Texas improperly picked winners for contracts worth $10 billion, health insurers argue

_{* Correction appended.}

_{Editor's note: This story has been updated to include comment from former HHSC Executive Commissioner Charles Smith.}

The state of Texas is trying to give away a business opportunity valued at roughly $10 billion. To win, all an applicant has to do is score highly on something like a standardized test.

The applicants — in this case, health insurance companies vying for a chance to collect premiums for covering elderly, blind or disabled adults in the state’s Medicaid program — spent months answering test questions that spanned almost 60 pages, comprising mostly essay prompts and a few true-false questions.

There’s just one problem, according to some of the test takers: More than 30 people were responsible for evaluating the responses, and they couldn’t even agree on the answers to the true-false questions, let alone the more subjective ones.

More than half a dozen health insurers — a group that includes multibillion-dollar corporations as well as local, nonprofit health plans — are protesting the Texas Health and Human Services Commission’s awarding of contracts in Medicaid’s STAR+PLUS program on the grounds that the scoring process simply made no sense.

“The manner of scoring proposals was irrational, arbitrary, and failed to comply” with state law, lawyers for Amerigroup wrote. Cigna’s legal team argued that the health commission’s “reliance solely on technical scores was unreliable due to failures of certain evaluators to meaningfully evaluate the proposals.”

They’re hoping for an intervention from Texas Health and Human Services Executive Commissioner Courtney Phillips, who announced this week she will resign in March and has remained mum about the contract decisions. A spokesperson for the agency declined to comment for this story.

The STAR+PLUS dispute is the latest in a high-stakes game of government contracting, in which billions of dollars are on the table for companies looking to manage the health care of some of the most vulnerable Texans. The Texas Health and Human Services Commission announced tentative contract winners in October, but the final decision has been tied up amid a lengthy appeals process and an ongoing lawsuit.

About 530,000 Texans with complex and expensive health problems receive coverage through STAR+PLUS, and the contract application underscores the expertise required to meet their needs.

One section asked insurers to describe how their nurse hotlines would field calls from distressed patients: “A Member states she has had incidences of low blood sugar at night for several weeks. Her husband, with whom she lives, is on hospice care.”

Another section invoked hypothetical patients like “Ben,” a 21-year-old with a traumatic brain injury who needs a new home but has problems like “hitting, punching, scratching, pinching, and spitting at others multiple times a day, hitting himself in the head, slapping his legs, acting defiant, and smearing feces.”

A team of 33 graders assigned scores of 1 through 10 to the applicants’ responses. The top two or three scorers in each region of the state were chosen to receive contracts.

Most questions were complex and open to subjective opinion, but some were straightforward: Did the health plan indicate which areas of Texas it wants to operate in? Did its answers run over the page limit?

Even straightforward questions sometimes yielded conflicting scores from the Health and Human Services Commission.

Question 245 asked health commission graders to note whether an insurance plan had ever been sanctioned for its marketing practices — and if so, to award no points for that question. Publicly posted documents on the health agency’s website indicate that UnitedHealthcare was fined $100 for “prohibited marketing practices” in fiscal year 2017, yet the company received full points.

Another example: Molina submitted two applications, one for its health maintenance organization plan (Molina Healthcare of Texas) and another for its exclusive provider organization plan (Molina Healthcare Insurance Company). There was significant overlap in the responses, many of which were word-for-word copies. But in at least 25 cases, scorers assigned each plan a different grade for the same response.

Sometimes, scorers apparently disagreed about whether the health insurance companies even attached necessary paperwork. One evaluator gave WellCare 8 out of 10 points on a question about the company’s “valued added services statement.” “Response clearly satisfies requirements,” the scorer wrote. A second scorer who evaluated it wrote that he or she couldn’t find the document.

The final scores for the health plans fell within a handful of points, meaning that even small discrepancies could significantly change which health plans were chosen for awards.

The procurement process for STAR+PLUS, the costliest of the state’s privatized Medicaid programs, has been rocky from the start. The state first asked health insurers to submit business proposals in March 2018 but then halted and restarted the process two times, finally requiring proposals to be submitted in November 2018.

Nearly a year passed before the health commission publicly announced its list of winners. But records later released by the health commission raised eyebrows when it became clear that the list of high scorers changed significantly shortly before the awards were announced. The changes appeared to benefit UnitedHealthcare in particular.

A September 2019 memo released by the agency recommended that UnitedHealthcare, based on its application scores, receive contracts in four regions of the state. By October, that number had increased to nine.

Meanwhile, Amerigroup and Molina lost the health commission’s endorsement in two and three regions, respectively. The agency has declined to say why some health plans’ scores changed.

Notably, two nonprofit health plans — the Houston region’s Community Health Choice and San Antonio’s Community First Health plans — never made the list of winners. Those plans have argued in court that they were unfairly excluded because Texas law requires the state to enter into “mandatory contracts” with nonprofit health insurers that are owned and operated by local hospital districts. A judge ruled in favor of Community Health Choice last week, ordering the state to change its list of contract winners.

The Texas Health and Human Services Commission is no stranger to controversy surrounding its high-dollar contracting processes. In 2018, the Texas State Auditor’s Office examined 28 of the health commission’s procurements and found significant errors in the agency’s evaluations of all of them.

Earlier that year, Charles Smith, who was the agency’s executive commissioner, stepped down after the agency made scoring errors in health plans’ applications to administer the Children’s Health Insurance Program. Gov. Greg Abbott publicly criticized Smith’s “failure to ensure the integrity” of the state’s procurement process.

In an email, Smith said he "retired from state government after 30 years of great service" and was not asked to resign.

"The Governor and his staff knew that I didn’t directly oversee procurement processes for the agency," Smith said, and Abbott's letter was "clearly directed toward others in the agency who actually oversaw the process."

Disclosure: Amerigroup, United Healthcare and Community Health Choice have been financial supporters of The Texas Tribune, a nonprofit, nonpartisan news organization that is funded in part by donations from members, foundations and corporate sponsors. Financial supporters play no role in the Tribune's journalism. Find a complete list of them here.

Correction: Due to an editing error, an initial version of this story incorrectly stated the year that a memo released by Texas Health and Human Services recommended that UnitedHealthcare, based on its application scores, receive contracts in four regions of the state.