Medicaid and CHIP Risk-Based Managed Care in 20 States. Experiences Over the Past Decade and Lessons for the Future.. Advantages of Different Plan Types.


In the opinion of state officials, plans with a national presence have many advantages. One advantage is that they have experience in other states, particularly experience with a variety of administrative standards and requirements.

If they can adopt basically the same standards that are the highest out of all their markets, then everybody gets the benefit. (State Official)

On the other hand, state officials said that it is critical for large, national plans to establish a local presence and to learn about the communities they are serving. For instance, one state representative expressed the importance of a local presence for national plans.

There is a way for them to invest in the area that they are serving. They may have their national headquarters outside of the state, but they can still be connected here.

(State Official)

Large MCOs are viewed as often having the infrastructure in place to provide services efficiently, such as a good IT infrastructure. They also can spread their risk across markets and many covered lives.

Even if you’re not making it in [this state] you may be making it somewhere else. You get to cover part of your fixed administrative costs over a large range of lives [by virtue of operating in several states]. (State Official)

By contrast, smaller plans are viewed as possibly suffering from high administrative costs because they cannot benefit from the economies of scale of a large insurer.

Plan representatives from larger plans, especially those with commercial enrollees, expressed the opinion that they have more leverage with providers than smaller plans do because they are able to take advantage of their existing provider networks. One health plan stated that its decision to enter the Medicaid managed care market came from this ability to provide ready access to care through the strength of its provider network.

Plans with commercial enrollees often create a Medicaid-only subsidiary to operate Medicaid managed care. This may evolve through purchasing a previously (sometimes local) public-only plan. Several reasons were given for setting up such a subsidiary. One informant claimed that subsidiaries are formed in Medicaid managed care because of provider taxes by the state on plans.

There is an MCO tax, which is subject only to the Medicaid gross revenues. [By having a separate Medicaid subsidiary] they shelter all the additional sources of revenue that they may have. (State Official)

While large national commercial plans have created Medicaid-only subsidiaries, they may brand them as a national plan in preparation for implementation of the Affordable Care Act.

They are anticipating people moving across different products once the health exchange is up and running; [large insurer] wants to maintain brand identity so they don’t lose people [who move between Medicaid and the exchange plans]. (State Official)

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