North Carolina Budget Impasse Is a Setback for Health Insurers
(Bloomberg) -- A months-long budget standoff in North Carolina has turned into a headache for health-insurance companies counting on $6 billion in contracts from an ambitious revamp of the state’s Medicaid program.
A high-profile plan to switch 1.5 million North Carolinians into private Medicaid managed-care health plans was supposed to begin in November. The effort to transform the state’s safety net for low-income residents drew national attention for innovative experiments to promote preventive health and address social needs.
But the state has put the plan on hold indefinitely with the state’s Republican-controlled legislature and Democratic governor at an impasse. The two sides were unable to reach a deal when lawmakers convened for a one-day session in January. They’re not scheduled to meet again until late April.
At the heart of the dispute is a fight over whether the state should expand eligibility for Medicaid, as 36 states have done under the Affordable Care Act. Republicans oppose the idea, while Governor Roy Cooper has made it a priority and vetoed proposals that don’t include the expansion.
The deadlock has caused some companies awarded contracts last year to rein in their financial forecasts and, in some cases, put operations on hold.
Centene Corp. told investors in December it was planning for its North Carolina contract to begin on Oct. 1, 2020. The delay reduced the insurer’s forecast for 2020 revenue by $500 million and shaved 6 cents from its projected earnings per share for the year, it said at the time. Centene expects to gain 200,000 Medicaid members from the contract. It will report its latest quarterly results on Tuesday.
UnitedHealth Group Inc. had included the North Carolina Medicaid contract in its outlook for this year, with the assumption that the program would begin in mid-2020, executives said on a call with analysts Jan. 15. However, a delay until 2021 “would not affect our expectations for the year,” said Chief Executive Officer Dave Wichmann.
Anthem Inc., which is working with Blue Cross Blue Shield of North Carolina, is preparing for a delay until next year, CEO Gail Boudreaux said on an earnings call last week. “Based on where we are sitting today, it’s our expectation that the business won’t be going live until 2021,” she said.
Medicaid, the public health-insurance program for low-income Americans jointly funded by the federal and state governments, has become an increasingly important business for health insurers. States paid more than $265 billion to privately run Medicaid health plans in 2018, according to data from the Kaiser Family Foundation, and six large for-profit insurers accounted for 44% of the market in 2017.
It’s unclear how long the health plans will have to wait for North Carolina’s plan to move forward. State officials aren’t committing to any timeframe.
“The longer the delay, lots of things get stale and we’ll have to redo more things as we’re preparing to go live,” said Dave Richard, deputy secretary for NC Medicaid. Some Medicaid beneficiaries had already selected private health plans that are now on hold, Richard said.
“What we don’t want to do is start all of those things again and have providers and others spending money that they don’t need to until we know the date that we have a budget,” he said.
Cityblock Health, a venture-backed startup working with the state Blue Cross Blue Shield plan to improve care for high-cost patients, had opened several new locations in Greensboro, Charlotte, and elsewhere last fall in anticipation of the new Medicaid program.
In mid-January, with the funding still on hold, the company said it would pause most of its operations in the state and keep locations open “with minimal staff.” One of Cityblock’s board members, Sidewalk Labs Chairman Dan Doctoroff, was CEO of Bloomberg News parent Bloomberg LP until 2014.
Still, health care companies have little doubt North Carolina will eventually make the switch, said Mark McClellan, a former federal health official and director of the Duke-Margolis Center for Health Policy.
“The reason that the plans are sticking with it, even though this is definitely not what they would prefer, sticking with their investments in North Carolina, is they know this is going to happen,” McClellan said. “It’s just a question of when and how exactly these Medicaid expansion issues are going to get worked out.”
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