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Medicaid contracts to favor FL-based HMOs

A little-noticed clause in the state overhaul of Medicaid could mean a bonanza for WellCare Health Plans and Blue Cross & Blue Shield of Florida.

In determining which companies win contracts to enroll 1.5-million Medicaid recipients, the law says, the Agency for Health Care Administration should give preference to those based in Florida.

WellCare is based in Tampa; Blue Cross & Blue Shield's home is Jacksonville. They are by far the largest Florida-based companies expected to compete in what Citigroup analyst Carl McDonald called "the single largest Medicaid managed care expansion in history.”

McDonald, who called attention to the plum in a report released Monday, estimated up to $6.4 billion is at stake. "Among the publicly-traded plans, WellCare is the only company that will have this advantage,” he said.

He didn't mention it, but the non-profit Blue Cross & Blue Shield of Florida appears to have a similar advantage. 

The market opportunity was created in legislation this spring that made controversial changes to Florida's insurance program for low-income families and disabled individuals. The law calls for almost all Medicaid beneficiaries who are not already enrolled in HMOs and other prepaid plans to become enrolled in one in 2013-14.  Frail elderly persons, including those in nursing homes, are to be shifted first.

AHCA will decide which plans will be offered as choices in each region of the state. Less-populous areas must have at least two plans available, and densely populated regions may have up to 11.

Companies will compete for contracts on a tiered system, with points for different assets. Being based in Florida is one of the features that adds points.

Plans that have all their operations – call centers, claims payments, and so on – based in Florida get the most points. BCBS-FL meets those criteria without question. WellCare meets most of them, based on a statement released today by spokeswoman Amy Knapp:

"Our Tampa headquarters manages the shared services and high volume transactions, such as claims processing, that benefit from centralized management. We have local market leaders who manage the customer-facing functions like member and provider outreach. The combination allows us to maximize both efficiency and community relations."

Knapp said that WellCare has call centers outside Florida, but all are managed from the Tampa headquarters.

The statement added: "We look forward to learning more about how we can work with AHCA and the expanded use of managed care to provide more care and services to Floridians with the limited funds available, while creating more jobs throughout the state."

"We look forward to learning more about how we can work with AHCA and the expanded use of managed care to provide more care and services to Floridians with the limited funds available, while creating more jobs throughout the state."

BCBS-FL, which covers 4 million Floridians, has not contracted with Medicaid before. It announced in May that it will begin enrolling Medicaid recipients in 2012.

“We’re going to design a product specifically for Medicaid,” said Dwight Chenette, the Blues’ new vice president for Medicaid business. He said the decision to enter the Medicaid market was reached even before the company knew that it would have a home-field advantage in the competition.

“Blue Cross & Blue Shield believes there’s room in this marketplace for a new insurer,” Chenette said in a phone interview. “Our focus is a little different than some of the for-profit entities. We have much more mission orientation,” of improving health for all.

Florida cannot carry out its conversion to managed care without approval from the Centers for Medicare and Medicaid Services, since the federal government pays more than half the cost of the joint program for the poor. The state requested that permission on Aug. 1.

If the plan is approved, next year the state will invite HMOs and provider-service networks to apply to enroll the elderly and disabled Medicaid population, beginning in 2013.

Other Medicaid patients — mostly healthy children and pregnant women — won't have to enter a managed care organization until 2014, although they can enroll sooner if they want. A majority of Medicaid beneficiaries from these groups are already enrolled in HMOs.

The only beneficiaries exempted from the mass move to managed care are the developmentally disabled, such as individuals who have very low IQs or autism.

Blue Cross & Blue Shield has decided not to vie for the first round, the nursing-home-eligible caseload, Chenette said.

WellCare executives said recently in an earnings call that they expect to compete for the frail elderly as well as other groups.

Proponents of the overhaul said that by moving nearly all Medicaid recipients to managed care the state could save money and insure better access to care. In the traditional Medicaid system, it is sometimes hard for patients to find doctors or dentists who will accept Medicaid payment rates.

But critics of the managed-care expansion, including physicians and patient advocates, say the five-county pilot program on which it is based did not show money savings or improved access to care.