Reform could bring new business to Amerigroup

For Amerigroup, "the ballpark I would give is massive," James G. Carlson, its chairman, president and CEO, told the gathering.

In their attempts to extend coverage to 45 million individuals who lack health insurance, House and Senate committees have determined that Medicaid will play a major role. If their proposals become law, Virginia Beach-based Amerigroup and other managed care companies that concentrate on Medicaid are likely to see a major rush of new business.

However, Carlson acknowledged, paying for a massive expansion in health care coverage remains a volatile issue in Congress. Amerigroup is combing through the details, he said, and the biggest one is "exactly how much relief the states are going to get from the federal government."

Medicaid covers more than 42 million people, including low-income children, their parents and indigent disabled, blind and elderly people. Congressional proposals would broaden the eligibility to adults without children and those with incomes slightly higher than the federally defined poverty level. That would open up Medicaid programs to 11 million more individuals, the Congressional Budget Office estimated.

What complicates the expansion is the need for funding. States manage their own Medicaid programs but rely on the federal government to pick up much of the cost.

"The most significant component of reform is the expansion of public programs," John E. Littel, Amerigroup executive vice president for external affairs, told the analysts' gathering in New York. "It's also the most costly component and thus among the most hotly debated ones."

Despite assurances from members of Congress that the federal government will pay for extending Medicaid to newly eligible individuals, state governors and legislators worry about their states' ability to bear any added costs.

In a recent letter to the Senate Finance Committee, the National Conference of State Legislatures insisted that the federal government pay for mandatory increases in Medicaid eligibility and any mandatory reimbursements to health care providers. Saddling the states with greater costs would be especially harmful, the organization said, because state legislatures "are struggling daily with the most drastic budget shortfalls in several generations."

The mechanics for financing greater use of Medicaid will be worked out, Carlson predicted in an interview last week. "Our read is that (state officials) are going to be concerned until they see the details and the money."

In addition, questions persist as to whether states will have sufficient resources to attract the numbers of health care professionals needed to serve a much larger population of Medicaid beneficiaries.

The "last thing the administration wants to do is put 15 million uninsured Americans into Medicaid where they have to wait six months to get a doctor's appointment," securities analysts Gregory K. Nersessian and Jason Twizell of investment bank Credit Suisse said in a report on the prospects for Amerigroup and other Medicaid managed care companies.

Extending coverage to millions of individuals who now lack insurance probably will put pressure on the entire health care system, not just on the parts involving Medicaid, Carlson said. However, Amerigroup has the resources to make services available to those enrolled in its health plans, he said. "We have a network of 75,000 to 85,000 doctors and 750 hospitals," he said.

Amerigroup had revenue of $4.5 billion in 2008 and $2.5 billion in the first six months of 2009. The company has 4,200 employees, including 1,780 in Virginia Beach.

Concerns about financing an expansion of Medicaid haven't blunted Amerigroup's enthusiasm for certain measures pending in Congress. That's partly because the company has a significant presence in some states with large concentrations of uninsured people.

In his remarks to analysts, Carlson called attention to Texas, where 5.8 million people -- a quarter of the state's population -- have no coverage. Amerigroup also has a major foothold in Florida, where 3.7 million people -- almost 21 percent of the state's population -- lack coverage.

The company has not disclosed how many individuals it expects to add to its health plans if the Medicaid proposals in Congress are enacted. Some analysts, however, have come up with their own estimates. In the 11 states where Amerigroup does business, it could add 1.2 million uninsured individuals who fall under the proposed income limits for eligibility, Credit Suisse's Nersessian and Twizell said in their report. That would be a 71 percent increase over the 1.7 million people now enrolled in Amerigroup's plans.

One proposal that would work to the company's benefit is a Senate Finance Committee call for coordinating the way Medicaid and Medicare finance and administer their services to elderly poor, blind and disabled people. Dubbed "dual eligibles" because they are often using both Medicaid and Medicare, these individuals tend to have chronic medical problems that are costly to treat. They account for 18 percent of all Medicaid recipients but a disproportionately high 46 percent of Medicaid's costs, according to the Kaiser Family Foundation, an organization that analyzes health care issues.

Amerigroup aims to expand its services to that part of the Medicaid population. While aged, blind and disabled individuals make up 12 percent of the enrollment in Amerigroup's health plans, they account for 30 percent of the company's revenue, Carlson told analysts.

Amerigroup, he said, is intrigued by another proposal in the health care reform bills -- the use of insurance exchanges to bring together insurers and individuals in need of coverage. As part of the overhaul of its state health care system three years ago, Massachusetts created an exchange to match insurers with individuals who are unemployed, self-employed or working for small businesses that don't offer health insurance.

Amerigroup, said Carlson, would be interested in using local insurance exchanges as a way to offer coverage to participants in the Children's Health Insurance Program, a state-administered program for children and pregnant women with family incomes too high to qualify for Medicaid but too low to buy private insurance. Amerigroup also is attracted to the use of exchanges for serving indigent elderly, blind and disabled people and uninsured individuals whose incomes surpass the poverty level.

What's not yet known, Carlson said, are the unintended consequences of the legislation taking shape in Congress. Still, he said, "we see more opportunities than threats."