New state Medicaid contracts drop Passport and Anthem, which say they will appeal; top Beshear aide voices concern

On its way out, the administration of Republican Gov. Matt Bevin has given five health-insurance companies new, five-year deals to manage the care of Kentuckians on Medicaid — and dropped Anthem Inc. and the nonprofit Passport Health Plan, which now have contracts with the state.

The three returning firms are subsidiaries of Aetna, Humana and WellCare. The two newcomers are UnitedHealthcare Community Plan of Kentucky and Molina Healthcare of Kentucky. The new contracts would replace the old ones on July 1, unless Passport and Anthem win protests they say they will file.

On Dec. 10, Bevin will be replaced by Democrat Andy Beshear, who defeated him this month. Beshear’s top aide, J. Michael Brown, issued a statement saying, “Awarding $8 billion in contracts with just 11 days left in this administration is concerning. As we move through the transition and ultimately the change of the administration, we will be taking a close look at this action.”

The insurance-company subsidiaries are known as “managed care organizations.” MCOs manage the care of about 1.2 million Kentucky Medicaid beneficiaries, which costs $8 billion a year, with about 80 percent of the money coming from the federal government.

“The Bevin administration solicited bids for the contracts over the summer, but the announcement of the successful bidders has been delayed,” reports Chris Otts of Louisville’s WDRB-TV. The Cabinet for Health and Family Services, which oversees Medicaid, referred questions to the Finance and Administration Cabinet, where spokeswoman Pamela Trautner said in an email that contracts were awarded competitively.

Trautner wrote: “Proposals were submitted by prospective MCOs, which were evaluated and scored by a technical evaluation team comprised of subject matter experts against the evaluation criteria stated in the RFP. The RFP stated that between three and five awardees would be selected. The five highest scored vendors were selected. Because Passport and Anthem were not among the five most highly scored proposals, they were not awarded a contract.”

Passport is a nonprofit formed in 1997 to get the state into the business of managed care, with the goal of saving taxpayers’ money. The company said in a news release that it was “deeply disappointed” by the decision and that it plans to challenge the outcome. Anthem also plans to challenge the decision, Deborah Yetter reports for the Louisville Courier Journal.

Passport serves more than 300,000 Kentuckians on Medicaid, mostly in the Louisville region. Anthem serves 130,000 enrollees in Kentucky, mostly outside Louisville, Yetter reports.

Bevin and Passport have a conflict that predates his governorship. In May 2015, Passport gave $25,000 to the Democratic Governors Association, which supported Bevin’s Democratic foe, Jack Conway. Passport said the money funded a one-day health-policy conference in Louisville. In 2018, the state cut some MCOs’ payment rates, and Passport said it was hit hardest and almost went out of business. “Bevin had been critical of Passport, calling it ‘poorly run’,” Yetter notes.

In May, Evolent Health, a health-management firm, agreed to buy 70 percent of Passport, but told investors “that the company would likely liquidate Passport, selling it for parts, if Passport failed to win the next round of Medicaid business from Kentucky,” Otts reports.

Evolent spokeswoman Kim Conquest told Yetter that the company supports Passport’s decision to protest the loss of the contract and that Evolent “will continue to support efforts to keep the plan on solid financial footing. Per our agreement, we intend to proceed with the pending acquisition as planned and anticipate it will close by the end of this year.”

“Should the deal fall through, the University of Louisville, as a founding partner of Passport, could lose about $45 million from the sale,” Yetter notes. U of L spokesman John Karman told her that the university is disappointed in the decision: “U of L is proud of its longstanding relationship with Passport and supports its decision to challenge the outcome of the evaluation and award process for this contract.”

Yetter notes that most of the company’s main revenue comes from managing care for Kentucky Medicaid. Anthem, by contrast, is one of the nation’s largest health-benefit companies.

Passport spokesman Ben Adkins told Yetter that the company has about 600 employees in Louisville.

“This decision, if upheld, would have a profound impact on our 300,000-plus members whose access to care will be disrupted as a result,” he told Yetter. “We strongly encourage state leaders to reconsider this decision and its devastating impact on our proud Kentucky company and the communities we serve.”

The Cabinet for Health and Family Services said in its news release announcing the contracts thay they include a number of improvements, including a a separate contract with WellCare to cover all children in the state’s foster-care system.

The contracts also include, among other things, provisions for tighter management of the prescription drug program, including abolishing “spread pricing,” a system in which middlemen known as pharmacy benefit managers can profit by paying pharmacists less than they make from state Medicaid programs.