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3 Reasons Why Blue Shield of California Is Suing DHCS

Analysis  |  By Laura Beerman  
   October 13, 2022

The insurer, which just filed suit in California's State Superior Court, was one of four to appeal the state's recent Medicaid awards.

Deadlines. Documents. Designates.

These are three of the reasons cited by Blue Shield of California for its new lawsuit against the California Department of Health Care Services (DHCS), the agency that administers Medi-Cal, the state's Medicaid program. The lawsuit is in addition to the insurer's original appeal and rebuttal following DHCS's recent Medicaid MCO award announcement.

In August, DHCS chose three insurers—Blue Cross of California Partnership Plan, Inc., Molina Healthcare of California, Inc., and Health Net Community Solutions, Inc.—to serve Medi-Cal enrollees across 21 counties. In all counties but seven, these plans were chosen as the sole Medicaid managed care organization (MCO).

1. Documents

In a press release announcing the suit, Blue Shield alleges that DHCS did not produce all of the documents its requested as part of its appeal related to "crucial information about their scoring process, methodology, and their communications about the bid."

2. Deadlines

Blue Shield also requested additional time "so that each party to the appeal has the opportunity to review all documents related to the request for proposals." The request was denied by the state-appointed hearing officer, who Blue Shield appears to object to in its press release.

Regarding the delayed documents and denial of the request for more time, Blue Shield president and CEO Kristen Cerf stated: "We have waited in good faith and the Department of Health Care Services is refusing to provide the public information we are requesting or to provide a reasonable amount of time for the appeal process."

Cerf added: "We believe that the Department of Health Care Services has a duty to get this right and not just rubber stamp its original decision."

Related: Blue Shield of California Campaigns Against Medi-Cal 'Failed' Contracting Process

3. Designates

Philip Heinrich of DHCS was appointed the Hearing Officer by Department Director Michelle Baass. Regarding his selection, Blue Shield further noted that "the state assigned an employee from its Information Management Division as the hearing officer in this matter; this means an IT professional is responsible for reviewing all appeal materials and making the final decision as to which health plans will be available to millions of Medi-Cal beneficiaries."

Blue Shield's press release notes its nonprofit status and calls attention to the "national, for-profit companies beholden to Wall Street" that DHCS chose to serve state Medi-Cal enrollees. It further noted the separate, statewide, no-bid contract DHCS awarded Kaiser Permanente earlier in 2022—labeled as a sweetheart deal by critics.

These actions follow a six-month procurement process in which DHCS selected three plans to begin or continue service Medi-Cal members effective 2024 for the state's multiple Medicaid MCO models.

The Request for Proposal (RFP) was to select commercial health plans for the two-plan, Geographic Managed Care, and Regional models. The RFP did not apply to the State's County Organized Health System (COHS), Local Initiative Plan, or single plan (in non-COHS counties) models.

Across 14 counties, Blue Shield was joined in its appeals by Aetna Better Health of California, Inc. and/or Health Net appealed in 14 counties, with CHG Foundation d/b/a Community Health Group Partnership Plan appealing in San Diego County. There were no appeals in the remaining six counties, where Blue Cross was either the sole or joint awardee.

As of October 10, none of the non-awarded plans has extended its appeal to legal action.

Laura Beerman is a contributing writer for HealthLeaders.

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