Louisiana Official Rejects Aetna, Coventry Medicaid Protests

A state of Louisiana health official has rejected protests from insurers Aetna Inc. (AET) and Coventry Health Care Inc. (CVH) after those companies weren't selected last month to coordinate service for nearly 900,000 Medicaid recipients in the state.

The Louisiana Department of Health and Hospitals recommended five companies--Amerigroup Corp. (AGP), Centene Corp. (CNC), UnitedHealth Group Inc. (UNH) plus two private firms--for Medicaid contracts in arrangements that could add up to $2 billion in annual revenue for the managed-care industry. Aetna and Coventry each raised issues with the process and how applications were scored, but Bruce Greenstein, secretary for the Health and Hospitals department, rejected some arguments and largely affirmed how proposals were scored.

In one case, he agreed to award Aetna some extra points for a review on financial suitability and sustainability, but said this doesn't change the outcome. Greenstein addressed the companies' protests in separate letters dated Friday.

An Aetna spokesman said Tuesday the company is in the process of reviewing Greenstein's response and didn't have a public comment. A Coventry spokesman couldn't be reached for immediate comment.

According to Lisa Faust, a spokeswoman for the Louisiana department, Coventry and Aetna can appeal Greenstein's decision to the state's Commissioner of Administration.

The contracts with the winning companies still aren't finalized. They remain subject to steps such as thorough readiness reviews and approval by the Division of Administration, Faust said.

Amerigroup, Centene's Louisiana Healthcare Connections unit and private firm Amerihealth Mercy of Louisiana were picked for prepaid coordinated care networks in Louisiana, which means they'll get a monthly fee for each enrollee to handle core benefits and services. UnitedHealth and Community Health Solutions were picked for shared-savings programs, which have a managed fee-for-service model.

Medicaid is a government health program for the poor. The Louisiana award is one of a few in recent weeks that broadened the Medicaid market for managed-care companies while creating billions of dollars in new revenue opportunities. Texas in early August awarded new Medicaid business to several firms including Amerigroup, Centene and Molina Healthcare Inc. (MOH). In July, Coventry, Centene and WellCare Health Plans Inc. (WCG) were winners in Kentucky.

Shares of Aetna recently traded down 1.8% at $37.67 while Coventry declined 0.8% to $31.08 amid broader-market declines.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

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