California Medicaid Acquisition a Sign of the Times, as Managed Care Goes After Growth

This week’s announcement that Blue Shield of California was acquiring a Medicaid carrier is consistent with observations that the fruits of healthcare reform have gone to larger players, a trend that is likely to continue.

Blue Shield of California, which ranks as the fourth-largest health carrier by revenue, agreed Monday to purchase Care1st Health Plan for an undisclosed sum, pending regulatory approval. Blue Shield currently covers 3.4 million people but does not have a Medi-Cal, or Medicaid plan. Care1st Medicaid business is growing rapidly due to the Affordable Care Act and had 473,000 Medicaid members as of September 30, 2014.

In states like California that elected to expand Medicaid under the ACA, enrollment in the plan is a huge source of growth potential for commercial plans that manage such plans. According the a survey released this fall by Kaiser Family Foundation, Medicaid enrollment growth is expected to rise 18% in the 28 states and District of Columbia that agreed to expand enrollment criteria, with federal funds picking up all of the added cost through 2017. Medicaid spending in these states will rise 18.3%, the Kaiser survey found.

A Kaiser study of Medicaid managed care, now the dominant model for risk-management, found that in 18 states that release managed care organization data, local and regional MCOs account for over 55% of Medicaid MCO enrollment, and MCOs owned by multi-state parent companies account for almost 45%. Six publicly traded firms—WellPoint, UnitedHealth Group, Centene, Molina, WellCare and Health Net—control more than a third of all Medicaid MCO enrollment in these states.

Healthcare consultant Steve Valentine told Modern Healthcare that the Care1st acquisition would help BlueShield “get a bigger critical mass,” and also improves the insurer’s delivery network. He predicted that more smaller Medicaid plans would sell to larger plans, which have the platform and technical resources for expansion.

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