Indiana has selected three health insurers to manage care for poor, elderly, blind and disabled people under a new four-year, $4 billion Medicaid program.
Anthem Blue Cross and Blue Shield, Managed Health Services of Indiana and MDwise (PDF) won the contracts, which start April 1, 2015. Anthem is a subsidiary of WellPoint, and MHS is a subsidiary of Centene Corp. MDwise, founded by Indiana University Health and the Health and Hospital Corp. of Marion County, is a not-for-profit plan.
The managed-care companies will receive lump-sum payments to provide coordinated care for 84,000 aged, blind and disabled Medicaid enrollees who also qualify for Medicare, a population often referred to as dual-eligibles.
Each health insurer is expected to receive about $335 million in annual revenue under the contract, assuming each covers an equal amount of enrollees, said Justin Lake, an analyst with J.P. Morgan Securities. He said in a research note that the contract could be most meaningful for Centene. If Centene is able to build a 3% operating margin on the Medicaid plan by 2016, it could boost earnings per share by about 2%.
Indiana created the new program, called Hoosier Care Connect, as a way to improve care quality and coordination for disabled Medicaid members, cut Medicaid expenses and move away from fee-for-service reimbursement. A state task force found that 69% of Indiana's Medicaid costs in 2012 were attributable to those who were aged, blind and disabled.
Three insurers—CareSource, Magellan and Advantage Health Solutions—lost during the bidding process. Publicly traded Humana has partnered with CareSource on these types of Medicaid contracts. Lake said in his note that Humana has acknowledged that partnering with CareSource “may not be the optimal way to fully address the dual-eligibles opportunity,” and the loss in Indiana may prompt Humana to explore other strategies, including acquiring a Medicaid plan.
Indiana is not one of the 12 states participating or planning to participate in the CMS Innovation Center's demonstrations seeking to improve the quality and lower the cost of care for dual-eligibles. Most of the participants in that initiative are likewise hiring managed-care companies to align care for the beneficiaries under capitated contracts.
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