Kentucky must rebid Medicaid contracts again, judge rules

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The latest lawsuit will be the third round of procurements for these awards.



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This ruling puts six insurers at risk of losing their lucrative contracts with the state. It’s unclear when the state will rebid the work.



A Kentucky judge ruled Wednesday that the state must again rebid its lucrative Medicaid contracts previously awarded to some of the nation’s largest health insurers.

Franklin Circuit Court Judge Phillip Shepherd blamed “irregularities” in the state’s procurement process and said taken together they “severely undermine public confidence in the bidding process.”

This ruling puts six insurers at risk of losing their contracts with the state. However, to prevent any disruption for the more than 1 million patients covered by Kentucky Medicaid, the current awards will remain in place for now. It’s unclear when the state will begin the rebidding process.

“The judge’s orders are being reviewed and the impact is being assessed,” said Susan Dunlap, a spokesperson for Kentucky’s Cabinet for Health and Family Services, which oversees the state Medicaid program.

This will be the third time the contracts are rebid, Molina’s CEO Joe Zubretsky said on a call Thursday with investors. The contracts were re-bid last year after a new governor, Democrat Andy Beshear, was installed and wiped out the previous contracts that were awarded at the tail end of his predecessor’s term. Beshear was keen on beginning a new request for proposal process because he wanted to modify the state program, mainly to end the controversial Medicaid work requirements.

The same seven companies bid on the new proposal under the Beshear administration. The same five were awarded the work: Aetna, Humana, Molina, UnitedHealthcare and WellCare.

Anthem and Kentucky-based insurer Passport Health, both previous incumbents, were not selected again.

Anthem protested the contract loss and brought a lawsuit against the state. As part of the suit, Anthem wanted Molina removed as a contractor for hiring a former member of Beshear’s transition within one year after leaving the government post. The court did not remove Molina from the program, but it did allow Anthem to become the sixth Medicaid managed care organization for the state.

To expand its footprint in Kentucky, Molina acquired the second-largest Medicaid plan, boosting membership there to 315,000 members, which analysts said at the time would mean an additional $1.1 billion in premium revenue for the insurer.

“We’ll be bidding on the contract, but we’ll be bidding as a strong incumbent, we’ve already won the contract twice; we’ll win it a third time,” Zubretsky said Thursday.

Contracting with states to provide Medicaid coverage to low-income residents has become a lucrative service for insurers.

Many have noted that enrollment in this area has ticked up over the course of the pandemic. The public health emergency has played a part in that as it bars states from running re-determinations to kick people off who are no longer eligible. As states are blocked from terminating coverage, membership has increased for insurers like Anthem and Molina.

Plus, the strategy is similar for many insurers that offer Medicaid coverage; they also sell Affordable Care Act marketplace plans to those eligible for subsidies. They are poised to see growth in this area as President Joe Biden’s administration opened a special enrollment period due to the pandemic so no one goes without coverage at this time. The special enrollment period ends Aug. 15.


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