State Health Care Reform: The Impact of Withdrawals by Medicaid Managed Care Plans on Behavioral Health Services

In 1998 and 1999, several managed care plans exited Missouri's Medicaid market. In the eastern region of the state, Humana withdrew at the end of its contract and Prudential was purchased by HealthCare USA. In the central region, Blue Choice exited at the end of its contract and Gencare left midcontract because it had been purchased by United HealthCare. The only plans serving the northwestern region—Blue Advantage Plus and Community Health Plan—withdrew from the Medicaid market as well, forcing their enrollees into fee-for-service arrangements.

State officials report that the process of having enrollees make the transition into new plans in the eastern and central regions went relatively smoothly. The officials attribute this success to several factors, including the number of managed care plans that entered the market at or around the same time; the large degree of overlap among the provider networks serving plans that were exiting, currently available plans, and those that were entering; and the open enrollment period of approximately two months that was given to enrollees to select a new plan.

Missouri allows enrollees receiving mental health or substance abuse services at the time a plan exits to continue with their current provider, even if continuation entails going out of the new plan's provider network. The providers in the networks of exiting plans also work to familiarize the care managers in the new plans with the treatment profiles of the mental health and substance abuse population. In the case of the enrollees in the northwestern region who had to return to a fee-for-service environment, no significant disruptions to behavioral health care were reported by state Medicaid officials, even though several providers had to be enrolled as fee-for-service providers under Medicaid.

Oregon maintains a statewide carve-out program that contracts with multiple vendors that provide only behavioral health services. The state also has an integrated program that operates in selected regions. In those regions, enrollees who do not opt for the integrated program are automatically enrolled in the carve-out program. Over the past few years, Oregon has seen much activity in terms of Medicaid managed care plans entering and exiting specific service regions. In addition, in 1996 and 1997, three plans—PACC HMO, PacifiCare of Oregon, and QualMed —left the Oregon market altogether (3). Among other reasons for the exits, one state official reported that many dissatisfied providers in rural areas had left plans to start independent practice associations, forcing plans with depleted networks to leave the market.

Although state officials report that plans' exiting the market has generally not caused problems for enrollees in the integrated behavioral health program, the impact may vary somewhat across the state as a function of the degree of overlap among provider networks. There has been much movement among plans in the coastal and southern regions of the state, but few problems have resulted, because most physicians contract with multiple Medicaid managed care plans. On the other hand, in the more rural central and eastern regions, many plans prohibit their physicians from contracting with more than one plan. As a result, although there has been more plan stability in these areas, disruptions to the patient-physician relationship may be more likely if plans leave the market.

Vendors contracting with the state's carve-out program have been much less likely to leave the Medicaid market in Oregon. This stability may be attributable in part to the fact that these mental health and substance abuse plans serve broader regions of the state. In terms of the impact on carve-out enrollees of physical health plans leaving the market, it is worth noting that because some behavioral health services are provided in the primary care sector, disruptions to treatment relationships may result, even for carve-out enrollees, if there is insufficient overlap among primary care provider networks.

Three managed care plans—Garden State Health Plan, Oxford Health Plan, and HIP Health Plan of New Jersey—exited the New Jersey Medicaid market in 1997 and 1998. HIP Health Plan left the state entirely in September 1998 after becoming insolvent. The American Preferred Providers Plan has since left the Medicaid market as well.

Although consumers who were previously enrolled in these plans were randomly assigned to other plans with preexisting contracts, there was little disruption to mental health and substance abuse services because these services are not covered by managed care plans but are instead provided on a fee-for-service basis. Again, any behavioral health care received in the primary care sector may have been disrupted. Although the fee-for-service approach may raise questions about the coordination of care between physical and behavioral health services, these types of problems are not related to the issue of plan exit and thus are beyond the scope of this column.

These three case studies suggest that carve-outs and fee-for-service arrangements offer some protection against disruption to behavioral health specialty treatment for Medicaid beneficiaries in the event of managed care plans' exiting the Medicaid market. However, exit by a specialty mental health or substance abuse entity, through either termination or nonrenewal of a contract, is also a possibility. The exit of specialty entities, particularly through contract termination, has been less common than the exit of physical-health or integrated managed care programs in general, but it has occurred. For example, in Montana, Magellan Behavioral Health ended its contract after conflicts with the state over problems with claims payments and data collection, along with what the state claimed were poor relationships between the plan's providers and its management (7,8,9). Also, Massachusetts switched carve-out vendors when reprocuring its carve-out contract in 1996.

The rarity of termination of carve-out contracts is probably attributable to several factors. One possible explanation is that states use detailed requests for proposals and contracts in an attempt to clearly outline the responsibilities and expectations of both parties in advance. Another such factor is the presence of state regulations that govern the financial reserves necessary for plans to hold behavioral health carve-out contracts.

Although both contract termination and contract nonrenewal are likely to be disruptive, nonrenewal is potentially less disruptive given states' ability to plan ahead to ensure a smooth transition from one contractor to the next. For example, states may expand their networks to include providers who are currently treating enrollees, give enrollees a transition period during which to switch to a network provider, or extend the open enrollment period to give enrollees more time to select a new plan. It is also worth noting that the level of disruption created by a plan's exit may be influenced by the extent of involvement of public-sector providers. For example, a new carve-out vendor's decision to restrict the volume of referrals to public providers could both threaten the continued viability of the providers and harm established patient-provider relationships.