State’s premature release of bid proposal info touches off new battle over $116 billion in Medicaid contracts

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Aetna, which is set to win a multibillion Texas Medicaid contract, got a peek at sensitive information submitted by 17 rival health plans during the bidding process after the state Health and Human Services agency erred and sent competitors’ proposals to the health insurance giant too early, according to emails and documents obtained by The Texas Tribune.

The agency confirmed the error in emails it sent to Aetna and others earlier this year, according to a court filing in Travis County this week.

Officials with Aetna’s Medicaid division – Aetna Better Health Texas – would not discuss the matter with Tribune. HHS officials initially declined to comment on the procurement or the release of the records.

On Monday, three days after this story originally published, the agency sent a statement to the Tribune saying that no laws were broken and that the release did not affect the outcome of the procurement — which has been heavily criticized by some for proposing to shuffle the health plans of some 1.8 million low-income Texans.

The agency "has no reason to believe that the release of the redacted proposals via the [Public Information Act] process had an impact on the procurement results," the statement said.

But the court documents include the state agency’s own admission to the insurance bidders that the release of the information to Aetna was in error.

“The PIA copies were sent to you in error as this procurement is still in the open stage,” reads a Jan. 12 email to Aetna from a legal assistant for the agency, referring to redacted copies of the bids required by the Texas Public Information Act. “As a courtesy, would you please destroy the copies? Once the Notices of Award are issued, we will provide the PIA copies to you.”

HHS officials still have not commented on why those emails were sent in January.

"HHSC practice has been to release procurement records after awards have been determined," the Monday statement said. "However, the release of records prior to oral presentations is allowable under state law."

The early release of documents throws into doubt the legitimacy of a procurement worth about $116 billion over the next 12 years because it gave a single competitor a look at the other bidders’ playbooks while the procurement game was still on, several bidders argue.

“One of the basic tenets of procurement law is that a procuring government entity must ensure a level playing field for all respondents,” attorneys for Superior Healthplan wrote in an April 19 protest letter to HHS. “This procurement utterly failed in that regard, among others.”

Superior Healthplan stands to lose its $900 million contract if the new Medicaid bids are finalized, a move expected later this year.

The competing bidders who are complaining about Aetna’s potential unfair advantage say the responsibility for that imbalance lies with the state, not with Aetna, which made a legal and publicly available request for the documents through the proper channels.

But at present, Aetna Better Health Texas is set to win seven new Medicaid contracts once the state finalizes its awards, which were announced March 7. Because records related to the bid evaluations are largely being withheld by the state, it is unclear whether or how any of that information might have been used during the decision-making process.

So far, eight insurance plans have filed protests in response to the state’s intent to award the new six-year contracts to Aetna and other winners, one of which is brand new to Texas Medicaid. Each of those contracts can be extended up to a total of 12 years.

The list of winning bids shocked many in the health care community because it dropped three Texas children’s hospital-affiliated plans — in Fort Worth, Houston and the Rio Grande Valley — in favor of competitors new to either the region or the state Medicaid programs. It also gutted the coverage areas of some long-standing for profit plans, including WellPoint and Superior.

On Wednesday, Superior Healthplan asked a Travis County district court to compel Texas HHS to release scoring, evaluation notes, audio and video and other records related to the procurement, signaling a contentious battle ahead.

The ‘error’

Medicaid in Texas provides health insurance for more than 4 million people, mostly mothers and children. HHS manages the program but pays contractors to handle individual billing and payments to medical providers.

Each time the state has to reassess and collect new bids from companies that will actually issue insurance coverage to these residents, it can bring a cutthroat battle between companies and the state over who will win those multibillion contracts.

As part of any contract process, companies routinely look for advantage. And one way is by filing open records requests to a state agency to get a handle on what competitors are proposing.

It’s a perfectly legal move to request the documents through public information channels, and the onus is on the state to determine if it’s appropriate to release them.

But during this STAR/CHIP contracting round, those documents were released before the bid winners were announced – and indeed before the competitors had even been interviewed by the state’s evaluation teams – and that has resulted in the losing companies crying foul.

The Aetna request was made in August, long before the awards were announced last month, emails between Aetna representatives and Texas Health and Human Services show.

One other Medicaid contract bidder received the same records in October, but Aetna was the only bidder to receive them while the companies were still presenting their cases to the evaluation team. Another requestor, a research clearinghouse with no affiliations to any bidders, received the records in August as well.

By the time the records were released, scoring on the written questions — the answers to which were in the proposals — had already been completed. Oral presentations — hours-long interviews before a panel of evaluators that were part of the scoring process — did not conclude, however, until mid-October.

In January, HHS notified all three companies to “destroy” the documents because they were “sent to you in error as this procurement is still in the open stage.” The email said that once the state announced who they intended to award the contracts to the following month, they would re-release those documents.

Curiously, the error was made despite two Texas attorney general rulings that stated the agency had grounds to hold records private until after the procurement process because releasing them could unfairly affect the outcome.

“The agency’s misconduct created an unlevel playing field that advantaged one competitor to the detriment of all others in this procurement for the largest state contracts in Texas,” Superior attorneys wrote in the April letter. “The only appropriate remedy is to cancel … and start over. Any other response would simply be a waste of taxpayer dollars and government resources in a misguided attempt to defend HHSC’s indefensible actions.”

Agency officials said Monday that the records contained no confidential information and that it would be difficult to use the proposals effectively in the oral arguments because they are based on what the competitor had already asserted in their application packets.

"HHSC uses oral presentations in its procurement process to determine whether an MCO’s ability to quickly strategize and convey information in real-time aligns with the written proposal the MCO submitted to HHSC," officials said in the statement. "Access to the information contained in the redacted proposals has no impact on an MCO’s ability to describe its own services and operations in its oral presentation."

Aetna declined to comment specifically on the release of the records or the procurement.

“While we defer to the state of Texas to comment on its procurement process, we remain confident in Aetna’s ability to deliver excellent service and value across these Medicaid contracts,” according to a statement emailed to the Tribune by an Aetna spokesperson.

New contracts, new battles

In March, Texas HHS announced its intentions to drop children’s health plans that are run by three legacy children’s hospitals and award the majority of Medicaid STAR and Children’s Health Insurance Program contracts to national for-profit health chains.

More than a week ago, two major children’s hospitals that had previously held Medicaid insurance plan contracts but lost them this round, announced they would likely have to shut down those programs if the deals are signed.

Some 1.8 million Texans who receive Medicaid coverage from six managed care organizations – the health insurance providers that actually issue the coverage – across the state would lose their current health plans and be shifted to new insurers next year if the decision is finalized.

Lawmakers, angered at the plight of the children’s Medicaid plans, have called on HHS to delay the procurement so that they could strengthen laws governing the process and better protect high-quality legacy plans.

Officials with managed care organizations, or MCOs, who lost contracts said they were troubled by the possibility that information they had assumed would be kept private until the end of the procurement process could have been used to compete against them.

“We are aware of this situation and are deeply concerned about the questions this raises about the process," officials from Cook Children's Health Plan said in a written statement.

Officials at Driscoll Health Plan, which is likely to shut down if it loses its long-standing Texas Medicaid contracts, said they were stunned to learn that one of its competitors had gotten a look at their bid proposals while the plans were all still being evaluated.

They have already filed a protest saying that the new scoring system used in the evaluation phase was unfair, arbitrary, and did not take into account legally required quality measures, among other failures.

“For this procurement attempt to be riddled with so many substantive failures — including the failure to meaningfully evaluate the actual, historic performance of health plans and the failure to involve local community and stakeholder feedback in the selection process — that we believe the process is already fundamentally flawed,” said Craig Smith, Driscoll Health Plan’s president and CEO, in an emailed statement. “To now add such serious questions as to the procedural integrity of the procurement attempt, we believe unequivocally that it is due time to set this attempt aside.”

If the procurement is negated, it would be the third failed attempt in six years by Texas HHS to award contracts for the Medicaid programs that encompass the vast majority of state health insurance’s low-income Texas recipients.

If it stands, it would mean a reduction in the number of MCOs that administer STAR and CHIP, a shift toward for-profit companies in most areas of the state, a smaller number of top-rated plans administering care, and the introduction of new national plans to regions historically served by local MCOs.

Among those who would be affected are a collective 700,000 families, pregnant women and children covered by Cook Children’s Health Plan in the state’s Tarrant service area, Texas Children’s Health Plan in the Harris region, and Driscoll Health Plan in South Texas, all which formed when the CHIP program was created two decades ago.

Why so many contractors 

Texas Medicaid STAR and CHIP programs cover the cost of routine, acute and emergency medical visits. STAR is primarily for pregnant women, low-income children and their caretakers. CHIP provides health care to low-income children whose family’s income is too high for Medicaid, which has some of the lowest income limits in the country. Their members compose the vast majority of Texans on state Medicaid programs.

HHS contracts with health plans to provide, arrange, and coordinate preventive, primary, acute care, behavioral health, non-emergency medical transportation, and pharmacy covered services for pregnant women, newborns, children, and parents with limited income.

The state’s privatized Medicaid program divides the state into 13 service areas, and multiple contracts are awarded for each service area so enrollees can have a choice of plans, as required by federal law.

Texas law allows three two-year renewals on the six-year Medicaid STAR and CHIP contracts, which are combined into a single service contract so that every MCO that gets a STAR contract also gets a CHIP contract. After the contracts have been in place 12 years, HHS must run a new procurement.

The last completed STAR/CHIP procurement was in 2012.

When the health plan companies submitted bids beginning in 2022, they included redacted “Public Information Act” versions, or PIA copies, of their proposals in their application packets. The PIA copies are required per state law that mandates such information be made available to the public.

Companies were advised from the start that they should not include information in the PIA copies that they do not want released to the public.

But the state’s request for proposals did not specify when that information might be released. Texas law does not say explicitly that the state may not release the proposals while the competitors are still being actively evaluated or before the awards are announced.

Attorney General Ken Paxton's office gave HHS the authority to withhold procurement documents in two rulings last year specifically on the STAR/CHIP procurement — once in June and once in October.

Paxton said the state has the right to withhold procurement-related documents while it was still open “if a governmental body demonstrates that release of the information would harm its interests by providing an advantage to a competitor or bidder in a particular ongoing competitive situation.”

Two months after the first ruling, in late August, HHS released thousands of pages of redacted bid proposals by the 18 health plans to Aetna, according to emails contained in this week’s court filing.The companies’ oral presentations — hours-long, in-person interviews and presentations that were scored alongside the proposals as part of the overall evaluations — weren’t scheduled to end until Oct. 13.

The redacted copies that were released to Aetna contained answers to a list of technical questions posed to bidders as well as written arguments for why each company believed they should get or keep a contract.

The bids include sensitive information including company business and marketing strategies or what innovations the bidder has made in dealing with provider shortages — any and all of which can be discussed during the oral presentations.

Shortly before the orals came to a close in October, Paxton’s office issued the same ruling in response to a new inquiry by HHS. But a few days after the companies’ oral presentations were done, the agency released the redacted proposals to an attorney for the Houston-based Texas Children’s Health Plan.

Then in January, HHS attempted to claw them back from Aetna, TCHP and Health Management Associates, a health care consultancy and clearinghouse that routinely requests procurement records and also had received them in August.

Even without a state law regarding the timing of public information releases, the Texas Administrative Code instructs the state to “provide for consistent and uniform management and procurement and contracting processes,” in a “fair consideration of proposals.”

Scorned health plans argue that sending the competing bids, even the redacted ones, to a single competitor halfway through the procurement process runs counter to both of those ideas.

“HHSC’s disclosure to Aetna of its competitors’ proposals before the oral presentations and while the evaluation of proposals was ongoing destroyed any semblance of a level playing field and gave Aetna an unfair competitive advantage,” Superior attorneys wrote in the company’s protest.

Superior is taking HHS to court over the agency’s refusal to release dozens of additional records Superior officials requested in March and April after the contracts were announced — including audio and video of the oral presentations, scoring notes and meeting minutes, the identity of the people on the scoring teams who made the decisions, internal communications regarding the evaluation process, and similar information.

Superior argues that because the state already announced who would win the contracts, the competition was over and the records could no longer affect the outcome.

HHS, meanwhile, has asked Paxton for yet another opinion, this time regarding Superior’s request, arguing that the additional records would interfere with the negotiations, with potential litigation, or with the evaluation process should the procurement be canceled and the competitors forced to go through it again.

The current fight over public records in government contracts is not a new one to HHS. The agency’s record of refusing or delaying release of public information related to Medicaid contracts triggered a lawsuit in November of last year.

Wellpoint, a long-standing contractor of HHS, sued the agency over the $10 billion STAR+PLUS program and what the company, formerly known as Amerigroup, described its lack of effective due process in procurement and barriers to information that is legally public.

Wellpoint’s lawsuit also claims that the agency has withheld documents even after the Texas Attorney General directed HHS to produce them.

The agency uses the state’s open records law as both a sword and shield - delaying bidders’ access to critical information and evidence, and then summarily dismissing protests without proper consideration or justification because the protester failed to provide the very evidence that HHSC itself is withholding,” the lawsuit stated.

Disclosure: Amerigroup has been a financial supporter 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.

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