MCOs- CareSource, HAP’s joint venture to expand Medicaid coverage

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[MM Curator Summary]: The two MCOs will team up in the Michigan market, with HAP getting help on the exchange and CareSource getting HAP’s 2% of the local Medicaid lives as a starting point.



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Health Alliance Plan, the integrated insurer of Henry Ford Health, signed a letter of intent to create a joint venture with Dayton, Ohio-based CareSource to expand its Medicaid coverage and re-enter the public health care exchange program.

HAP currently provides Medicaid coverage to fewer than 40,000 in Michigan, exclusively in the thumb region and in Oakland, Macomb and Wayne counties. CareSource, one of the nation’s largest managed Medicaid providers, has 2.3 million members across seven states. Besides Medicaid, it offers marketplace and Medicare Advantage plans.

Related: Henry Ford Health’s $2.2B redevelopment to transform Detroit campus

Currently, HAP insures less than 2 percent of the statewide Medicaid population, but hopes to grow its Medicaid membership to 100,000 through the expansion, Dr. Michael Genord, president and CEO of HAP, told Crain’s.

“This joint venture brings national scale and innovation to our Medicaid line,” Genord said. “Leveraging CareSource’s abilities just makes sense … and drives forward the Henry Ford mission of caring for the most at-risk Michiganders and really drives this health equity mindset and delivers value.”

The JV product will operate as a separate entity and be headquartered in Detroit, said Erhardt Preitauer, president and CEO of CareSource. Terms of the deal are not finalized, both executives said, and will require approval from state and federal regulators.

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The JV will offer a new product line that will “capitalize on the (HAP) brand and name in the market,” Preitauer said.

The deal is expected to receive regulatory approval by the end of the first quarter this year, with expansion coming thereafter, Genord said.

HAP will also benefit from CareSource’s public marketplace product line. The Health Insurance Marketplace is a federally-operated insurance marketplace for citizens not offered insurance through an employer.

The new healthcare marketplace comes at a critical time. Medicaid coverage for hundreds of thousands of Michiganders could end in the next few months as the feds plan to roll back the pandemic health care emergency.

The state’s Medicaid population grew by approximately 700,000 during the pandemic thanks to the federal Families First Coronavirus Response Act, signed by President Donald Trump on March 18, 2020, which required states to continue enrollment of Medicaid beneficiaries for as long as the government declared the pandemic a public health emergency.

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That directive will end as part of the 2023 budget bill signed by President Joe Biden late last year. Beginning in April, states will have to start to re-establish their redetermination process, which assesses whether an individual receiving Medicaid benefits continues to be eligible.

“A lot of people will be leaving a Medicaid plan,” said Genord. That’s where our long-term vision for the marketplace comes in. We’ll have a value differentiation (from competitors).”

Genord did not provide details on how it plans to differentiate.

It’s unclear how the potential Medicaid purge will impact the new joint venture’s Medicaid line.

This story first appeared in Crain’s Detroit Business.