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State panel recommends against CareOregon merger

Advisory committee says Oregon should reject the absorption of the low-income care provider by a California entity unless clear information is provided
December 6, 2023

The state should reject the merger of a major Portland-based Medicaid insurer, CareOregon, into a new multi-state California insurance entity, an Oregon Health Authority advisory panel agreed Wednesday.

In a unanimous vote with one abstention, members of the Medicaid Advisory Committee dismissed a last-minute plea from CareOregon and approved a memo to the health authority recommending denial -- unless CareOregon satisfactorily answers a slew of questions that panel members said have been lingering for months.

CareOregon, a nonprofit, contracts with the state to oversee care to about 500,000 low-income members of the Oregon Health Plan, the state’s version of Medicaid. Nearly a year ago it proposed merging with the SCAN Group, a rapidly expanding California-based Medicare Advantage insurer.

The Oregon committee’s memo said key questions have gone unanswered around exactly how the merger would improve services to Oregon Health Plan members and how the merger would address health care inequities in the state. The questions also focus on CareOregon’s proposal to transfer $120 million of its reserves to the new entity.

Under the proposal, California-based nonprofit multi-state Medicare insurer SCAN Group would form a new California-based nonprofit, HealthRight, and SCAN and CareOregon would become subsidiaries of HealthRight. CareOregon would put $120 million into HealthRight, and SCAN would put in $240 million, according to the proposal. Using that money, HealthRight would pursue unspecified health care initiatives, while SCAN and CareOregon would continue their current lines of work, according to the plan.

CareOregon has stated, while providing few details, that the merger will benefit Oregonians, including the members of the Oregon Health Plan who are covered though CareOregon in the Portland metro area and the Jackson and Tillamook regions.

The lack of details and specificity in the proposal has drawn the ire and skepticism of many members of the public in state-held commenting forums.

In Wednesday’s meeting, Nora Liebowitz, CareOregon’s chief innovation officer, made an eleventh-hour effort to get the panel to delay the vote.

Liebowitz insisted CareOregon has already answered many of the panel’s questions in filings with the health authority – although panel members did not agree with that view.

Liebowitz said HealthRight would be able “to help Oregonians through programs beyond Medicaid.”

SCAN specializes in Medicare insurance for the elderly, Liebowitz noted. “Through HealthRight, we’re going to draw on those skills to support building more and new things in Oregon, for example supporting the state’s aging population,” she said. “The idea is for us to be additive, not to subtract from what we do now.”

But panel members voted for the tentative denial recommendation after a brief discussion. The four-page memo they approved has 15 questions they want the health authority to get satisfactory answers to.

Member Shannon Buck, of Albany, said CareOregon still has the chance to provide the needed information to the health authority, which, together with the Oregon Department of Business & Consumer Services, decides on the application.

“We’ve provided more wiggle room to get information that was asked for previously,” Buck said. “These are all questions it seems we should have had the answers to and we shouldn’t have had to draft this letter in order to get that information to make a good informed decision.”

“If this was something that CareOregon felt was really, really important to go through, then that clarity needed to be more upfront for us,” she said.

Echoing comments the state heard from many members of the public, panel co-chairman Gabe Triplett of Portland was especially concerned about CareOregon sending $120 million to an out-of-state entity.

Over the years, from the profits of its Oregon Health Plan administration work, CareOregon has amassed investment reserves of about $1 billion.

In the proposal “I see a lot of state resources leaving the state when they should be staying local and they should be utilized for the betterment of Oregonians,” he told the panel.

“The moving of health care out of a local to a multi-state organization is contradictory, I think, to how I see health care being implemented best, and I think we heard that from a lot of people around the state.”

Since late last year, CareOregon and SCAN executives have pushed their vision of the two nonprofits joining to form a larger insurer with multiple lines of business. They argue that combined, they would be better equipped to compete against giant national for-profit health insurers.

Federal law requires the state to use the Medicaid panel, comprising 14 health care experts, providers, government officials and community representatives from around the state, to advise it on matters concerning the Oregon Health Plan. That’s the state’s version of Medicaid that provides taxpayer-funded care to more than 1.3 million low-income Oregonians.

Publicly posted application filings by CareOregon and SCANprovide little detail about how the transaction could affect CareOregon’s Oregon Health Plan members and the broader Oregon community. The two entities say they have not yet made many decisions about what they would do after the merger is approved. They have broadly asserted the merger would benefit CareOregon’s members, but they have not spelled out how.

The health authority and the consumer services department are in the midst of collecting public comment on the deal. It is not clear when they will complete their analysis and issue a decision. A denial from either agency would kill the proposal.

 You can reach Christian Wihtol at [email protected]