GROUP HEALTH, REGENCE, KAISER DECIDE AGAINST ENTERING HEALTHY OPTIONS MARKET

Perhaps, one of the most impactful market activities of 2012 took place on Dec 2nd, and yet garnered no headlines.

With the State’s RFP for new Healthy Options plans due on the 2nd, many were expecting all 11 plans which had submitted a letter of intent to complete a bid for 2012.  Instead, according to the Health Care Authority, only 7 plans submitted:

1. Amerigroup Washington, Inc.
2. Columbia United Providers
3. Community Health Plan of Washington
4. Coordinated Care Corporation Inc.
5. Molina Healthcare of Washington Inc.
6. Premera Blue Cross of Washington
7. UnitedHealthcare

The RFP process asked for plans to bid on providing coverage under a new joint procurement model integrating the Medicaid Healthy Options patients, with the state’s Basic Health Plan enrollees, among other consumer groups.  From the HCA release:

“The contract is expected to save money for the state over that period since it leverages the state’s purchasing power by consolidating the Medicaid managed care program called Healthy Options with the state’s Basic Health Plan, which provides coverage for the working poor. Other populations in this procurement include Healthy Options clients such as foster children and Social Security Income recipients.

The Request for Proposals was opened to bidders in September.

The Healthy Options program currently provides fully capitated, managed care services for approximately 700,000 Temporary Assistance to Needy Families (TANF), TANF-related Children’s Health Insurance Program (CHIP) clients, which is about 60% of Washington’s total Medicaid/CHIP population. HCA intends to add Medicaid clients who are eligible for Supplemental Security Income (SSI) but not Medicare to the Healthy Options population. Basic Health provides subsidized health coverage for approximately 37,000 low-income adults.”

This list of plans is significant for a number of reasons.  Here are just a few of them.

1.  Group Health and Kaiser are not on the list.  Together, they cover about 20,000 Healthy Options lives (~3% of the total), and about 8,200 (~16% of the total) of the Basic Health plan currently.  (Complete enrollment data is here.)  While those numbers aren’t astronomical, these integrated delivery models have been producing the kinds of results (both in quality outcomes and reduced costs) that the new RFP had hoped to achieve.  Based on conversations with folks at GHC, it appears the primary limiting factor was the RFP’s requirement that plans not cap their Medicaid enrollments.  As GHC saw it, in their integrated delivery model, not capping the plan meant not capping the physician panels.  And, physician panel with no caps – particularly with the coming expansion of Medicaid – would have meant financial ruin for the cooperative.  Both groups expect to contract their physician services with other plans.

2.  Regence is not on the list.  Between its eastern Washington brand, Asuris, and the Regence brand, Regence has about 42,000 Healthy Options lives (~7% o the total).  Regence is Washington’s largest provider of commercial insurance services.  They’ve had a long involvement in managed care models, going back to the RegenceCare model from a decade ago, and clearly they are in the market now.  That they did not participate has been perhaps the biggest surprise among health plan folks we’ve talked to in the last week.  We’ll have a complete statement from Regence soon.

3.  There may only be a net increase of 1 plan.  A primary reason, understood by many, that the HCA wanted to release this RFP was to bring in more plans to the market.  The resulting increase in competition was hoped to shake up a marketplace dominated by Molina at 325,000 lives, or 50% of the total Healthy Options market.  With more competition, it was hoped more innovation around care coordination would come to Washington, and with it a reduced reliance by the state on one major plan.  It is still possible for competition to increase as plans are assigned counties for operations.  However, it seems that goal is much harder to achieve with only 7 plans.

4.  National for-profit plans will likely grow their footprint in Washington.  Currently, only one publicly traded, national plan operates in the market.  It’s likely that number will grow to four.  While many see this issue as an open question about whether this is good or bad for Washington, some are still raising concerns.  For instance, Sen. Karen Kesier and Rep. Eileen Cody, the chairs of the respective health care committees in the Senate and House, sent a letter on Dec 2nd  to Doug Porter, HCA Administrator, outlining their thoughts, which included the nuanced statement:

“However, managed care plans’ commitment to the Healthy Options program over the long term, and the historical performance of current Healthy Options contractors are important considerations as well.”

On the one hand, this is exactly what inviting competition into the market looks like.  The anticipated innovations around care coordination will be a benefit to the market, providers and consumers.  And, Molina already controls the largest portion of the market, so publicly traded plans dominating the Washington marketplace isn’t new.  On the other hand, plans that send millions of dollars in profit out of state aren’t the most politically popular right now in a budget climate as dire as the one Washington is in.

We will be watching this issue closely in the weeks ahead, as the implications for plans, the state, and providers are all very consequential.