A different kind of Medicaid expansion

A growing number of Medicaid managed-care insurers have received approval from state regulators and state insurance exchange officials to enroll non-Medicaid members on the exchanges in October, marking the first time these specialized insurers will offer health coverage to the general public.

These insurers are rolling out new plans that meet the benefit and other requirements of the exchanges, which were established by the Patient Protection and Affordable Care Act. Some also will be selling non-Medicaid plans outside the exchanges. They are expected to offer competitive premiums given their traditionally lower provider-reimbursement rates. Experts say that could drive down premiums in the exchanges overall. These companies also are experienced in coordinating care for lower-income enrollees and those with chronic conditions.

The entry of these insurers into the exchange market will test whether a broader segment of Americans will accept the economy-class health coverage that Medicaid beneficiaries have gotten used to.

Medicaid managed-care companies already have received approval to serve exchange enrollees in California, New Mexico, New York, Oregon and Washington, among others. In California, Medicaid insurers participating in the exchange include Alameda Alliance for Health, Contra Costa Health Services, Molina Healthcare, L.A. Care Health Plan, Ventura County Health Care Plan and Valley Health Plan.

In Oregon, they include Trillium Community Health Plan and PacificSource Health Plans, a commercial insurer that runs Medicaid managed-care plans in Idaho and Montana and plans to participate in the health exchanges there, too. In New York, they include Fidelis Care, Affinity Health Plan, Healthfirst and MetroPlus Health Plan. Some of these are for-profit companies, and others are not-for-profit plans formed by safety net hospitals and community health centers.

Molina Healthcare, a publicly traded Medicaid managed-care company based in Long Beach, Calif., is asking regulators for approval to offer exchange plans in 2014 in nine of the 10 states where the company operates Medicaid plans: California, Florida, Michigan, New Mexico, Ohio, Texas, Utah, Washington and Wisconsin. In 2015, it expects to offer plans on the health exchange in Illinois, where it just started running Medicaid plans, a company spokeswoman said.

Major commercial insurers that have Medicaid managed-care units—including UnitedHealth Group and Aetna, which recently acquired Medicaid managed-care provider Coventry Health Care—did not comment for this article on their intentions. Another big Medicaid player, Centene Corp., would not comment either, although a top Centene executive made public remarks in a conference earlier this year indicating it is eyeing the market because annual spending on the exchanges in the 19 states where the company does business is expected to reach $50 billion by 2016, according to a local business journal.

Regulators and consumer advocates, as well as the insurers themselves, say the participation of these Medicaid managed-care insurers in the exchanges will benefit consumers by letting them remain with the same insurer and provider network if their income changes and they have to switch between a private exchange plan and Medicaid. That, they say, will increase continuity of care and reduce administrative costs.

Under the ACA, Americans with incomes from 138% to 400% of the federal poverty level will qualify for subsidized private coverage through the state exchanges in 2014. Those below 138% of poverty will qualify for an expanded Medicaid program in many states, where many will be served by Medicaid managed-care plans. Where Medicaid managed-care insurers also serve as exchange insurers, people moving between these income thresholds could stay with the same insurer and network.

“This is potentially a very positive development,” said Matt Salo, executive director of the National Association of Medicaid Directors. “By having Medicaid plans start to participate in the non-Medicaid exchange market, we will have a way to address churn issues. As people's income fluctuates, it will be really important that they not be handed off from one health plan to another and instead stay with the same plan.”

Betsy Imholz, special projects director at consumer advocacy group Consumers Union, agreed. “Overall it is a good thing because lines are blurring between the Medicaid and non-Medicaid population under the Affordable Care Act,” she said.

In addition, some experts predict these plans will offer exchange consumers lower premiums. In New York, for instance, Medicaid specialists Fidelis and MetroPlus came in at the low end for premiums in the individual exchange market, with Fidelis offering a silver plan for single adults at $349 a month, the second-lowest rate.

“If you looked at the approved rates, in general they are at the lower end compared with some of the commercial plans,” said David Sandman, senior vice president of the New York State Health Foundation.

But the Medicaid insurers are not always the lowest in every state and market. In Portland, Ore., for example, Trillium came in highest—$329 a month—for a silver plan for a 40-year-old nonsmoker.

Some physicians and hospitals express concern that allowing Medicaid managed-care plans to move into the non-Medicaid exchange market may drive down payment rates. Providers generally receive significantly lower fees from Medicaid plans than from commercial plans, though there are no available data on this. The CMS' Office of the Actuary reported that in 2009, Medicaid payments to physicians were about 58% of private plan payments. Hospital and physician groups fear that exchange plan rates could be driven down near Medicaid levels, discouraging providers from serving millions of expected new exchange enrollees in 2014 and undermining the healthcare reform law.

Anne McLeod, senior vice president of the California Hospital Association, said Medicaid managed-care insurers will be offering “a brand new product in the health exchange, and the rates need to be negotiated between the hospitals and health plans. In no way should a Medicaid rate come into play because this is a completely new marketplace.” She said California hospitals already experience a $5.8 billion shortfall from Medicaid patients annually.

New York hospital officials also have expressed worries about payment rates falling to Medicaid levels. The head of the New York exchange has reassured them that exchange plan rates will not be based on Medicaid rates.

Lisa Rubino, a senior vice president at Molina, declined to discuss her company's provider compensation strategy in its new exchange plans, and a number of other Medicaid insurers did not return calls for comment.

Some provider organizations and consumer advocates also note that Medicaid plans generally offer more limited provider networks than commercial plans do, although California required Medicaid insurers to enhance their networks to participate in its state-run exchange. There have been criticisms in some states that Medicaid plans do not offer adequate access to physicians, particularly to specialists.

Some Medicaid plans deliver care primarily through public hospitals and community health clinics rather than through a network of private hospitals and physician offices. Molina, for instance, serves its Medicaid members through its network of primary-care physicians, specialists and hospitals as well as through about 25 Molina clinics with employed physicians that are operated by a subsidiary called American Family Care in California, Florida, New Mexico and Washington state.

“We believe (Medicaid plans) are well-positioned to care for the predominantly lower-income population that is subsidized because of their history of serving low-income populations and using existing relationships with the safety net providers typically accessed by lower-income individuals,” said Joe Moser, interim executive director of Medicaid Health Plans of America, a trade association in Washington.

It remains to be seen whether these Medicaid-style networks will appeal to non-Medicaid consumers with relatively higher incomes. Open enrollment in the new exchanges is scheduled to start Oct. 1 nationally.

Sandman said commercial insurers are concerned that exchange enrollees may switch from plans sponsored by Medicaid managed-care insurers to their plans if they face medical problems and need a broader network of providers.

But to keep their premiums competitive, the commercial insurers selling exchange plans also are expected to offer narrower provider networks than in the past.

Rubino said Molina's 32 years of experience serving low-income Americans gives it an advantage in serving exchange enrollees, a significant percentage of whom will be just above the poverty line. “We are familiar with dealing with regulators and with building networks,” she said. “It is essential that you have community providers. They are natural parts of our networks today. We have deep relationships with many of the navigators and soon-to-be assistors,” the community-based organizations charged with helping people sign up for exchange coverage, Rubino said. “We are familiar with risk adjustments. I think we have some pretty tremendous advantages.”

A company spokeswoman points out that in Massachusetts, which established a state insurance exchange in 2006, some exchange enrollees have chosen Medicaid managed-care offerings based on price, and have been satisfied using their Medicaid-like network.

Sandman notes that in New York, Medicaid managed-care plans have demonstrated a high level of performance based on National Committee for Quality Assurance measures, and have extensive provider networks.

The expansion of Medicaid managed-care insurers into the non-Medicaid market holds clear financial promise for these insurers. Currently, 36 states and the District of Columbia have enrolled some or all of their Medicaid population in private plans. Last year, Medicaid managed-care plans received $108 billion out of the total $435 billion spent on Medicaid nationally, according to the Medicaid and CHIP Payment and Access Commission. The Congressional Budget Office projects that 7 million people will sign up for coverage through the state exchanges in 2014, and 25 million will be enrolled by 2023.

“It is a big growth opportunity for them but it's a game that's pretty new,” Sandman said. “The big challenge is what kind of reimbursement rates the plans will negotiate with the providers. Whether they want to pay rates similar to Medicaid or more like commercial rates, and where they will be able to settle, we will have to find out.”

Moser suggested that not all Medicaid managed-care companies may jump into the exchange market, at least initially. “At the end of the day, exchange participation is a business decision that each company must make based on market factors,” he said.

Dr. Jeffrey Cain, president of the American Academy of Family Physicians, expressed guarded support for Medicaid insurers moving into the exchanges. “Any proposal that expands coverage to more individuals falls under the overarching goal of healthcare for all,” he said.

But he added that physicians worry about paperwork and administrative hassles in dealing with all managed-care plans.

M.P. McQueen is a freelance writer based in New York.

—with Harris Meyer