California regulators intend to award coveted five-year Medicaid managed care contracts to Molina Healthcare, Centene subsidiary Health Net and Elevance Health’s Anthem Blue Cross Partnership Plan, the state Department of Health Care Services announced Thursday.
Medi-Cal is the largest Medicaid program and covered 14.6 million lower-income people as of February, according to the most recent state data. The contracts run from Jan. 1, 2024 to Dec. 31, 2028.
The three insurance companies already hold Medicaid contracts with California. The new arrangements represent the Golden State’s first-ever statewide managed care plan procurement and they require insurers to implement new payment, quality and transparency measures. CVS Health’s Aetna, Blue Shield of California, Chinese Community Health Plan, Community Health Group and UnitedHealth Group’s Imperial Health Plan were not chosen. UnitedHealth Group will stop covering Medi-Cal enrollees by the end of the year, Department of Health Care Services Director Michelle Baass said during a call with reporters. Health plans that lost bids have until Sept. 1 to appeal.
None of the winning or losing companies immediately responded to interview requests.
Cetene won the Medicaid contract despite a state investigation into allegations that the company defrauded Medi-Cal over prescription drug prices. The largest Medicaid insurer reserved $1.25 billion to settle similar claims with 11 other states that its former pharmacy benefit manager division inflated drug prices. California regulators fined then-Centene subsidiary Magellan Health $3.8 million this year after worker shortages left patients and providers waiting on prior authorization approvals. Centene covers 2.14 million Medi-Cal beneficiaries.
California also will move ahead with a plan for Kaiser Permanente to expand its Medicaid contract and continue selecting the people it enrolls, which rival health insurers argue allows the integrated health system to cherry pick healthier customers. The state has long allowed Kaiser Permanente to limit its Medi-Cal membership to recent former Kaiser Permanente employer-based or individual policyholders.
Gov. Gavin Newsom (D) enacted legislation in June that directly contracts with Kaiser Permanente in 32 counties and will increase its enrollment by 25% over the five-year term, according to the California Senate health committee. The company had more than 896,200 Medi-Cal members at the end of June, and directly operates or subcontracts with local plans in 17 counties. The agreement is pending federal approval. Kaiser Permanente did not immediately respond to an interview request.
The majority of Kaiser’s geographic footprint and enrollment stem from subcontracting with county-run insurers, which will be eliminated under the new law. The new statewide contract requires Kaiser Permanente to take on risk and directly finance its members’ care.
The current subcontract arrangement is unnecessarily complicated and a single, direct contract would create a more consumer-friendly experience, according to a report the state Senate health committee issued in June. The Local Health Plans of California trade association and several counties also contend that the new model weakens access to care because it excludes providers and services outside of the Kaiser Permanente system.
The new arrangement also expands eligibility for Kaiser Permanente plans to Medicare-Medicaid dual-eligibles, foster youth, those who fail to choose a health plan and are assigned one by default, and a few other groups.
The National Union of Healthcare Workers has said that any expansion of Kaiser Permanente’s Medi-Cal presence should be delayed until the company enters into a binding agreement with the state to remedy its behavioral health shortfall. More than 2,000 Kaiser Permanente mental health workers went on strike in California this month after a year of contract negotiations. The union employees had been working without a contract since September.
The California Department of Managed Health Care is conducting “a non-routine survey” of Kaiser Permanente’s mental healthcare services in response to an uptick in consumer complaints, Director Mary Watanabe told legislators this month.