CareSource prepares for bid defining its future

Nov. 8--As part of a sweeping overhaul of Medicaid, Ohio is rebidding the contracts to manage the state's health insurance program and that outcome has big implications for the Dayton area and the future of CareSource.

The Dayton-based insurance company originally built its business in 1989 around managing Ohio Medicaid plans and has since grown into the largest plan in Ohio -- larger than the other Ohio Medicaid plans combined. The large downtown Dayton employer has 2,200 local employees and nearly 4,000 Ohio statewide.

"This is the majority of our business so this is a very big deal. It's really our top priority right now to articulate the fact that there's nobody higher in quality than CareSource in Ohio," said CareSource CEO Erhardt Preitauer.

CareSource faces competition in the rebidding process: other insurance companies that haven't worked with Ohio Medicaid in the past are expected to try to enter the field and potentially chip away at the Dayton company's market share.

"There are some plans that we know of who are interested in applying who are not currently in our pool," Ohio Medicaid Director Maureen Corcoran said in October.

Any winner will also have to make their case for why they can play by a new set of rules that Ohio Medicaid has set forth to improve the health outcome of the 1 in 4 Ohioans the program covers.

Why the overhaul?

The DeWine administration is using its overhaul of the Medicaid program as a sweeping health policy tool.

There are problems with the current system. Kids are falling behind on important health care. Health care providers struggle to deal with the bureaucracy, which can drive some to opt not to accept Medicaid.

In theory, the state can engineer better outcomes for all kinds of health care issues through requirements for how Medicaid dollars get spent. Whatever rules the state creates for receiving those Medicaid dollars can in theory incentivize anything from expanded access to addiction treatment, to better birth outcomes, to more teens screened for depression.

Earlier in October, Ohio Medicaid unveiled the details of the new set of conditions for how it wants those dollars spent. The state is now open for bidders such as CareSource who want to be a part of the overhauled system.

The companies that intend to apply already had to let the state know they are planning to bid, but the names of the companies aren't public. Ohio Medicaid will let the winning bids know with award letters Jan. 25.

The Medicaid system

Ohio Medicaid covered more than 3 million people with low incomes or disabilities as of September. This includes about 412,000 people in the nine-county region surrounding Dayton.

The health insurance program is jointly funded by the state and federal government.

About 90% of Ohioans who are covered by Medicaid don't have their benefits managed directly by the state government. Instead, people get their Medicaid benefits through an insurance plan that's managed by companies like CareSource or others.

This is called Medicaid managed care. These insurers get a payment per member per month and use that money to pay for their member's health care.

CareSource is a goliath in the current system, with about 1.3 million Ohioans having their Medicaid plan through CareSource.

Preitauer said their scale allows the company to do things that other company's can't do.

In 2019, CareSource posted it had 1.8 million members with an $82.1 million operating margin. Out of its $10.6 billion in revenue for that year, the company reported spending about 8.3% on administrative costs.

CareSource and the Dayton Chamber commissioned a study by Cleveland State University on the insurer's economic impact. The full study has not been released but Chris Kershner, CEO of the Dayton Chamber, shared some of the preliminary findings including that the company's Ohio economic impact is $964.6 million.

"In just a few decades, CareSource has created 4,000 local jobs and grown an Ohio based company with a $1 billion annual economic impact. 40 years ago CareSource was a dream, now it's an economic driver for the entire state of Ohio," Kershner said.

Report cards

The winners will have to demonstrate to the state that they can perform well and meet the state's goals.

In the most recent report state card, released the beginning of November, CareSource received 16 out of 25 possible stars. The report card looks at how each of the five current Ohio Medicaid plans performed and compares them to each other on different health measures.

CareSource received the highest ranking in the state for how happy members are with their doctors' communication and service.

CareSource also received the highest ranking overall for the year before.

"I believe we are better positioned today than we ever have been. Nobody in Ohio is ranked higher in quality than us and we're also the most cost effective," Preitauer said.

Preitauer said the company ranks among the highest in the country for member satisfactions.

"Due to our scale, due to our mission orientation, we're continuing to push the envelope on innovation, on our performance and on some of our rich programs that we're known for over the last 30 years," he said. "We've got a legacy that we're not resting on and we're going to continue to build on."

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