In a deal that shows the increasing allure of managed care for both Medicaid and Medicare-Medicaid dual eligibles, Blue Shield of California on Dec. 8 unveiled plans to acquire Care1st Health Plan for an undisclosed cash price. Care1st has 473,000 Medicaid, 46,000 Medicare Advantage and 5,300 duals members, with the vast majority of them in California. But Care1st also has members in Arizona and Texas that the would-be acquirer tells AIS it intends to keep.

The deal, which the companies say is expected to close in the second half of 2015, would mark 3.4-million-member California Blue Shield’s entry into both the Medicaid and duals markets. It comes as additional evidence that a growing number of Blues plans have found the four-year-old Affordable Care Act (ACA) dramatically improved the attractiveness of serving Medicaid and duals populations many Blues licensees had shunned before.

Blue-branded plans now serve the Medicaid market in 17 states plus Puerto Rico, reports Justine Handelman, vice president, legislative and regulatory policy at the Blue Cross and Blue Shield Association (BCBSA). This is aside from perhaps another handful of Blues-owned plans that offer Medicaid coverage without the Blue brand in other states or in states that already have a Blue-branded Medicaid insurer.

The latter situation would be the one occurring if the Blue Shield-Care1st deal goes through since Anthem, Inc. already uses the Blue brand for Medicaid in California (Anthem has declined to comment on the Care1st deal). But the market — especially the 11.3 million Californians now in Medicaid, with 2 million of them joining the program since the expansion under the ACA took effect in January — is attractive enough that the Blue Shield plan wants in, even if it means operating in Medicaid without the Blue brand.

It’s been a strategic priority of Blue Shield of California “for some time” to enter Medicaid, and the insurer’s action to do so was “precipitated” by Care1st becoming available, Stephen Shivinsky, vice president, corporate communications at the Blues plan, tells AIS. The insurer hasn’t entered Medicaid previously, he explains, because that is a “big and complicated program on its own” and California Blue Shield didn’t want to “initiate it from scratch.”

While Medicaid clearly is the biggest draw in the deal for the acquirer, Shivinsky leaves no doubt that the MA and duals stakes were pluses too. He says the Blues plan expects MA to continue to grow, and operating in it is in keeping with the plan’s mission of furnishing health care to all Californians.
The insurer reports that it now has 89,483 MA prescription drug and 9,365 stand-alone Prescription Drug Plan (PDP) members, along with 137,149 Medicare supplement enrollees.

Similarly, San Francisco-based California Blue Shield isn't in the state’s big duals demo now because the duals business takes a kind of “expertise” it hasn’t had before but figures to get from Care1st, Shivinsky asserts. This is “one more advantage” in the Care1st deal, according to Shivinsky, and shows why Care1st is “a complementary and strategic fit.”

Just-released California figures for its duals demo show 58,945 enrollees in the demo as of Dec. 1, with another 84,294 enrollments pending for Jan. 1, 2015.

Excerpted from the 12/18/14 issue of AIS’s Medicare Advantage News