Kansas lawmakers alter bidding process for Medicaid services after Aetna loses state contract
TOPEKA — A major health insurance company lost out on a bid to continue its role as one of Kansas' Medicaid providers, and the state Legislature passed a law to avoid a repeat.
Aetna Better Health of Kansas embroiled itself last year in legal battles with the state arguing the selection process for providers of the $4 billion Medicaid program was flawed. Legislators similarly criticized the executive branch for a lack of transparency. One Republican said the ordeal would be a 'stain' on Kansas' contract processes for years to come.
Aetna provided health coverage as a managed care organization under KanCare, as Medicaid is known in Kansas, for five years leading up to the state's 2024 evaluation process. The company tied for third place with another private health insurance company and ultimately lost the bid. In August, Aetna asked a legislative committee to consider changing the rules for MCO selection as it was going through an appeals process, which it lost.
House Bill 2284, which Democratic Gov. Laura Kelly vetoed April 4 and the Legislature revived Thursday, forces the executive branch to create policies addressing some issues Aetna litigated. Republicans, who overrode the veto, say the bill improves transparency.
But the governor in her veto message said the bill is a 'dramatic overreach' into the authority of the executive and judicial branches.
'Most alarmingly, this bill creates a haphazard procurement process that does nothing to mitigate conflicts of interest among legislators and creates an environment that is rife for exploitation and graft — exactly the opposite of what the existing process, overseen by the Department of Administration, is designed to do,' Kelly said.
She said the bill risked creating 'legal, ethical and constitutional challenges.'
In the Senate, the override passed Thursday without debate in a 30-10 vote with Sen. Tim Shallenburger, a Baxter Springs Republican, joining Democrats in opposition. The House completed the veto with an 88-37 vote along party lines.
'It's a good bill. Vote for it,' said Rep. Will Carpenter, an El Dorado Republican.
That was the extent of House Republicans' remarks on the bill in their effort to overturn the veto.
Kelly said she would have supported the bill in its original form.
'As amended, this bill is now unworkable and opens the state up to costly and protracted litigation,' she said.
During the 2024 contract bidding process, Aetna and Healthy Blue, a Blue Cross Blue Shield affiliate, earned the same score, warranting a tiebreaker. However, state officials destroyed documentation of evaluators' scoring notes that informed the selection of Healthy Blue over Aetna.
Aetna appealed the state's decision to pick Healthy Blue. The decision, which came from the Department of Administration, eventually was upheld in Shawnee County District Court. Aetna also sued state agencies for destroying the scoring records, and was unsuccessful.
Sen. David Haley, a Kansas City Democrat, refrained from voting on the veto override at first, but after being required to cast a vote under Senate rules, he voted to sustain the governor's veto. He said he supported the bill in its original form but deferred to the governor's opinion.
'I think it's good to have procedures in place when we look at our MCOs,' Haley said. 'However I greatly respect the overarching view that the governor can give to these measures and her vetting this and finding it to be something that should be reconsidered. I won't lean on my own judgement, my own opinion.'
In its original form, the bill contained three provisions regulating the MCO bidding and selection process. It required the executive branch to create policies that prohibit the destruction of records covered under the Kansas Open Records Act, adopt tiebreaking procedures and 'to be transparent with the Legislature during each step of the procurement process to the fullest extent permitted by state law.'
Later, lawmakers added a fourth provision requiring a new appeals process. Currently aggrieved bidders go through judicial review. Under the new law, an appeals committee made up of legislative leadership — and headed by the senate president — will take up review.
Rep. Susan Wikle, a Lawrence Democrat, said her primary issue with the bill was the modification of the appeals process. Democrats initially were left out of the newly established legislative panel but were later included, Wikle said.
She said she had unanswered questions about the interplay between the existing judicial review process and the new panel's function, but after she found answers, she reached the conclusion that the bill was an 'overreach.'
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