Three providers for KanCare post losses of $110 million in first year

05/21/2014 4:33 PM

08/08/2014 10:24 AM

The three companies that provide health care services to those in KanCare – the state’s privatized Medicaid program – all saw net losses during the first year of the program, according to a report by the Kansas Department of Health and Environment.

The losses have some concerned about the viability of the program and whether the companies will continue to work in Kansas.

“What’s Plan B if one or more people pull out? Because it would be hugely disruptive,” said Rep. Jim Ward, D-Wichita, who serves on the legislative joint committee on KanCare oversight.

“(The companies are) not going to subsidize the Medicaid program if it doesn’t work. If it doesn’t work, they will leave. ... Fundamentally, at the end of the day, they have to make profit. They have shareholders and stockholders that hold them accountable.”

But state officials and others say one year is too short a time to make a judgment about the KanCare program, which was implemented in 2013.

State officials also note that the companies are contractually obligated to provide services for three years, starting with 2013.

“That’s not a concern of ours,” said Kari Bruffett, director of health care finance at the KDHE. (She will become secretary of the Kansas Department of Aging and Disability Services on June 9.)

“The idea, the very concept of KanCare, is an investment in preventive services and other services and care to reduce costs. ... It’s a long-term investment not only in savings but in better outcomes,” Bruffett said.

According to reports from the National Association of Insurance Commissioners, the companies lost more than $110 million collectively.

“It’s not unusual for first year to see operating losses,” Bruffett said, but it’s also “not about just one year.”

The state uses the NAIC reports, along with reports from the companies, to ensure that the companies are on solid financial ground, Bruffett said.

“All three have sound financial parent entities and have enough capital on hand to ensure meeting the requirements of the contract,” she said.

Amerigroup representatives refused to be interviewed for this story. Centene, the parent company of Sunflower, did not respond to interview requests.

Molly McMillen Malat, director of public relations for UnitedHealthcare, did not respond to requests for an interview but said in an e-mail that “it is difficult to forecast financials on any new business so we would expect some level of financial volatility in the first year of a program as robust and comprehensive as KanCare.”

She also said that, “Programs focused on preventive services and engaging individuals on Medicaid in their health care will ultimately lead to better health outcomes and lower costs for the state.”

Track record

All three companies have a history of leaving Medicaid programs in other states amid financial and contractual problems.

In fall 2012, Kentucky Spirit Health Plan, a subsidiary of St. Louis-based Centene, announced it was terminating its contract as a provider for Kentucky’s Medicaid program after one year with steep losses.

Court documents showed the health plan lost more than $120 million during its contract with Kentucky, according to the Associated Press.

“Clearly, with this level of experience with Medicaid managed care, the Commonwealth expected that Centene and its state-based subsidiary Kentucky Spirit had a sound and tested business strategy,” Audrey Tayse Haynes, secretary of the Kentucky Cabinet for Health and Family Services, said in a news release from October 2012 about the contract termination. “I am deeply frustrated that this publicly traded, Fortune 500 company has chosen to put profits above people and will not honor the terms of its contract. The managed care model is working in many states and is working here in Kentucky.”

Centene currently operates as a managed-care organization in about 20 states.

Also in 2012, Minnesota-based UnitedHealthcare announced it was dropping its contract for BadgerCare Plus, Wisconsin’s Medicaid program, because it said the state wasn’t paying enough to cover claims, the Milwaukee Journal Sentinel reported.

Earlier this year, the company announced it would return to the Medicaid program in Wisconsin, the Milwaukee Business Journal reported.

In Ohio, Virginia-based Amerigroup pulled out as a managed-care company from Medicaid in July 2013 amid a lawsuit that it filed after it lost out on a new contract with the state, where it had 61,000 members.

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