare informed investors that its profits for the third quarter of 2012 did not meet expectations. The company stated two factors contributed to this outcome: (1) CMS’ disallowance of Georgia Medicaid’s planned payments to settle a dispute between the state, WellCare and other MCOs; and (2) an unacceptably high member benefit ratio (MBR) because of unexpected claims. Even so, WellCare is expanding to cover the Louisville region in Kentucky. Depending on the number of new enrollees from this fall’s open enrollment, WellCare expects its Medicaid premium revenue from Kentucky to be $675 million to $700 million next year.
WellCare is instituting a free fitness program for its Georgia Medicaid members and taking on a behavioral health carve-out to manage the care of Hawaii Medicaid beneficiaries with serious mental illness. It also has agreed to purchase United Health Care’s South Carolina Medicaid business.