Monday bid deadline prompts scramble among Illinois insurers, legislators
With bids due Monday for private insurers who want a piece of a key Illinois Medicaid program, one of the biggest health plans is in talks with potential buyers.
For Chicago-based Family Health Network, known as FHN, the effort to sell off its assets or enrollees to another health plan is a last-ditch effort to keep from suddenly shuttering. After all, there will be losers: Illinois Gov. Bruce Rauner's administration is revamping its Medicaid managed care program. Twelve insurers, including FHN, have to rebid to participate, but in an effort to squeeze out more savings, the state plans to award just up to seven contracts.
The reboot has whipped the health care industry into a frenzy. In April, the FHN board chairman said he feared the state was locking the insurer out of a new contract. Like vendors across the state, the insurer is owed money by the State of Illinois: Among a backlog of state bills that tops $12 billion, FHN's overdue tab comes to about $260 million.
As for FHN's discussion with potential buyers about selling off parts, if not all, of its business, "Essentially at some point that's what they're being forced to do," Illinois Sen. Omar Aquino says. Aquino's legislative district includes two of the five hospitals or health systems that co-own the insurer. "They would rather prefer to stay in business."
Aquino is among five Democratic sponsors of a resolution that seeks to suspend the bidding process and highlights the plight of FHN in particular. A spokeswoman for the health plan declined to comment.
In a statement, John Hoffman, a spokesman for the Illinois Department of Healthcare and Family Services, which implements Medicaid, said: "This plan is about better fulfilling the promise of healthcare. We are doing this through a transparent process to ensure integrity, strong competition and sustainable costs. For more than two years, we held hundreds of hours of meetings with stakeholders and lawmakers to transform managed care."
In a state where healthcare makes up more than half of the overall budget, about 65% of Medicaid recipients (or roughly 2 million people) are in managed care. The intent is to surround patients with doctors, social workers and others who closely monitor and coordinate their care with an eye toward lowering medical costs.
But Rauner's revamp has been criticized by Illinois Comptroller Susana Mendoza, among others, as moving too quickly. The new contracts would be awarded next month and begin on Jan. 1, leaving the winning bidders a short time frame to get ready—that is, expand their contracts with doctors and hospitals statewide.
Meanwhile, a flurry of legislation and public hearings have sought more transparency and accountability on the managed care program. Participating insurers are slated to get a collective $9 billion in contracts a year, over four years.
One resolution filed by state lawmakers calls for auditing the insurers. State Sen. David Koehler, a downstate Democrat, has filed a bill to limit enrollment in managed care. He fears all Medicaid enrollees will eventually be under the program, effectively privatizing it.
"Then what role does the legislature have in any of this?" Koehler asked, referring to oversight. "We're out of it."
He questioned if managed care has actually saved the state any money. In March, Felicia Norwood, the director of the healthcare and family services department, told Crain's that the agency hired a firm to find out.
Andy Kane, a hospital consultant who served as Medicaid program's chief financial officer from 2001-04, analyzed state budget data. He said Medicaid spending has climbed, while enrollment has dipped. For example, in 2008, Medicaid cost $3,758 per enrollee. Fast forward a decade, the tab is expected to rise to $4,800 per person. This is despite a quick and big push toward managed care in the last few years. (His analysis does not include enrollees added to Medicaid under the Affordable Care Act of 2010 because the federal government covered all of the recipients' medical costs.)
Samantha Olds Frey, Chicago-based executive director of the Illinois Association of Medicaid Health Plans, a lobbying group for insurers contracted with the state, understands the frustrations of the lawmakers and providers alike. She said she's working to find common ground. Efforts include streamlining administrative headaches for providers.
She added that she's not opposed to audits (the state combs through insurers' books now). "We are funded by taxpayer dollars, and we are not opposed to that in any way," Olds Frey says.
Meanwhile, her members are starring down a Monday deadline if they want to vie for a chance at staying in the managed care game.
"Monday bid deadline prompts scramble among Illinois insurers, legislators" originally appeared in Crain's Chicago Business.
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