Two of the nation’s largest insurers are reaching out to doctors as they prepare to offer health coverage to low-income residents in California’s Medicaid program.
UnitedHealth and Aetna plan to join Medi-Cal managed care in San Diego and Sacramento counties beginning next year, pending final state approval.
Their participation shows that “Medi-Cal is a good business to be in,” said Stan Rosenstein, a consultant with Health Management Associates and a former Medi-Cal administrator. “Insurers are recognizing that with Medi-Cal covering a third of Californians, [they] really can’t ignore it.”
Medi-Cal, the state’s version of the federal Medicaid program, currently serves 13.4 million people, about 80 percent of whom are in managed care plans. It is the largest Medicaid program in the country, and its enrollment has grown by about 40 percent since the Affordable Care Act expanded eligibility in 2014 to single, childless adults and people with slightly higher incomes.
In Medi-Cal managed care, the state pays insurers a fixed amount per enrollee to provide comprehensive care. That contrasts with traditional Medi-Cal, in which the state pays medical providers directly for services provided.
California health care officials have been criticized for failing to ensure that Medi-Cal managed care plans are providing adequate care. A state audit last year found that the state did not verify the accuracy or sufficiency of insurers’ doctor networks.
There are currently 22 insurers in Medi-Cal managed care. The program has remained relatively stable for years; the last new insurer to enter the market was Centene, in 2013.
The California Department of Health Care Services said it opened the Medi-Cal managed care program to new insurers in Sacramento and San Diego because the current contracts in those two counties “have been in place for an extended period of time.”
Operating within Medi-Cal managed care isn’t easy for insurers, said Chris Perrone, who directs the “improving access” team at the California Health Care Foundation (California Healthline, produced by Kaiser Health News, is an editorially independent publication of the foundation). One of the main reasons is that California spends only about $6,000 a year per enrollee, placing it in the bottom 10 for spending. That’s half as much as Washington, D.C. spends, according to a recent analysis based on 2012 data.
But Perrone said insurers still see an opportunity — especially if they can keep their costs down and their quality high. “There is money to be made, even with low Medicaid payment rates,” he said.
Aetna spokesperson Anjie Coplin said in a written statement that the company had decided to participate in the Medi-Cal managed care program in part because it is “the nation’s largest Medicaid market and most populous state.”
“We are always looking for opportunities to serve Medicaid beneficiaries, and California is a logical next market,” Coplin said. “It has always been on our radar as a place to grow.”
One of the company’s health plans, Aetna Better Health, expects to start small and grow to approximately 150,000 Medi-Cal members, Coplin said. While Aetna is focusing on San Diego and Sacramento counties, it would like eventually to expand to other counties, she added.
UnitedHealth spokesman Tyler Mason said even though it’s always a challenge to balance resources in Medicaid, the company is doing it successfully in numerous other states.
UnitedHealth insures 3.7 million Californians through their employers or Medicare, and it already has offices in San Diego and Sacramento counties.
“We already know the providers and the delivery system,” Mason said. “Combine that with the experience we have nationwide working in these programs, and it bodes well for us being competitive in these counties.”
Mason added that UnitedHealth will work with local health and community organizations as it begins rolling out its services to Medi-Cal members in the two counties. In the future, it “will continue to look at other opportunities in California,” he said.
UnitedHealth’s decision to participate in the Medi-Cal market comes at the same time the insurer is pulling out of Covered California and most of the other state exchanges where it has been selling health plans.
The state Department of Health Care Services said the Medi-Cal start date for both insurers would be July 2017 or later and depends on the insurers proving they are ready to take on beneficiaries of the program. That includes demonstrating they have an adequate network of doctors who aren’t located too far away from enrollees.
The department said it will also review how the insurers plan to communicate with members and will seek to ensure that they provide “high-quality, accessible and cost-effective” coverage.
Jane Ogle, a consultant and former deputy director at the department, said Aetna and UnitedHealth could have difficulty getting a foothold in the two counties, since there are already several Medi-Cal insurers operating there. But success there could lead to even more business around California as the state opens up other counties to new insurers.
“You can bet those big commercial plans will be bidding on other counties,” Ogle said.
Blue Shield of California Foundation helps fund KHN coverage in California.