NC’s newest ACA health insurer serves the neediest, but faces fines and lawsuits

July 30--RALEIGH -- A national health insurer that's been fined $1.5 million by regulators in Washington and is the subject of a class action lawsuit in that state plans to enter North Carolina's federal health care market.

Missouri-based Centene Corp., the nation's largest provider of individual health insurance under the Affordable Care Act, is expanding its coverage throughout the country, including North Carolina where it will offer plans in Durham and Wake counties under the name Ambetter.

But the Fortune 100 company is also eying North Carolina for bigger spoils: a coveted contract to manage a part of the state's $14.6 billion Medicaid market.

Health insurance advocates say North Carolina will benefit from a new competitor. The state is down to one ACA insurer that covers all 100 counties, Blue Cross and Blue Shield. Another, Cigna, is limited to just five counties: Wake, Johnston, Orange, Chatham and Nash. Centene's entry will make Wake the only county in the state with three ACA options. Several years ago Blue Cross vied for ACA customers in numerous North Carolina counties against two national carriers, Aetna and UnitedHealthcare.

"We obviously want to see more choices for consumers," said Brendan Riley, a health policy analyst with the N.C. Justice Center in Raleigh. "This is a good sign. Despite all the effort to repeal and undermine the Affordable Care Act, we're seeing some stability in the market."

That's a sentiment shared by Kevin Counihan, Centene's senior vice president of products. He told investors on July 24 that the company "remained very bullish about the exchange business" and added, "We think it remains very, very stable and we're very enthusiastic about open enrollment coming up."

Centene currently covers more than 1.5 million people in 16 states through the federal marketplace and expects to generate $60 billion in revenue this year from its health care business, according to the company's public filings.

But Centene will establish operations here under scrutiny by the N.C. Department of Insurance because of the company's ACA practices in Washington state. Washington's insurance commissioner fined a Centene subsidiary $1.5 million last year for not having enough health care providers in its network to meet the medical needs of its customers. The state suspended $1 million of the fine but subsequently fined Centene again for $100,000, saying the insurer was "seriously deficient" in anesthesiologists, immunologists, dermatologists and rheumatologists.

Ted Hamby, North Carolina's deputy insurance commissioner, said Centene's application for rate approval in North Carolina is independent of the company's operations in other states, and will be evaluated by Centene's ability to meet North Carolina's financial and administrative requirements.

"We would be remiss not to be aware of the potential that such problems could occur in N.C.," Hamby said by email. "In a time where other insurers are pulling away from the individual health insurance market, a newcomer that meets the licensure requirements is an added insurer choice for N.C. consumers."

North Carolina law requires health insurers to maintain adequate networks of doctors for their members and also financial solvency to pay medical claims.

Centene's headaches include a class action lawsuit filed in January accusing the company of operating junk plans and failing to provide adequate doctors to treat its customers in multiple states. The suit claims Centene's provider network is "largely ficticious" and was created by copying "entire physician directories" and listing medical students as belonging to the insurer's physician network.

"Centene's profitablilty in the ACA marketplace is due in large part to its exploitation of the ACA subsidy program and other government support, while failing to provide the minimal coverage required," according to the lawsuit filed in federal court in Washington state.

In an emailed statement, Centene spokeswoman Marcela Hawn said, "We dispute the allegations in the class action litigation and the company will continue to defend itself in the courts."

Centene specializes in offering federally-funded health insurance to low-income populations, including Medicaid, Medicare Advantage and Children's Health Insurance Program. The company's ACA business is built on a foundation of managing state Medicaid programs and creating small networks of doctors who accept lower payments than reimbursements paid by commercial health insurers, said David Windley, a health care analyst with the Jefferies firm.

"Their predominant business has been serving a low-income membership that has been paid for by the state," Windley said. "You've got to get lower rates from doctors and labs and hospitals for your Medicaid population than [other insurers] get for their commercial population."

In a June research report for investors, Windley wrote that Pennsylvania, Texas and North Carolina "will be key sources of growth" for Centene. The insurer's interest in North Carolina is driven by an upcoming bid next month for a contract to run the state's 1.8 million member Medicaid program, Windley said.

Last year, The N&O reported that Centene had formed a partnership with the the N.C. Medical Society and the N.C. Community Health Center Association; their company, Carolina Complete Health, was created to compete for a state contract to sell health-care plans to Medicaid patients under the state's move to privatize the Medicaid program.

And in May, the N.C. Department of Health and Human Services stated it will favor Medicaid bidders who sell or plan to sell health insurance on North Carolina's individual market.

"It's self-evident," Windley said. "It's one of the biggest contract opportunities for the Medicaid industry in the next five years."

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