In November 2011, Ohio State made national news by landing native son Urban Meyer as its next football coach, signing the in-demand coach to a six-year, $24 million contract that includes use of a private jet, a golf course membership, and bonuses up to $2.4 million if he is still coaching the Buckeyes in 2018. Based on that blockbuster deal, perhaps Ohio's Department of Job and Family Services could use OSU's legal team to help evaluate Medicaid contracts.

In a surprising move, Ohio Medicaid officials on June 7 reversed their April 2012 decision to award $7 billion in Medicaid contracts to CareSource, Paramount Advantage, Aetna, Meridian, and UnitedHealthcare. The reversal came after three incumbent Medicaid plans - Molina, Amerigroup, and Centene  protested the initial contract award citing numerous errors in the selection process. As a result of the reversal, Molina and Centene will remain in the program with statewide contracts, would-be newcomers Aetna and Meridian are out, and the state has egg on its face.

The Ohio Medicaid contracts serve more than 1.6 million beneficiaries and cover both the medical and prescription drug benefits. Ohio is also reducing the number of Medicaid regions in the state from eight to three, with each of the selected plans serving all three Ohio regions. Beneficiaries will be enrolled in the new plans in January 2013. Insurers will have the opportunity to gain thousands of new enrollees, a number that could spike in 2014 if Medicaid eligibility expands through national healthcare reform.

In issuing its reversal, the state had to admit its review process was flawed. For instance, Meridian apparently should have been disqualified because it did not meet deadlines to have adequate licensing from the state's department of insurance. Aetna received points it shouldn't have, with the state erroneously crediting the MCO for taking on full risk in states where that wasn't the case.

The news is a huge help to Molina, which could ill afford to lose the Ohio contract since it accounts for roughly 25 percent of the company's earnings. Even more timely, the reversal news came a day after Molina's shares tumbled 31 percent on news of financial bleeding in its Texas contract, where Molina has seen extremely high medical costs in the Hidalgo and El Paso regions.

The Hidalgo market, which includes 13 counties around the Rio Grande Valley, did not have a managed Medicaid program prior to March 2012. Insurers in the new Hidalgo service area are facing higher utilization as members receive care for previously untreated conditions. Costs should level off as members receive regular care, but the program start-up and higher-than-anticipated spike in utilization has taken an early toll.

Ohio's decision is a blow to Aetna, which has struggled to develop its Medicaid business since its purchase of Medicaid ASO operator Schaller Anderson. It's also a setback for upstart MCO Meridian, which can console itself with a recent contract award in New Hampshire. And the situation points to how quickly health plans fortunes can turn in the Medicaid business: losing a major contract, or agreeing to a lowballed reimbursement amount, or discovering a higher-than-expected member acuity level can wreak havoc for Medicaid plans. The best MCOs can do is hope their state partner will work with them and make things right. Even if it's a tad embarrassing.

 

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