New rules for insuring state's poor cause flurry of competition

Aug 5, 2011

"There's a lot of courting going on ..."

OLYMPIA, Wash. – In Washington, there are more people on Medicaid than there are kids in public school – 1.2 million. And that number will grow significantly in 2014 when the new federal health care overhaul kicks-in.

The expansion has triggered a high-stakes competition for state contracts to provide Medicaid coverage.

For the past decade, two comparatively small insurance companies have handled the bulk of that business in Washington. But now major national insurers are looking to get into the state as insuring poor people can be profitable.

Big business

At the Carolyn Downs Family Medical Clinic in Seattle, Dr. Peggy Eaton primarily sees patients who are low-income. A lot of them carry a Community Health Plan of Washington insurance card. It's one of the leading providers of managed care to Medicaid clients in Washington.

This is big business. Last year, Community Health took in more than $400 million in Medicaid payments. CEO Lance Hunsinger is proud his company grew out a network of clinics – like Carolyn Downs.

"We're the only not-for-profit health plan working with the state state-wide and we’ve been doing that for a long time," Hunsinger says. "Being a not-for-profit all of the resources stay in our community."

For the past decade, Community Health and Molina Healthcare, a now for-profit California company, have been the two major players in Medicaid managed care in Washington. But that may soon change.

A $1.5 billion program

This fall, for the first time in a decade, Washington will throw open the doors to competition. The state will invite bids from companies that want a piece of Washington's $1.5 billion a year Medicaid managed care program.

Several large, out-of-state for-profit health insurers have been reaching out to lawmakers and doctor networks.

"There's a lot of courting going on," says State Senator Karen Keiser, a Democrat. She chairs the Senate Health Care Committee.

She welcomes the competition – in fact the state legislature is already counting on $60 million in savings over the next two years from cheaper Medicaid contracts. But Keiser is also wary.

"I don't want to be sucked in by someone offering gee whiz promises for the first two years and then all of a sudden things change," she explains.

Controversial move

Washington beware says Dr. Joseph Zobian. He's an eye surgeon in Hawaii. Zobian claims after his state contracted with two major for-profit carriers he didn't get paid for six months.

"When we don't get paid by these national companies and they're holding back on our reimbursement that money is staying in their coffers and being paid out in dividends and profits," Zobian says.

Zobian believes the way companies make a profit insuring poor people is by shorting doctors or denying care.

"They will make their profits at the expense of the community," he says.

One of the companies Dr. Zobian complains about is United Healthcare, the largest health insurance carrier in the country. United is expected to submit a bid here.

"We're very interested in the state of Washington," says Jim Donovan. He's is in charge of business development at United Healthcare.

The for-profit argument

He contests the idea that profits and good care are incompatible. Donovan points out there are plenty of for-profit hospitals around the country.

"We're trying to deliver more services for moms and kids," he says. "For pregnant women we're trying to get more frequent pre-natal care and for children we're trying to get immunizations and preventive care services that they may not be getting today."

If newcomers like United win a piece of the action in Washington, it could have major implications for incumbent carriers Molina and Community Health Plan. CEO Lance Hunsinger says he welcomes the competition, but fires this shot across the bow.

"I just hope no one comes in and leaves anybody without access or destroys what has been built over the years."

The stakes are high for both insurance companies and low-income patients. In 2014, another 400,000 Washingtonians will become eligible for Medicaid.

On the Web:

Copyright 2011 Northwest News Network