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Aetna, UnitedHealth Take On California’s Medicaid Program

Both Aetna and UnitedHealth is joining California's Medicaid Program, specifically its managed care plans.

By Vera Gruessner

The two major health payers UnitedHealth and Aetna plan to join California’s Medicaid program called Medi-Cal managed care, according to Kaiser Health News. Aetna and UnitedHealth will serve residents of the San Diego and Sacramento counties. California’s Medicaid program serves as many as 13.4 million people with the majority participating in managed care plans.

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Due to the federal funding provided by the Affordable Care Act, the state of California has been able to expand their Medicaid program including eligibility requirements for this type of coverage. This has led to a 40 percent increase in enrollment since the program now allows single, childless adults and those with slightly higher incomes than before.

Instead of using a fee-for-service approach, the managed care population within the state’s Medicaid program pays a specific amount for each beneficiary receiving more comprehensive medical care.

Payers find operating through the Medi-Cal managed care program a difficult process because California falls into the bottom 10 of states when it comes to spending. It spends $6,000 per enrollee every year, which makes it harder for payers to manage provider reimbursement.

Part of the reason the national health payer Aetna has chosen to participate in California’s Medicaid program is due to it being the most populated state and includes the largest Medicaid market in the country, said Aetna spokesperson Anjie Coplin.

“We are always looking for opportunities to serve Medicaid beneficiaries, and California is a logical next market,” Coplin told the news source. “It has always been on our radar as a place to grow.”

The health plan Aetna Better Health is looking to take on about 150,000 Medicaid managed care beneficiaries in California. UnitedHealth, on the other hand, already has offices located in San Diego and Sacramento while also serving as many as 3.7 million California residents either through Medicare or employer-sponsored health plans.

“We already know the providers and the delivery system,” UnitedHealth spokesman Tyler Mason told the news source. “Combine that with the experience we have nationwide working in these programs, and it bodes well for us being competitive in these counties.”

UnitedHealth has strategically decided to undertake this market while at the same time moving its health plans out of several state health insurance exchanges including Covered California. Both Aetna and UnitedHealth would begin serving the California Medicaid program beginning in July 2017.

Many have been concerned that UnitedHealth’s move out of the exchanges could bring other payers to drop out of this marketplace.

“UnitedHealthcare doesn’t feel like it can stay profitable in that group of business and it would indicate that others might be struggling as well,” Merrill Matthews, a resident scholar at the Institute for Policy Innovation, told

“Several insurers came out and said that they’re still committed to being here, but it might indicate the death spiral that we’re concerned about in the exchanges. There’s been a long-running concern that what the exchanges will ultimately be is the place where the people who are the sickest and need subsidies from the federal government will reside.”

“The question comes about – would even some of those people be able to buy cheaper insurance, even considering the subsidies, outside of the exchange if a death spiral initiates. If so, does that ultimately make the exchanges unworkable?”

While Aetna is also seeing a lot of red flags from the Department of Justice when it comes to its sought-after health insurance merger, this move to serve the California Medicaid market may bring more benefit to the payer. UnitedHealth’s profit losses on the state exchanges may also be left behind if it sees a financial boost from serving this state’s Medicaid managed care beneficiaries.


Dig Deeper:

Does Blocking Health Insurance Mergers Impact ACA Exchanges?

NY’s Medicaid Payment Reforms Aim to Reduce Hospital Use


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