Judge tells state to keep Anthem in Medicaid managed care, cites role of former Beshear aide working for another successful bidder

A Frankfort judge ordered the state Friday to keep Anthem Inc. as one of its managers of Medicaid, an $8 billion program that pays for health care for one of every three Kentuckians.

Franklin Circuit Judge Phillip Shepherd's order "comes just days before the state is set to begin enrolling people in Medicaid health plans for 2021 on Nov. 2, and as the state is facing record enrollment of 1.6 million Kentuckians in Medicaid, largely because of the covid-19 pandemic," notes Deborah Yetter of the Courier Journal.

Judge Phillip Shepherd

Shepherd ruled in a lawsuit Anthem filed in May after it lost out in bidding for new contracts. He said the huge insurer had raised "a substantial question" about the contract-award process and demonstrated "a substantial likelihood" that it would win the case.

Anthem alleged, among other things, that one of the new contractors, California-based Molina Health, had hired a former employee of Gov. Andy Beshear who was privy to key documents that other bidders couldn’t see. Shepherd said the role of Emily Parento "creates the appearance that Molina had the inside track on the bidding process."

"He also cited multiple irregularities of the scoring and evaluations process the state used to select the five companies that initially won the contract," Yetter reports. "Shepherd found the process to be 'arbitrary' and poorly documented."

Passport Health Plan, the main Medicaid manager for the Louisville region, also lost out in the bidding but sold its assets to Molina, which is using the Passport name and says it plans to complete a new headquarters in western Louisville, a major boost in jobs for a poor and Democratic-voting area.

Emily Parento

Parento, who was health-policy director for the governor’s father, then-Gov. Steve Beshear, signed a non-disclosure agreement to see “non-public files” about the bidding as part of the transition team at the start of Andy Beshear's administration. She “had unfettered access to inside information” about other bidders “as well as the evaluators’ notes regarding the strengths and weaknesses of each of those bids,” Anthem said in its suit.

Molina "denied there was any conflict with Parento working for it as a consultant," Yetter reports, and said "she did not get access to any confidential information that would have helped it win a contract."

The Finance and Administration Cabinet said Molina swore that Parento did not have access to confidential information about the proposals and didn't "divulge any confidential information she obtained prior to working as a consultant to the company," Yetter writes. "But Shepherd found otherwise and devoted a considerable portion of his order to examining Parento's role in the case."

Shepherd "said that under state ethics guidelines, she should have been barred for at least a year from working for any company involved in the Medicaid contracts after leaving the Beshear transition team," Yetter writes. The judge said that created at least "the appearance of impropriety."

Anthem also objected to Molina making confidential required information about lawsuits in which it had been involved and any official sanctions levied against it. It says in a footnote, “It appears that the decision to waive scoring of this item occurred at the final stages of the process and apparently after the individual evaluators had completed their preliminary scoresheets.”

The scores were close. WellCare got 1,662; Aetna 1,653, Humana 1,605, United HealthCare 1,520, Molina 1,507, Anthem 1,491 and Passport, 1,409, according to the bid protest.

Shepherd had already ordered the state to delay sending notices to Medicaid beneficiaries asking them to choose a managed-care provider until he could decide on Anthem's request for an injunction or a temporary restraining order.

His latest order says, "Public interest supports allowing Anthem to participate in this contract, bringing more competition and a wider variety of choices to Medicaid recipients," his order said. "Most significantly, Medicaid recipients currently enrolled in Anthem will not be required to change providers and disrupt their medical care."