A provider-owned health plan in Hawaii is contesting the bidding process that awarded a $1.5 billion state Medicaid managed-care contract to two of the nations largest health insurers.
AlohaCare, a not-for-profit plan based in Honolulu and founded in 1994 by community health centers, alleges that in February the state unfairly granted the managed-care contract to Evercare, a subsidiary of UnitedHealth Group, and Ohana Health Plans, a subsidiary of WellCare Health Plans.
The three-year contract is to provide healthcare services to the 37,000 beneficiaries in Hawaiis Aged, Blind and Disabled Medicaid program.
Like many other states, Hawaii has gradually been shifting its Medicaid population into managed care. Some 65% of Medicaid enrollees nationwide are now in managed-care plans, according to the Kaiser Family Foundation.
The CMS granted Hawaii a waiver to move its aged, blind and disabled Medicaid beneficiaries into managed care starting Nov. 1 as part of an expansion of the states Medicaid managed-care program, called Quest. The states remaining Medicaid beneficiaries, about 160,000 people, already receive healthcare services through Quest, according to the Hawaii Department of Human Services.
AlohaCare officials say the bid process for the contract was skewed to favor large, for-profit, out-of-state health insurers at the expense of local providers.
Key to their argument is a 4.265% premium tax rebate to be paid to the for-profit insurance companies as part of the contract. The rebate of the insurer tax was designed to stimulate competition in the bidding process among for-profit insurers, which pay the state tax and level the playing field with not-for-profit insurers, which dont pay the tax. But AlohaCare said this rebate is illegal and estimates that the reimbursement to UnitedHealth and WellCare will add more than $65 million to Medicaid costs over the life of the contract. If the rebates had been included in the bids, AlohaCare says its offer would have come in lower than its mainland competitors.
It distorts the bidding process, said Ed Kemper, lawyer for AlohaCare. We dont think its particularly fair.
AlohaCare also is disputing the point system used to score the bids, saying that too many points were given for experience managing Aged, Blind and Disabled programs in other states, while too few points were awarded for experience working with the Hawaiian population, Kemper, a partner at Kemper & Watts, Honolulu, said. AlohaCare has 55,000 members and is the third-largest health plan in Hawaii. It provides services to other Medicaid managed-care recipients through Quest.
AlohaCares bid for the contract was disqualified because of technical problems with its request-for-proposals submission, Kemper said.
Department of Human Services Director Lillian Koller has rejected AlohaCares appeal of the contract award. The state chief procurement officer is now reviewing the departments 40-page decision and is expected to rule on the matter by mid-April, said Toni Schwartz, spokeswoman for the DHS.
The DHS declined to comment until after the chief procurement officer renders a decision, Schwartz said. She added that Koller worked very hard to keep the process as fair and impartial as possible.
Awarding the contract to UnitedHealth and WellCare is not in the best interest of Hawaiians, according to AlohaCare. UnitedHealth is under fire from regulators in California and New York for claims processing violations and rates for out-of-network providers. Tampa, Fla.-based WellCare is under investigation by the FBI, HHS, the Securities and Exchange Commission, and Floridas Medicaid Fraud Control Unit, and is the target of class-action complaints and a whistle-blower lawsuit.
If Hawaii does not decide in AlohaCares favor, the health plan could take legal action, Kemper said, adding that it may have some legal standing because of a March 2006 court decision that requires the state of Hawaii to give AlohaCare parity with its out-of-state competitors.