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MCOs continue to lose money in KanCare’s second year

Insurance companies drop $73M in first half of 2014 after $110M loss in 2013

By Andy Marso | September 09, 2014

The three private insurance companies that administer the Kansas Medicaid program under KanCare lost $72.6 million in the first half of 2014, after losing $110 million in 2013.

Rep. Jim Ward, a member of a KanCare oversight committee who requested the fiscal information from the Kansas Department of Health and Environment, questioned Tuesday how long the three companies can sustain such losses.

Rep. Jim Ward, D-Wichita

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"These companies can’t keep subsidizing Medicaid to the tune of $100 or $150 million per year, and that’s what’s happening,” said Ward, D-Wichita.

KanCare is the initiative launched by Gov. Sam Brownback on Jan. 1, 2013. It moved virtually all the state’s Medicaid enrollees into health plans run by Amerigroup, UnitedHealthcare Community Plan and Sunflower Health Plan, a subsidiary of Centene.

The three managed care organizations, in information to be filed with the National Association of Insurance Commissioners, reported a total of about $96 million in underwriting losses in the first half of this year. The claims they paid outstripped the $394 million to $483 million each received from the state based on how many Medicaid clients they have.

Amerigroup reported about $45 million in underwriting losses, Sunflower reported about $27 million in losses and United HealthCare reported about $24 million in losses. Amerigroup and Sunflower reported investment income and tax items that reduced their losses to about $38 million and $11 million respectively. United HealthCare did not break out its investment income from that of its parent company.

The figures do not include pay-for-performance bonuses to be distributed to the MCOs for their work in 2013, but at about $42 million, those bonuses would not offset the first-half losses.

Ward, who has been a persistent critic of KanCare, said his concern with the managed care organizations losing money was that one or more would pull out of the program and cause "a huge disruption" in delivery of Medicaid services.

“At some point in time, these are for-profit companies," Ward said. "They have boards of directors, they have people they report to.”

Cindy Wakefield, vice president of corporate communications for Amerigroup, said the company was still all in with KanCare.

"We continue to collaborate with our state partners and are committed to the program and our members," Wakefield said via email.

Molly McMillen Malat, a spokeswoman for United HealthCare, said the same.

"We are committed to the success of KanCare, our partnership with the state and are proud of the programs we are delivering on to help more than 127,000 people live healthier," Malat said via email.

Sara Belfry, a spokeswoman for KDHE, noted that the three MCOs signed contracts for at least three years, with options for a fourth and fifth.

"MCOs have no contractual right to terminate their respective KanCare contracts, either for cause or for convenience," Belfry said via email.

Belfry said KDHE, which administers the KanCare contracts, will begin reviewing this month the per-client payment rates it provides to the MCOs to see if they need to be altered for 2015.

She said the agency also is in the process of "mid-year rate adjustments" to determine if this year's rates should be changed, particularly for Kansans with intellectual and developmental disabilities, whose long-term support services were carved into KanCare this year.

Medicaid is a state-federal partnership in which the federal government pays about 60 percent of the costs. In Kansas it provides health care coverage for about 400,000 people — most of them low-income children, pregnant women and people with disabilities.

Many other states — including Kansas — previously turned to private managed care to administer portions of Medicaid, but the wholesale switch that KanCare represented was unusual. Brownback said the program would save the state $1 billion over five years without cutting eligibility, services or provider payments and lead to better health outcomes by coordinating care and preventing health crises.

Belfry said the program is working in that regard, with an increase in primary care usage by Medicaid clients and a decrease in emergency room visits.

"The point Rep. Ward is missing is that people enrolled in KanCare have experienced the benefits of coordinated and integrated care," Belfry said. "We have seen the benefits to consumers in a number of ways."

Ward said the state could have implemented managed care itself instead, and he remains skeptical of including the for-profit companies in Medicaid.

“You can’t make money on poor-and-disabled people insurance," Ward said. "If you could, there would be no Medicaid.”

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