Aetna and CareSource protest how Kansas awarded KanCare MCO contracts, KORA lawsuit filed

Two managed care organizations are formally protesting how Kansas officials awarded KanCare MCO contracts.

Aetna and CareSource filed protests with the Kansas Department of Administration after the state awarded contracts to three of their competitors: Healthy Blue, Sunflower and United. Aetna and CareSource were among the losing bidders that responded to the KanCare MCO request for proposals.

Aetna is also suing the state in Shawnee County District Court in an attempt to get documents from the contracting process after public records requests were largely denied. Meanwhile, lawmakers have asked Attorney General Kris Kobach for an opinion on whether a KanCare oversight committee has the legal right to view those documents while the administrative protests are ongoing.

While the protest process continues, state officials are proceeding with the assumption that the new contracts will start as planned on Jan. 1, 2025.

Who are the KanCare MCOs?

KanCare is the state's privatized Medicaid program that serves about 458,000 people. The state contracts with managed care organizations, or MCOs. Those contracts are the most lucrative deals in state government, with the old MCO contracts worth nearly $4 billion combined.

Democratic Gov. Laura Kelly's administration was in charge of rebidding the contracts through a request for proposals after the Republican-led Legislature delayed it until after Kelly's reelection.

The state announced in May that it had awarded MCO contracts to two incumbents while dropping a third incumbent contractor and replacing it with a new one.

Incumbent contractors Sunflower Health Plan, which is a subsidiary of Centene, and United Healthcare Community Plan got new contracts. The third contract went to Healthy Blue, a collaboration of Blue Cross and Blue Shield of Kansas, Blue Cross and Blue Shield of Kansas City and Anthem Partnership Holding Co.

That left four bidders, including incumbent Aetna, without contracts.

Two losing bidders file protests

Aetna and CareSource, one of the other losing bidders, have filed protests.

The protest filings aren't considered public records by the Department of Administration while the procurement process remains open. However, they were made public by the organizations through testimony to the Legislature's KanCare oversight committee on Monday.

Adam Proffitt, Department of Administration secretary, acknowledged the protests but told lawmakers he wouldn't go into specifics because they remained active "and I want to maintain the integrity of the process." Agency staff "are looking to see what it is from the bidders' perspective that they feel was missed during the procurement process."

The final administrative decision on the protests is expected in early to mid-July. It will be made by the director of purchases without Proffitt's involvement to prevent any "undue influence." At that point, if their protests are unsuccessful, Aetna and CareSource could then go to court for judicial review.

Proffitt said the Department of Administration advised the Kansas Department of Health and Environment and the Kansas Department for Aging and Disability Services to move forward with preparing for the new contracts, and they can pivot if necessary.

"We feel that that is in the best interest of those that we are serving on the KanCare program to ensure continuity of operations, just continue to move forward with the three bidders that were selected," he said.

Why are Aetna and CareSource protesting MCO contracts?

Contracting documents show the seven bidders were scored based on their responses to the RFP. Sunflower had the highest score, followed by United. But Aetna and Healthy Blue had a tie score for third, while Care Source wasn't far behind.

Jane Brown, CEO of Aetna Better Health of Kansas, took issue with how the tie was broken, ousting "an incumbent who is, at least as far as I'm aware, well regarded by constituents, by members, by providers."

"It is our position that a procurement process should be fair, equitable and transparent," Brown said. "The basis for our protest is simple: one cannot make up grading criteria after a bid has already been opened and graded."

She alleged that the tiebreaker was "made on the basis of a capricious and arbitrary and seemingly cherrypicked set of standards that are not visible or transparent to us."

Among other issues, Aetna also alleges a conflict of interest in favor of Healthy Blue after its coalition members hired recent state employees, including the state's former Medicaid director, KDHE's former senior director of public affairs, Kelly's former chief counsel and the previous chief of staff for the House minority leader.

Chad Moore, market president for the nonprofit CareSource Kansas, also raised transparency and process concerns. But price was the biggest issue he raised.

He said the CareSource bid was close to the cost estimate set by the state actuary and alleged that competitors underbid the contract.

"What we found in what has been made available is that two of the plans dramatically underbid this contract," Moore said.

He alleged that Healthy Blue in particular underbid by the equivalent of "hundreds of millions of dollars" over the life of the contract. He also suggested that underbidding the contracts jeopardizes the Legislature's rate increases for underpaid providers, worth $60 million to $80 million.

"These are for-profit plans, right?" Moore said. "They are tasked with delivering value to shareholders and will not let 100-plus million dollars go unspoken for."

Public records dispute heads to court

Aetna Better Health of Kansas Inc. filed a lawsuit on Friday in Shawnee County District Court against the Kansas Department for Aging and Disability Services, the Kansas Department of Administration, the Kansas Department of Health and Environment and the Office of the Governor.

Aetna alleges that the state has acted in "bad faith" and violated the Kansas Open Records Act by largely denying records requests related to the KanCare contracts. Aetna filed those records requests in an attempt to get more information on how the tiebreaker criteria was determined and the scoring by individual question.

"This is about transparency, and this has not been a transparent process," Brown said.

Legislators on the oversight committee likewise appeared frustrated that they also couldn't get more detailed information from the executive branch on how the contracts were awarded.

"We have a responsibility to the state of Kansas and over 450,000 Medicaid folks, and it would be nice to have some kind of fact," said Rep. Will Carpenter, R-El Dorado.

Janet Stanek, the KDHE secretary, said one reason for there being limited public information is because of the ongoing bid protest. She also defended the contract procurement.

"I don't know what else to tell you other than we're confident in the process that was used, no matter what's being said today," Stanek said.

Carpenter motioned to ask the attorney general's office for a formal legal opinion on what contract procurement documents are available at this point in time to the oversight committee. The motion passed on a voice vote with no official vote tally, but it appeared to be all the Republicans in favor and all the Democrats opposed.

"I'd like to know what we actually have in information available to us as the KanCare oversight committee involving this entire process," Carpenter said.

Amerigroup successor company is part of new contractor

Legislators expressed frustration with the awarding of a contract to Healthy Blue because one if its collaborators is Elevance Health, formerly known as Anthem, which was previously known as WellPoint when it acquired Amerigroup.

Amerigroup was one of the original three contractors in 2013 when the state Medicaid program was privatized. Its contract was not renewed in 2018 when contracts were rebid. Amerigroup went to court to challenge the contract awards, but lost its case.

Brown alleged that Aetna's past compliance issues were used against them while Amerigroup's were ignored.

Lawmakers also raised concerns over a conflict that doesn't appear to have been previously reported publicly. Legislators alleged that Amerigroup owed millions of dollars to providers when it exited, and Proffitt said there was a settlement of the issue.

"It was their exit that was so poorly done," said Rep. Susan Concannon, R-Beloit. "I cannot imagine why on earth they would ever be considered to be brought back in, and that right there should have eliminated them."

She said she had not previously "connected the dots ... that that is the same company and I'm just appalled that we are reentering into a contract with the way that they behaved when they exited."

Jason Alatidd is a Statehouse reporter for The Topeka Capital-Journal. He can be reached by email at jalatidd@gannett.com. Follow him on X @Jason_Alatidd.

This article originally appeared on Topeka Capital-Journal: Aetna and CareSource protest how Kansas awarded KanCare MCO contracts