Shelby Livingston October
30, 2019
Health insurers Anthem, Cigna Corp.
and Molina Healthcare stand to lose millions in premium revenue after losing
ground in the Texas Medicaid Star+Plus program, a managed care program worth
nearly $10 billion in premium revenue for managed care organizations.
The Texas Health and Human Services
Commission on Tuesday evening announced three-year contract awards for the
program, which serves about 525,000 seniors and people who are blind and
disabled. Contracts start on Sept. 1, 2020. It's likely that some insurers will
challenge the contract awards.
Long Beach, Calif.-based Molina,
which lost five regions but would still operate in two, suffered the biggest
blow. Several equity analysts estimated the loss would reduce the insurer's
future revenue between $700 million and $930 million.
It's the insurer's third recent
Medicaid contract loss—it suffered losses in New Mexico and Florida in late
2018 and early 2019—but the first bid that the new CEO had a hand in.
On Wednesday, CEO Joseph Zubretsky
told investment analysts during Molina's third-quarter earnings call that the
insurer is seeking more information from Texas' HHS and exploring all options,
suggesting it may protest the contract awards.
"If in fact this development
does create a future revenue shortfall, bear in mind that this team has
demonstrated the ability to overcome many challenges," Zubretsky said.
"The team has grown margins to industry-leading levels, even in the face
of a significant revenue decline in 2019. We are committed to meeting the
challenge again and will continue to pursue the revenue opportunities that lie
ahead."
Cigna's loss of its only three
regions in the state could mean a $908 million hit to revenue, according to
equity analysts at Barclays and Evercore ISI. Cigna did not immediately respond
to a request for comment.
Indianapolis-based Anthem,
meanwhile, could lose an estimated $260 to $400 million, according to equity
analyst's reports. Anthem, which operates as Amerigroup in the state, lost
contracts in four regions, but renewed contracts in four and gained a contract
in a new region. The insurer is still evaluating the award and its next steps,
a spokeswoman said.
"Amerigroup has enjoyed a
decades-long partnership with the Texas Health & Human Services Commission,
and we look forward to ongoing collaboration as we evaluate the results of the
Texas Medicaid STAR+PLUS procurement," Patrick Sturdivant, the plan's
president, said in an emailed statement. "Together, we have served Texas
Medicaid STAR+PLUS participants since the program's inception and have built a
depth of experience and understanding around the unique needs of vulnerable
Texans. We remain committed to delivering innovative, high quality and
person-centered care solutions to the consumers we are privileged to serve, and
look forward to welcoming new individuals and families to our health plan upon
new program implementation in 2020."
Louisville, Ky.-based Humana also
bid for a contract but did not win. The insurer had not previously served Texas
Medicaid Star Plus members.
On the flipside, Aetna, Centene and
UnitedHealthcare won contracts that could boost their revenues. Not-for-profit
plan El Paso Health also won a contract in one region.
Aetna, which previously did not
have a contract in Texas, stands to gain the most, with Barclays and Evercore
ISI analysts estimating an increase in revenue of a little more than $1
billion. The contract awards could also increase UnitedHealthcare's revenue in
the state by $575 million to $620 million, those analysts projected.
In a research note, Piper Jaffray
analyst Sarah James estimated that Centene's win could increase its revenue by
more than $300 million. Centene operates as Superior HealthPlan in Texas.
Texas is expected to award separate
contracts for its Children's Health Insurance Program in December. Those
contracts are worth another $10 billion in revenue.
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