Health plan shake-ups could disrupt coverage for low-income Californians

About 2 million of California’s poorest and most medically fragile residents may have to switch health insurers as a result of a new state strategy to improve care in the Medicaid program.

Participating in the program, known as Medi-Cal, requires commercial managed-care plans to reorganize their contracts for the first time in statewide contracting competition and compete against others in hopes of taking away those contracts. Contracts will be revised to provide new benefits to insurers and meet stricter standards for care.

Long-planned reshuffles of insurers may bring short-term pain. Four managed-care insurers, including Health Net and Blue Shield of California, stand to lose the Medi-Cal contract in a little more than a year, according to preliminary results of bidding announced in late August. If the results stand, some enrollees in rural Alpine and El Dorado counties, as well as populous Los Angeles, San Diego, Sacramento and Kern counties, will have to change health plans — and possibly doctors.

“I’m still in shock and I’m still getting over it,” said John Storm, one of about 325,000 members of Community Health Group, the largest Medi-Cal plan in San Diego County, that could lose its contract. “Can I have a doctor? How long will it take me to change plans? Are there any contingency plans when, inevitably, people slip through the cracks?” Storm wondered.

Storm, 54, who has three mental health conditions, mostly stemming from childhood sexual abuse, said finding a psychologist and psychiatrist can take a lot of time and effort. He pointed to the disruption caused by the rollout of Medi-Cal’s new prescription drug program this year, despite assurances it would go smoothly.

“I have concerns, and I know other people in the community have concerns about what we’re being told versus what the reality is going to be.”

Arguably, the biggest loser in the bidding is Health Net, Medi-Cal’s largest commercial insurer, which stands to lose half of its enrollees — including more than 1 million in Los Angeles County alone. St. Louis-based Centene Corp., which is under investigation for allegedly overcharging the state for California prescription drugs, bought HealthNet in 2016 for its Medicaid business, including the LA crown jewel.

But state health plan selection is not set in stone. Losing insurers are fiercely contesting the outcome of formal appeals against their competitors and declaring war on the state. Some of the losers basically called their victorious rivals liars.

The stakes are high, with sports contracts worth billions of dollars annually. Insurers who lose their appeals to the state Department of Health Care Services that administers Medi-Cal can take their grievances to court. That could delay final decisions by months or years, causing headaches for the department, which seeks coverage under the new contract starting Jan. 1, 2024.

State officials expect to spend the rest of this year and 2023 ensuring all selected health plans have enough participating providers to reduce barriers to care.

“Member access and continuity are really our top priorities as part of this transition, and we have dedicated teams that will work with health plans on transition planning and continuity planning,” Michelle Bass, division director, told KHN.

Bass also noted that enrollees have continuity of care rights. “For example, if a member is currently under the care of a doctor for the previous 12 months, the member has the right to continue seeing that doctor for up to 12 months if certain conditions are met,” he said.

The competitive bidding process is an effort by the department to address persistent complaints that it has not effectively monitored subpar health plans.

Eight commercial insurers bid for Medi-Cal business in 21 counties. They must submit voluminous documents detailing every aspect of their operations, including past performance, the extent of their provider network and their ability to meet new, stricter contract terms.

The new agreement contains numerous provisions intended to increase quality, health care equity, and transparency — and to increase accountability to subcontractors to whom health plans often outsource patient care. For example, plans and their subcontractors must reach or exceed the 50th percentile of Medicaid plans in a host of pediatric and maternal care systems nationally — or face financial penalties.

They would also hook into an ambitious $8.7 billion, five-year Medi-Cal initiative known as CalAIM, already underway, to provide non-medical social services that address socioeconomic factors such as homelessness and food insecurity.

Local, publicly managed Medi-Cal plans, which cover 70% of the 12.4 million Medi-Cal members who are in managed care, did not participate in the bidding, although their performance has not always been top-notch. Kaiser Permanente, which this year negotiated a controversial deal with the state for exclusive Medi-Cal contracts in 32 counties, was also exempted from bidding. (KHN is not affiliated with Kaiser Permanente.)

But all Medi-Cal health insurers, including KP and local plans, must commit to the same goals and requirements.

In addition to Health Net, Blue Shield of California, and Community Health Group — which only have contracts with Medi-Cal in San Diego County — are also big losers, as is Aetna, which lost bids in 10 counties.

Blue Shield, which submitted bids in 13 counties where it lost, filed a strongly worded appeal that accuses its rivals Anthem Blue Cross, Molina and Health Net of failing to disclose millions of dollars in fines against them. It accused the three plans of poor performance “and even humiliation” and said they filled their bids with “puffery”, which the state “bought, hook, line and sinker” without “an iota of independent analysis”.

Health Net’s petition condemned Molina, which defeated it in LA, Sacramento, Riverside and San Bernardino counties. Molina’s bid, HealthNet said, “contains false, inaccurate and misleading information.” The entire bidding process, it said, was “grossly flawed,” resulting in “incorrect contract awards that jeopardize the stability of Medi-Cal.”

Specifically, HealthNet said, the Department of Health Care Services “improperly restarted procurement” after the deadline, allowing Molina to make “extensive changes” that boosted his score.

The protesting health plans are requesting that they be awarded the contract or start the bidding process from scratch.

“It would be easier for everyone involved if they just added us,” said Joseph Garcia, chief operating officer of Community Health Group. They don’t have to move anyone.”

The community health group garnered overwhelming support from hospital executives, physician groups, community clinics and the heads of several publicly managed Medi-Cal plans who sent a letter to Bass saying they were “shocked, concerned and deeply disappointed” by the state’s decision. They called Community Health Group “our strongest partner in 40 years,” for which “equity is not a buzzword or a new priority,” noting that more than 85% of its staff is bilingual and multicultural.

The community health group noted in its filing that it lost by less than one point to HealthNet, which won a San Diego contract — “a small difference that itself results from deeply flawed scoring.”

Garcia said that if Community Health Group loses its appeal, it will “absolutely” sue in state court. A hearing officer appointed by Baass to consider the appeal has set a deadline of October 7 to receive written responses and rebuttals.

There is ample precedent for protracted legal battles over bidding for Medicaid contracts. In Louisiana, Centene and Aetna contested the results of the 2019 reenterment process, causing the state to rescind its award and resume bidding. New results were announced this year, with Centene and Aetna among the winners. In Kentucky, a state court of appeals this month issued a ruling in a contested Medicaid buyout case that was held two years ago.

Another factor that could delay the new deal: California is working on several major Medi-Cal changes at the same time. They include the implementation of CalAIM and the expected enrollment of nearly 700,000 unauthorized immigrants ages 26-49 by January 2024, with nearly a quarter of unauthorized immigrants 50 or older who became eligible this year. And then there’s the recalculation of enrollees’ eligibility, which will happen once the federal Covid-19-related public health emergency ends. It could kick 2 million to 3 million Californians off Medi-Cal.

“Listening to all these things gives me a mini panic attack,” says Abigail Corsole, a senior attorney at the National Health Law Program. “They’re doing a lot for themselves in a short amount of time.”

But, Coursolle added, the state “has a very positive approach to improving access and improving the quality of services that people on Medi-Cal receive, and that’s very important.”

This story was produced by KHN, which publishes California Healthline, the editorially independent service of the California Health Care Foundation.

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