Wisconsin Insurers in Financial Distress Over Medicaid Program

As of October 31, 2012, United HealthCare is no longer overseeing the care of 174,000 recipients of BadgerCare Plus, one of Wisconsin’s Medicaid programs. The managed care organization (MCO), the largest of four servicing Medicaid recipients in southeastern Wisconsin, elected to terminate its contract with the state after losing millions of dollars due to reduced payments.

In an attempt to balance its budget, the Wisconsin Department of Health Services reduced payment rates to MCOs by 11 percent over two years, and it must still find another $372.3 million in state and matching federal funds combined to slash before June 29, 2013. In addition to United HealthCare, two of the other three MCOs have also raised concerns that they are losing money.

BadgerCare Plus covers children under 19 years of age, pregnant women, and other qualifying adults who meet income eligibility requirements, which generally is less than 200 percent of the federal poverty limit ($46,100 for a family of four). In certain instances, some people may qualify for a limited coverage plan if they exceed these requirements.

For each individual covered under the program, the MCOs get paid a fixed monthly amount by the state, which the MCO uses to reimburse health care providers. States are required by federal law to pay insurers based upon their anticipated costs. The problem the MCOs are claiming is that the fixed payment is now inadequate to cover the costs of some care, even at the rate negotiated with the providers.

Molina Healthcare Inc., the second MCO to raise concerns, stated that in the first half of 2012, it paid approximately $3.7 million more in claims above what the state had paid it. According to Mark Rakowski, the executive director of Children’s Community Health Plan, the third complaining MCO, “What we get paid by the state is not tied to what we pay providers.” The fourth MCO in the area, CommunityConnect HealthPlan, declined to comment on the issue.

While Molina has reiterated its commitment to the area market, it declared that it will continue to work with both state and federal Medicaid agencies to achieve sufficient payments for Wisconsin MCOs. However, it did caution, “If we are unable to achieve rates that are actuarially sound, it may no longer be feasible for us to continue as a health plan in the state.”

BadgerCare Plus recipients whose care was formerly managed by United HealthCare will now have their care paid for directly to their providers by the state.