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Multi-billion-dollar Medicaid contract at stake in legal filing by Aetna Better Health. Insurer asks for review of DHHS selection process.
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Multi-billion-dollar Medicaid contract at stake in legal filing by Aetna Better Health. Insurer asks for review of DHHS selection process.


A dispute over which health insurers are the best options for the state's ambitious Medicaid transformation initiative took another legal step last week.

Aetna Better Health — as expected — re-filed its petition for judicial review in Wake Superior Court.

At stake: three-year PHP contracts for four insurers that are projected to be worth $6 billion a year starting with the 2021-22 fiscal year which begins July 1.

With two optional one-year extensions, a contract could be worth a total of $30 billion.

The state Department of Health and Human Services announced in February 2019 that the four PHPs are Centene (operating as WellCare of N.C.), AmeriHealth Caritas N.C., Blue Cross and Blue Shield of N.C. (operating as Healthy Blue) and UnitedHealth Group.

Aetna, along with two other health groups, has been challenging the legality of DHHS' decision-making process. In particular, Aetna claims it should have been chosen over Blue Cross NC.

On Aug. 25, DHHS said that a judge in the state Office of Administrative Hearings affirmed DHHS' process for selecting the four insurers.

DHHS said Judge Tenisha Jacobs notified the affected parties she granted the department’s request for summary judgment. Jacobs ruled in June 2019 to deny the plaintiffs' request to halt the implementation of transformation, finding they were not likely to succeed on the merits of their claims.

Also on Aug. 25, the three health insurers not chosen by DHHS filed a petition for judicial review in Wake Superior Court.

On Friday, Aetna issued a statement in which it repeated many of the claims it made during the legal dispute.

Those claims now include its allegation that the OAH judge "failed as a matter of law to address the (DHHS) violations of procedural law, as well as its own internal policies and procedures."

"These include conflicts of interest between DHHS and certain awarded carriers, changes in the scoring process by DHHS to benefit certain awarded carriers, and DHHS’ attempt to conceal how scores were changed to benefit particular awarded carriers."

Aetna said its latest filing "seeks to obtain an impartial and objective review of DHHS’ procurement process to ensure that North Carolina’s most vulnerable populations have the most qualified and experienced health benefit plan to help them achieve optimal health outcomes."

Five years of debate

The transition to PHPs is expected to cover between 1.6 million and 1.8 million North Carolina participants.

A key selling point for transformation is focusing on a patient's overall health for those experiencing mental health, substance abuse and developmental disability issues.

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Five years' worth of often-controversial public health and legislative debate culminated July 3 when Democratic Gov. Roy Cooper signed Republican-sponsored legislation that provided pivotal start-up funds.

State health officials told legislators on Aug. 11 they plan to begin open enrollment for the initiative on March 15 in order to launch the program as mandated on July 1.

A joint appeal petition of the DHHS decision was filed in September 2019 by Aetna, Optima and MyHealth by Health Providers, the latter a proposed PHP in which Cone Health, Novant Health Inc., and Wake Forest Baptist Medical Center are three of 12 hospital supporters.

State health secretary Dr. Mandy Cohen stressed to legislators in October 2019 she was confident in how the four PHPs were selected through a scoring process.

“Blue Cross NC has confidence that the bid procurement process was conducted fairly and without bias, and it looks forward to continuing to serve the citizens of North Carolina,” Blue Cross N.C. said in November 2019.

Aetna requested in November 2019 that an administrative law judge void the Blue Cross NC contract.

Lisa Farrell, My Health's president and chief executive, said in August that "the state has not met the General Assembly’s clear directive to include provider-led managed care across the state."

“The state also has failed to fulfill its own well-documented commitments to the federal government and the public.”

Moving ahead

The main launch challenge is getting the four statewide PHPs operational by the enrollment date.

Managed care is a system under which people agree to see only certain doctors or go to certain hospitals, as in a health maintenance organization, or HMO, or a preferred provider organization, or PPO, health-insurance plan.

Under the current Medicaid system, providers are paid on a fee-for-service model administered by DHHS.

By contrast, the PHPs will pay health-care providers a set amount per month for each patient’s costs. There will be a limited number of special-needs individuals who will remain with fee-for-service providers.

The next big rollout step for DHHS is formulating the per-patient rates for providers by November and submitting them to CMS.

DHHS will reimburse the PHPs, and people will be able to choose which PHP they want to sign up for, or a provider will be assigned to them by May 14.

Some of the initial Medicaid transformation funding would go toward patient enrollment-broker contracts, provider credentialing, data analytics and other program-design components.

Blue Cross has said it plans to create 500 jobs for its portion of the transformation.

Centene has committed to creating an East Coast regional headquarters and technology hub in Charlotte with an estimated 6,000 jobs and $1.03 billion capital investment.



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