AlohaCare protests $1.5B contract

Hawai‘i nonprofit health plan AlohaCare is considering how to move forward after unsuccessfully protesting the state’s decision to award a $1.5 billion Medicaid contract to two for-profit, Mainland-based companies.

Affiliates of WellCare Healthplans Inc. and UnitedHealth Group, on Feb. 1, were awarded the three-year contract to run the QUEST Expanded Access program. They will provide health care services for the state’s 37,000 aged, blind or disabled Medicaid members, an estimated 1,700 of whom are Kaua‘i residents.

AlohaCare protested the bid award on Feb. 8, claiming that the request for proposal was skewed to favor larger Mainland health companies.

The protest was denied last week, and the company has until today to appeal that decision.

“We are greatly disappointed by the state’s persistent refusal to confront and correct illegal and discriminatory problems with this $1.5 billion Medicaid contract,” Kemper said. “… We are currently weighing our legal options, but it is clear that this battle has only begun.”

AlohaCare was one of five companies vying for the contract, and is the only one to protest the outcome. Schaller Anderson and Summerlin also unsuccessfully competed for the bid.

AlohaCare attorney Ed Kemper says the request for proposal language was geared toward a profit-making insurance company with lots of experience, thereby singling out smaller Hawai‘i applicants.

UnitedHealth Group has more than 70 million members nationwide. WellCare serves 2.3 million members across the country. The much smaller AlohaCare is the third largest health plan in Hawai‘i, serving 58,000 members.

Kemper also alleges that the state offered as an incentive an illegal reimbursement of the 4.265 percent premium tax required of for-profit health plans.

“This inherently flawed bidding process does a grave disservice to the affected 37,000 Medicaid beneficiaries, their physicians, and to all of the people of Hawai‘i — who in the end will be making up the $21 million tax revenue that the state will annually rebate to these Mainland for-profit companies.”

The state declined to discuss the allegations.

“It is inappropriate for the Department of Human Services to comment on the QUEST Expanded Access procurement at this time because of the active bid protest that is being pursued,” Lillian Koller, Department of Human Services director, said in a statement.

AlohaCare has also called into question the stability of the companies, citing legal problems experienced by both in recent years.

Last year federal and state agents raided the Tampa, Fla.-based WellCare for alleged billing fraud. WellCare’s CEO, general counsel and other top executives resigned in January.

Earlier this year UnitedHealth subsidiaries were investigated in California and sued by the New York state attorney general for improper claim denials and improperly calculating payments for out-of-network services, respectively. Yesterday a federal judge granted class-action status to a 2006 shareholder lawsuit over stock options backdating at UnitedHealth.

In addition, WellCare and a UnitedHealth subsidiary were two of seven national health plans that agreed to temporarily stop Medicare marketing last summer after being cited by regulators for failure to comply with guidelines.

QUEST Expanded Access is a new program that for the first time provides Medicaid managed care to Medicaid clients who are 65 years or older and/or disabled.

This population is currently covered under Medicaid’s fee-for-service program.

Under the awarded contract, UnitedHealth will provide services as Evercare on O‘ahu, Big Island, Kaua‘i and Maui. WellCare will operate as Ohana Health Plans on O‘ahu, Big Island, Kaua‘i, Maui, Moloka‘i, and Lana‘i.

• Blake Jones, business writer/assistant editor, can be reached at 245-3681 (ext. 251) or bjones@kauaipubco.com