Blues Plans Partner, Buy to Get Medicaid-Specific Expertise Page 1 of 2

From Health Plan Weekly

Blues Plans Partner, Buy to Get Medicaid-

Specific Expertise
- February 5, 2018 - Volume 28 Issue 5

More and more Blue Cross and Blue Shield plans are starting to compete for Medicaid managed care business as
they see potential growth opportunities in that arena. To do so, many plans are renting capabilities or buying
companies that already operate in the Medicaid space, rather than developing the infrastructure in-house.

Over a decade ago, several Blues plans attempted to break into Medicaid managed care, but failed, with some
losing money in the process, says Bob Atlas, president of health care strategy consulting firm EBG Advisors. But as
competition for commercial business tightens and states continue to expand their Medicaid programs under the
Affordable Care Act, plans are reconsidering, he says.

“Blues organizations that are looking to grow have had to take a second look at the Medicaid opportunity, and they
are recognizing what’s going to be required to succeed,” Atlas tells AIS Health.

Therefore, he says, Blues plans are turning to partnerships to obtain Medicaid-specific capabilities they haven’t
developed in-house. Amerigroup Corp. and the AmeriHealth Caritas Family of Companies, both Blues-owned, offer
that expertise to other Blues plans.

“I’m not saying that partnering alone is the only way for Blues plans to go,” Atlas says. But he adds that Amerigroup
and AmeriHealth understand the Medicaid business.

Blues Partner on Medicaid

Anthem, Inc.’s predecessor, WellPoint, Inc., bought Amerigroup Corp. for $4.46 billion in 2012, more than doubling
its capabilities in Medicaid managed care. Independence Blue Cross (IBC) joined with Blue Cross Blue Shield of
2011 to purchase the remaining stake in AmeriHealth Caritas, which now participates in Medicaid in several states
and also has partnered with Blues plans on Medicaid programs.

Partnerships are an increasingly appealing way of entering the Medicaid managed care market. For example,
BlueCross BlueShield of Western New York said in December that it is using its existing Amerigroup partnership to
expand Medicaid operations into Niagara and Genesee counties. “Amerigroup brings national Medicaid expertise to
the table, and blends it with our health plan’s long-standing, local presence,” spokesperson Kyle Rogers tells AIS
Health. Amerigroup provides back-office services and programs tailored specifically to the Medicaid population, he
says.

The western New York Blues plan already insures about 31,000 members in Child Health Plus and another 28,500
members in Medicaid managed care as part of its partnership with Amerigroup, Rogers says, adding that the insurer
is hoping to lure many of the 45,500 Medicaid beneficiaries in Niagara and Genesee counties.

Amerigroup landed another partnership in January: Blue Cross and Blue Shield of Minnesota said it had partnered
with Amerigroup to handle back-office management for its Blue Plus Medicaid HMO, which covers 310,000 people.

Florida Blue Chooses AmeriHealth

Blues plans looking to partner on Medicaid also have turned to AmeriHealth Caritas or have sought to purchase
insurers that already were established in the Medicaid program. For example, AmeriHealth Caritas joined with
Florida Blue in 2011 to form Florida True Health. The joint venture acquired Prestige Health Choice, a Florida
Medicaid health plan, in 2015. Prestige currently serves Medicaid members in 55 of Florida’s 67 counties.

In addition, Blue Shield of California bought Care1st Health Plan in 2015, representing what Atlas says is the plan’s
first foray into California’s Medicaid program. At the time of the acquisition, Care1st covered 473,000 Medicaid
members and also offered Medicare Advantage HMO and Special Needs Plans.

https://aishealth.com/print/53451 3/1/2018
Blues Plans Partner, Buy to Get Medicaid-Specific Expertise Page 2 of 2

Medicaid Has Special Challenges

These partnerships, joint ventures and acquisitions all reflect the challenges of running a successful Medicaid
business, Atlas says. In the past, he says, Blues plans jumped into Medicaid, “thinking, ‘Here’s another opportunity.’
What some of them discovered is it’s a very different kind of enterprise — how you engage with beneficiaries and
what kinds of services get consumed.” Provider contracting also is very different in Medicaid, since it mainly consists
of low capitated rates.

And “contracting [in Medicaid] can be very lucrative one year, but changes can take that away,” Atlas says. “If plans
are making a lot of money off of Medicaid there will be a sure-fire reaction from the payer — it can be a bit of a roller
coaster.”

All these factors ultimately spooked some Blues plans. “In the early days, a lot of Blues plans essentially failed at
Medicaid — they didn’t appreciate all the adjustments they had to make to succeed in that business,” Atlas says.
Meanwhile, plans such as Amerigroup and Centene Corp. excelled.

Not all Blues plans that are active in the Medicaid space rely on partnerships with other insurers. For example,
BlueCross BlueShield of Tennessee has participated in the TennCare Medicaid managed care program for more
than two decades, and is the largest plan, with more than 529,000 members.

Health Care Service Corp. offers Medicaid coverage through its Blues subsidiaries in Illinois, Texas and New
Mexico. In January, Blue Cross Blue Shield of New Mexico won a new five-year contract from the state’s Human
Services Department for Medicaid managed care.

Anthem Expands in Wisconsin

In Wisconsin, Anthem is expanding its Medicaid plan to seven additional counties, making it the first Medicaid plan
to offer coverage options across the entire state.

And, Anthem itself is looking to capitalize on the brand strength brought by the Blue Cross Blue Shield name.
Anthem said in December that Medicaid MCO Amerigroup Nevada would rebrand to Anthem Blue Cross and Blue
Shield Healthcare Solutions as of Feb. 1.

“Amerigroup Nevada has been serving Medicaid members since 2009, and there are some non-Medicaid members
who have been insured by Anthem Blue Cross and Blue Shield, which has been serving state residents for nearly
50 years,” says President Eric Lloyd.

For more information, Contact Atlas at batlas@ebgadvisors.com, Rogers at rogers.kyle@healthnow.org and Lloyd
via Amerigroup spokesperson Olga Gallardo at olga.gallardo@amerigroup.com.

by Jane Anderson

Find this article at:: https://aishealth.com/archive/nhpw020518-40

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