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UPDATE: Aetna Protests Ohio Move That Canceled Medicaid Award
15/6/2012
21:39

--Aetna raises protest after losing prior award for Ohio Medicaid business

--Aetna takes issue with talks between state, another competitor

--Meridian, another insurer that lost state, has also raised protest

(Adds comments from state agency, updated share price, other information, in the fifth and ninth paragraphs.)

 
   By Victoria Stilwell and Jon Kamp 
 

Aetna Inc. (AET) is protesting an Ohio agency's decision to cancel an earlier Medicaid contract award to the insurer, saying undisclosed communication between the state and a competing company swayed the state's decision.

Aetna argued that the Ohio Department of Job and Family Services retrospectively changed its initial requirements, resulting in its decision to drop the insurer from its list of five Medicaid health plans that will serve the state starting Jan. 1. Meridian Health Plan, a nonprofit, was also dropped after initially being named a winner, and the two were replaced with Molina Healthcare Inc. (MOH) and Centene Corp. (CNC), which both protested their prior rejection.

Aetna said it learned that representatives from the state agency had undisclosed communications with another bidder after the initial protest period had closed. Aetna officials said they believe that the other bidder made "a number of false and misleading statements" in those conversations, and that Aetna didn't have a chance to respond in violation of state law.

"It's extraordinary for a state to introduce a new definition or standards after responses have been submitted, much less after awards have been made," said Jan Stallmeyer, an Aetna senior vice president, in a news release Friday.

The insurer wants Ohio to immediately reinstate the initial contract award. A spokesman for the Ohio department said legal staff there is reviewing Aetna's letter and declined further comment. The department has also received a protest letter from Meridian, the spokesman confirmed.

Medicaid is a joint federal and state health program for the poor. Many states, including Ohio, have tapped managed-care firms to run the Medicaid program with a goal of saving money. There are 1.6 million Medicaid-eligible people in Ohio.

The continued fight for Ohio's business also has larger implications, since incumbency may help companies compete when the state picks health plans to cover what are known as dual-eligible patients who also qualify for Medicare, the government program for the elderly. Ohio hopes to have coordinated coverage plans for these sought-after, high-cost patients up and running early next year.

Last week's reversals favoring Molina and Centene--both incumbent Medicaid providers in Ohio--surprised Wall Street and lifted shares of both companies, helping to offset pressure both Medicaid-focused insurers have felt from high-cost problems in other markets. Ohio means less from an earnings perspective for much-larger Aetna, but the company's initial win in April help to ease concerns about its ability to compete for Medicaid business.

Shares of Aetna traded down 16 cents to $41.34 in recent trading. The stock is off about 4% in the last 12 months.

Write to Victoria Stilwell at Victoria.Stilwell@dowjones.com and Jon Kamp at jon.kamp@dowjones.com.

(END) Dow Jones Newswires

June 15, 2012 14:39 ET (18:39 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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