Tennessee's three incumbent Medicaid managed care organizations won the latest rebid contracts, although at least one of them may end up with fewer members and revenue.
UnitedHealth, BlueCross BlueShield of Tennessee and WellPoint's Amerigroup are all the current MCOs for Tennessee's 1.2 million Medicaid beneficiaries, sharing more than $5 billion in revenue, and they beat out four other insurers vying for the contracts (Aetna, Cariten Health Plan, Centene and Cigna).
But the state is set to evenly divide membership for the three insurers across three regions, and that means United, which currently has a 49 percent market share in the program across the state, is likely to see membership and revenue decline, as Citi Research analyst Carl McDonald noted in a report on the RFP announcement.
"This is consistent with the theme that Medicaid RFPs are almost never good for an incumbent, especially one controlling half the market share," McDonald wrote.
With about 572,000 Medicaid members in Tennessee, United has almost half the market share, earning more than $2.5 billion in revenue and $40 million in gross profits last year, while BlueCross of Tennessee currently has about 388,000 members (bringing in just about $30 million in gross profits last year) and WellPoint's Amerigroup has about 200,000 members and earned $15.7 million in gross profits last year.
Amerigroup only covers members in the middle region, having a 17 percent share of the state membership, and there are only two plans in each region. In 2015, when the next contracts start and each of three regions has three plans with roughly equal membership, Amerigroup and BlueCross will see increases in market share while United will likely see its share fall to 33 percent.
"This is the best case scenario for United," McDonald estimates, "but it would still cost them approximately 180,000 lives, and $800 million in revenue."
All of the plans, which don't provide pharmacy or dental benefits, are facing medical cost pressures, though.
While Tennessee Medicaid does not set a minimum medical loss ratio for managed care plans, the plans' ratios look on track to increase over last year, from an average of 81.2 percent to 83.7 percent, according to McDonald.
After an 80.6 percent medical loss ratio in 2012, United's year-to-date MLR is hovering just below 85 percent, while Blue Cross's 81.8 percent 2012 MLR is currently at 82.4 percent and Amerigroup's 81.8 percent 2012 MLR is at just above 83 percent.
The contracts are expected to take effect through 2015, with the middle region scheduled to start in January of that year. Beneficiaries moving to a new plan will have 45 days to make a selection and all of the beneficiaries can change during an annual enrollment period.