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By Jon Kamp
WellCare Health Plans Inc. (WCG), Humana Inc. (HUM), Coventry
Health Care Inc. (CVH) and a local not-for-profit plan have all won
business to cover a total of 175,000 Medicaid recipients in
Kentucky starting next year.
For WellCare and Coventry--Aetna Inc. (AET) plans to buy the
latter company in a $5.7 billion deal announced in August--the move
represents expansion a state that has presented significant
high-cost challenges this year. Humana, working through an alliance
with the nonprofit CareSource, is launching a new Medicaid business
in its home state.
Medicaid is a government health plan for the poor jointly paid
for by the federal government and states. The Kentucky population
in question--in Louisville and 15 surrounding counties--has been
covered by the nonprofit Passport Health Plan for many years, but
the Centers for Medicaid and Medicare Services has told the state
it needs a choice of providers in the region starting Jan. 1.
Kentucky's Department for Medicaid Services plans to use a
"high-tech matching system" to decide which managed-care plan is
best for each Medicaid recipient, according to a state press
release Thursday. Members will get notices by early next month
informing them about the match, and then will have 30 days to
choose a different plan if they want to switch.
Medicaid recipients will get an additional 90 days to switch
after Jan. 1, when the contracts go into effect. The contracts will
cover an initial 18 months with four, one-year renewal options, the
state said.
Managed-care plans are steadily bulking up their Medicaid
membership as states look for help handling the programs and trying
and restrain costs. New markets can sometimes prove troublesome if
patients' use enough medical services to overwhelm incoming
revenue, causing the insurers to lose money.
This has happened in Kentucky, causing headaches for health
plans that entered the market late last year, including WellCare,
Coventry and Centene Corp. (CNC). They have talked about efforts to
get more revenue from the state and bring costs lower, but plans
for two insurers to expand business before these problems are
sorted out may spark some concern.
"Until we see evidence of improving fundamentals in KY Medicaid,
we think investors should take a very cautious view of margin
prospects" for this new region, Deutsche Bank analyst Scott Fidel
said in a note to investors.
WellCare noted in a statement that it will now serve Medicaid
recipients across Kentucky. Humana said CareSource will work with
Humana to administer Medicaid benefits using Humana's health-care
provider network in Kentucky.
Louisville-based Humana struck up the alliance with CareSource
earlier this year with an aim of going after an emerging market for
so-called dual-eligible patients who qualify for both Medicaid and
Medicare, the program for the elderly and disabled.
WellCare shares were unchanged in after-hours trade after
slipping 0.5% to close at $55.90 on Thursday. Humana shares were
recently down 1.2% after hours at $73.96 while Aetna shares
recently traded down 1.8% at $41.33.
Write to Jon Kamp at jon.kamp@dowjones.com
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