Texas Medicaid shake-up could force 1.8 million to switch plans

A major shake-up in Texas's Medicaid contract awards could threaten the existence of some hospital-owned plans, The Texas Tribune reported April 18. 

The prospective awards for the state's STAR Medicaid and CHIP programs have not been finalized. If they are awarded as forecasted by the state's health and human services department, 1.8 million people could be forced to switch to a new health plan, according to The Texas Tribune. 

Fort Worth-based Cook Children's Health Plan, Houston-based Texas Children's Health Plan and Corpus Christi-based Driscoll Children's Health Plan were all denied contracts in the tentative award process. 

Executives at Cook Children's and Driscoll Health told The Texas Tribune their health plans will likely shut down if they are not awarded STAR and CHIP contracts from the state. Hospital finances are not endangered by the contract award, the executives said.  

Texas's STAR and CHIP program contracts comprise the majority of Medicaid enrollees in the state. The STAR program serves pregnant women, low-income children and their caretakers, according to The Texas Tribune. 

Texas has not expanded Medicaid to all low-income adults. CHIP provides coverage to children whose families do not qualify for Medicaid. 

The tentative contract awards are the first the state has completed in 12 years, The Texas Tribune reported. It canceled two previous procurement processes. New procurement rules limited the number of managed care organizations that can operate in the state's 13 service areas to four. It also implemented a new scoring and weighting system, according to The Texas Tribune. 

Blue Cross Blue Shield of Texas, Molina Healthcare, Aetna and UnitedHealthcare were awarded the majority of the state's tentative contracts. Just one service area will keep the four MCOs it currently has, according to the Tribune, meaning 1.8 million people could switch MCOs.  

Centene, which currently holds contracts in nine of the state's 13 service areas, picked up just three in the tentative award. 

At an investor conference on March 12, Centene CEO Sarah London said Centene plans to challenge the awards. 

"The biggest concern for the program overall is the idea that the results are going to force 1.8 million members in Texas, which is a state that has a very high choice rate, to choose a different plan," Ms. London said. "We don't think that's the right thing for the Medicaid population in Texas." 

At least eight plans have filed challenges to the state's tentative awards and at least four have said they are considering legal action if their administrative protests are not successful, The Texas Tribune reported. 

A group of Texas state lawmakers urged the state to delay contract awards until next year, to give lawmakers a chance to amend the criteria the state uses to award contracts. 

Texas has the third-largest Medicaid population in the U.S., at 4.4 million in 2023, according to KFF. California, the state with the largest Medicaid enrollment, awarded new Medicaid contracts in 2022, a move which would have forced 2.2 million enrollees to switch plans. The state later reversed course, awarding contracts to several additional MCOs left out of its original awards. 

Read The Texas Tribune's full report here. 

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