Iowa's $7 billion privatized Medicaid program will work with 3 health insurance companies

Iowa will soon have three health insurance companies to help run its Medicaid program. 

On Wednesday, the Iowa Department of Health and Human Services announced the intent to award managed care contracts to two winning bidders: Amerigroup Iowa and Molina Healthcare of Iowa. Iowa Total Care currently holds a managed care contract with Iowa that lasts through 2025. 

Starting next year, these for-profit companies will help manage the joint federal and state program that finances roughly $7 billion in health care annually for nearly 790,000 Iowans who are lower income or have disabilities.

The state's decision to privatize the Medicaid system in 2016 has been a controversial one. Over the years, Medicaid enrollees and health care providers have reported reduced services or challenges with receiving accurate reimbursement. The abrupt exit of two carriers within the first years of privatization also caused turmoil for its members.

But the head the state program says this round of contract negotiations includes steps to mitigate any future issues within the program. 

"From when we first implemented managed care in 2016 to now, we've taken a lot of lessons learned," Iowa Medicaid Director Elizabeth Matney said in an interview with the Des Moines Register.

What's next for Iowa Medicaid?

There will be no immediate changes for Iowa Medicaid members with this week's announcement. Four-year contracts with these managed care organizations begin July 1, 2023.

Medicaid members will be distributed among the three insurers as equitably as possible, Matney told reporters Wednesday. She did not say whether members could be assigned a new managed care organization, but noted member preference will play a role in the upcoming transition. 

Matney said state officials are evaluating Medicaid provider networks to ensure members won't have to seek a new provider if they transition to a new organization. 

"We really want members to be able to make choices based on something other than which provider is in each one of the managed care organizations network," she said.

Though there's more optimism among critics in this latest round of contract negotiations, some said they had lingering concerns about the impact a transition will have on Medicaid members.

“I do believe the management team at Iowa HHS will do a better job of helping with this transition to adding a third (managed care organization) than we have seen in the past,” said state Sen. Pam Jochum, a Democrat from Dubuque. “But having said that, it will still be a tremendous upheaval for providers, for Medicaid members and for their families.”

A Medicaid member town hall meeting with state officials is scheduled for Thursday, Sept. 8. Details can be found on the Department of Human Service's website.

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About the three companies working with Iowa Medicaid

Amerigroup, which currently holds a managed care contract with the state, is the only insurer that has been with the Medicaid program since the beginning. The company is a subsidiary of Indiana-based Elevance Health (formerly known as Anthem), which provides Medicaid coverage for 11 million members in 25 states.

Iowa Total Care is also already working within the program. Its contract ends in 2025. The Missouri-based subsidiary of Centene joined the program in mid-2019.

On Wednesday, officials at Iowa Total Care said it will continue to be part of the Iowa Medicaid program, regardless of the state's intent to award new contracts.

"We look forward to continuing our partnership with the state, health care providers and community partners in delivering quality, effective care to our members," officials said in a statement.

Molina Healthcare, headquartered in California, provides managed care services to roughly 5.2 million Medicaid and Medicare members through state insurance marketplaces. 

In a statement Wednesday, Iowa HHS officials said they will be working with Molina on their readiness to join the program, and will continue to work with Amerigroup and Iowa Total Care to continue to provide services to members. 

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How were winning bids selected?

Five potential vendors submitted bids after the state posted the request for proposals in February. 

State officials said in Wednesday's announcement that the process to evaluate these proposals included "a multi-disciplinary team across the HHS agency" who work in a number of initiatives relevant to the managed care program.

According to a summary review of the bidders' proposals provided to the Register, Molina received the highest score among the five vendors, followed second by Amerigroup.

The state noted that Molina's proposal showed advanced preparation, including documented engagement with providers and stakeholders as well as proposed staff positions that went beyond the state's initial bid requirements.

Last year, the company had announced the hiring of Jennifer Vermeer as chief executive officer of Molina Healthcare of Iowa. Vermeer was the Iowa Medicaid director from 2008 to 2014, and most recently served as an executive at the University of Iowa Health Care.

In July, Molina Healthcare faced $1 million in penalties from California for failure to resolve provider disputes in a timely manner. To offset potential claims issues, Matney said Iowa is establishing strong oversight within the program to ensure insurers are meeting timeliness standards on reimbursements. 

State officials said in a statement Molina was selected for the company's "deep understanding" of managed care, especially its understanding of individuals who rely on long-term services and supports, a Medicaid waiver that covers individuals with the most complex health conditions. 

"Having Molina working alongside Amerigroup and Iowa Total Care will position the state well to deliver on critical program improvements," state officials said in a statement.

Officials did not specify why the other bidders — Aetna Health of Iowa, CareSource Iowa and UCare Iowa — were not selected. 

However, in the review of the bidders' proposals, officials highlighted weakness within individual applications to join the program. Reasons companies were docked points included limited managed care experience or lack of details in how initiatives would be deployed in Iowa.

State officials say the Medicaid program has improved

It's been a little more than a year since Matney took the helm as director of the Iowa Medicaid program. In that time, Matney said program administrators are listening to members' and providers' feedback "like we never have before," and taking those experiences to build a strategy to improve Iowa Medicaid. 

“Since Day One, Director Matney has focused on tangible improvements for the Medicaid program,” said Kelly Garcia, director of the Iowa Department of Health and Human Services. "She has charted out a vision to identify and address gaps, to focus on outcomes, to improve infrastructure and operations and to promote transparency."

Garcia continued, "Under Director Matney’s leadership the Iowa Medicaid program is really addressing the needs heard from the Iowans who rely on us. Making sure those we serve and those who advocate on their behalf are embedded in the conversation is the right thing to do and the work we’re doing reflects that.”

After a troubled history, state officials say they've included more checks on the program

Then-Gov. Terry Branstad announced his decision to switch to private management of the Medicaid program in early 2015, and despite intense pushback from Democrats and other critics, moved forward with the plan the following year. 

Less than two years after rollout, AmeriHealth Caritas, one of the three national companies picked to manage Iowans health care, withdrew from the giant program.

Then in 2019, another managed care organization — UnitedHealthcare — quit after company officials disputed its contract with state leadership. Iowa Total Care took the helm shortly after the exit. 

The "lessons learned" from these departures included creating a bid process and onboarding process for new managed care organizations that is robust to mitigate future issues with members getting services and providers being paid, Matney said.

That includes rigorous testing of claims submissions for services provided to members. Matney said prior to the 2016 implementation of managed care, program administrators learned they needed more provider input. This time around, Matney said the state is "going to be pushing hard and knocking on a lot of doors to get that participation." 

"From the initial rollout of managed care, we really did learn a lot about oversight and a lot about relationship development," Matney said. "But we also learned a lot about what the program needs from the perspective of really solid rate development — not just for the managed care organizations, but for providers as well."

Both AmeriHealth and UnitedHealthcare complained about the loss of hundreds of millions of dollars managing health care for thousands of fragile Iowans. While it's not the state's goal to help make companies rich off the Medicaid program, Matney said state leaders "do need to have everything in place so that they are financially stable."

Matney said she's also working to build transparent relationships with these insurers, so the state can be supportive as these companies manage often complex health benefits for Iowans.

"Ultimately, their success is our success," Matney said. 

Michaela Ramm covers health care for the Des Moines Register. She can be reached at mramm@registermedia.com, at (319) 339-7354 or on Twitter at @Michaela_Ramm.