Dive Brief:
- Illinois plans to award new contracts for the state’s largest Medicaid managed care program to six insurers, including Humana — a new participant in HealthChoice Illinois.
- The contracts, which run for three years but include an option to renew, represent tens of billions of dollars in revenue for each company, but come at a time of historic turbulence in Medicaid as the safety-net program absorbs funding cuts from Republicans in Washington.
- The awards could result in some shifts in market share for the incumbents, which include Medicaid giant Centene and CVS’ insurance arm Aetna. But enrollment changes will likely be manageable, one analyst said.
Dive Insight:
HealthChoice Illinois serves more than 2 million Medicaid beneficiaries in the state, with roughly half concentrated in Illinois’ populous Cook County. HealthChoice’s current contracts with managed care companies are set to expire at the end of 2026, leading state regulators to issue a request for new bids. Managed care companies submitted their proposals late last year.
On Monday, the Illinois Department of Healthcare and Family Services announced it intended to award Medicaid contracts to incumbents Centene, Molina, CVS, Health Care Service Corporation and CountyCare.
Humana, which already operates integrated special needs plans in the state but is new to HealthChoice, also nabbed an award, which should fuel the insurer’s expansion of its Medicaid business. Medicaid accounts for a small slice of Humana’s total membership and premiums, but is a growth area for the company as it looks to diversify and mitigate risks in its core Medicare business.
The addition of Humana could dilute the market share of incumbents, according to J.P. Morgan analyst John Stansel.
Currently, HCSC is the largest insurer in HealthChoice, with about 31% of the market share, followed by Centene (27%), CountyCare (17%), CVS (14%) and Molina (12%).
Centene has the largest market share outside of Cook County, according to Stansel. Meanwhile, though Molina and CVS have smaller footprints in the state, HealthChoice represents larger portions of their overall Medicaid businesses.
“There may be some dilution with Humana being added,” Stansel wrote in a note on Monday. But “[we] view any slight market-share shifts in contracts for [Centene], CVS, and [Molina] as manageable as the state potentially balances enrollment, as we expect each to still maintain healthy market share.”
In the HealthChoice contract, Illinois sought partners to continue much of the work outlined in the state’s previous agreement with managed care companies. However, the new arrangement has an increased emphasis on social determinants of health, care coordination and behavioral health, according to state officials.
The new contract runs through the end of 2030, and Illinois has the option to renew for up to five years and six months.
The agreement represents more than $140 billion in revenue for the six companies over its initial term, and an additional $291 billion if Illinois renews, according to preliminary bid approval documents.
Insurers that ink deals with states to administer managed care programs compete aggressively for such contracts, which can be lucrative. However, the current outlook for Medicaid funding is shaky, given the safety-net insurance program — which, along with its sister program for low-income children, currently covers roughly 75 million Americans — is facing steep spending cuts passed by the Republican-led Congress in the “Big Beautiful Bill” last year.
In particular, restrictions on mechanisms states use to increase their federal Medicaid funding and new work requirements for enrollees set to kick in next year are expected to drastically shrink the scope of the program. Nonpartisan government scorekeeper the Congressional Budget Office estimates that 7.5 million people will lose Medicaid as a result of the law, mostly because of the new work rules.
In Illinois, about 734,000 Medicaid beneficiaries are expected to be subject to the work requirements, which apply to working-age adults covered by a state’s Medicaid expansion under the Affordable Care Act. That’s almost one-fouth of the state’s Medicaid enrollees, according to the Illinois Association of Medicaid Health Plans.
Illinois expects a sizable number of these individuals to qualify for an exemption to the mandate, which require adults to work, volunteer or attend school for 80 hours a month in order to stay on Medicaid. However, states are currently absorbing guidance released by the CMS this month that is expected to make it more difficult for residents to prove an exemption.
