Aetna threatens to exit Illinois Medicaid over budget crisis
Aetna Better Health, which the state of Illinois owes at least $698 million, has had enough.
The subsidiary of the national insurance giant has given the state notice that it plans to terminate its Medicaid contracts, Aetna spokesman T.J. Crawford wrote today in an email.
"We have filed notices of intent to terminate our contracts but hope those terminations will ultimately be unnecessary upon resolution of the current Medicaid funding crisis," Crawford wrote. "In other words, no final decision has been made."
Aetna's exit would be the latest casualty of a chaotic state budget standoff that has left $14.7 billion in overdue bills. Universities have laid off thousands of people. Roadwork has stalled. Nonprofits are cutting back services or closing.
For Illinois Medicaid, the loss of a big insurer would mean a major shift. The roughly 235,000 low-income and disabled recipients Aetna covers would have to be moved to another health plan that might not have the same network of doctors and hospitals.
Laurie Brubaker, president of Aetna Better Health, warned last month that the insurer would make this move if the state didn't pass a budget by July 1, or if a federal judge didn't order the state to significantly chip away at the combined $3 billion owed to Illinois Medicaid providers.
"The organizational and investor tolerance for Aetna Better Health's growing financial risk—note that the Aetna enterprise must advance cash to Aetna Better Health to sustain operations—is waning and will soon reach a breaking point," Brubaker wrote in a June 29 court filing as part of a lawsuit against the state to pay Medicaid providers more money.
Aetna estimates that Illinois will owe the insurer more than $1 billion by the end of October, and nearly $1.3 billion by the end of 2017. That doesn't include interest for late payments.
While U.S. District Judge Joan Lefkow has ordered the state to ramp up payments to medical providers, Illinois still doesn't have a spending plan in place amid an epic standoff between Gov. Bruce Rauner and the Democrat-controlled General Assembly. That could change later today. Illinois House members are expected to vote to override Rauner's veto of a $36 billion budget package.
Meridian, too, has threatened to leave Illinois Medicaid over the budget crisis, according to a court filing. The health plan, which covers nearly 400,000 Medicaid recipients in managed care, is owed at least $591 million, not including interest.
Illinois Medicaid is Aetna Better Health's sole source of business. The insurer is considered an anchor in the state's managed care programs, which aim to rein in Medicaid spending by focusing on prevention.
Aetna is in the running for a new managed care contract as Rauner overhauls the initiative to wring out more savings.
In the court filing, Brubaker, who also is chief executive officer of the Medicaid business unit for parent company Aetna, said Aetna Better Health hasn't withdrawn its bid. But she cautioned about the crippling impact the state budget crisis is having on the managed care program in particular.
At least two other participating insurers have slowed or entirely stopped paying their providers, hampering access for Medicaid enrollees, Brubaker wrote. She noted that Aetna Better Health hasn't done that.
"If the state's arrearages to its (managed care insurers) continue to build, it is difficult to imagine how this provider-payment problem will not inevitably worsen," she wrote.
Networks of providers will likely shrink, and some doctors might refuse to see patients altogether, she warned.
The ripple effect: During open enrollment, Medicaid recipients might switch to other insurers, potentially overwhelming those health plans that also are waiting on a lot of money from the state. That's one of Aetna's concerns, Brubaker wrote, since another carrier that manages some of the sickest, most expensive Medicaid enrollees is terminating its contract as of Aug. 1. The state planned to steer about 800 of those enrollees to Aetna.
A spokesman for the Illinois Department of Healthcare & Family Services, which oversees Medicaid, did not immediately comment.
"Aetna threatens to exit Illinois Medicaid over budget crisis" originally appeared in Crain's Chicago Business.
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