A company that wants to continue managing health care plans for Nebraska Medicaid recipients is taking the state to court after losing its bid.

Aetna Better Health of Nebraska claims state officials unfairly withdrew its initial contract award in exchange for a different managed care organization that shouldn't have qualified in the first place.

State officials said they are in the best position to determine what's good for Nebraskans, calling the selection process impartial and designed to benefit taxpayers, not individual bidders.

Aetna wants the decision reversed, its lawyers say in a complaint filed Tuesday in Lancaster County District Court.

The company is fighting for a share of nearly $1 billion in long-term contracts to serve some 230,000 Medicaid recipients — possibly the state's largest-ever contract procurement.

Those contracts will determine which plans are available to Medicaid and Children’s Health Insurance Program participants under Nebraska's new managed care program, called Heritage Health. The program launches next year and is designed to cover each patient under a single plan, rather than separate plans for physical and behavioral health.

Six managed care organizations, including Aetna, applied last year to make their options available in Nebraska. When the state Department of Health and Human Services selected three winners this year, Aetna didn't make the list.

The company has operated in Nebraska for five years and already manages plans for about 105,000 Medicaid recipients here.

It earned the state's initial recommendation in February, but the Department of Administrative Services, which helps oversee state contracts, rescored the proposals following complaints by losing bidders. That caused a different managed care provider, WellCare, to come out ahead.

"Heritage Health is an important and exciting transformation of our Medicaid delivery system, and we understand that Aetna was disappointed in the outcome of the competitive process," HHS spokeswoman Kathie Oesterman said in an email. "We are confident that the process was fair and hopeful that the facts support a quick dismissal of this lawsuit so that our resources can be focused on improving our programs that serve Nebraskans."

In an emailed statement, Aetna questioned why the state would ultimately pick a less-familiar company over a "highly qualified" managed care organization that already has relationships with patients and providers in Nebraska.

The decision "jeopardized the state of Nebraska's ability to satisfy the basic needs of hundreds of thousands of its most vulnerable citizens," Aetna's attorneys wrote in their complaint.

State officials have dismissed that argument.

"Incumbents are not entitled to favoritism or preference," Bo Botelho, deputy director for Administrative Services, wrote to Aetna's lawyers after they challenged the decision through an internal process in March.

Aetna's complaint lists Administrative Services and HHS as defendants, along with HHS CEO Courtney Phillips, state Medicaid Director Calder Lynch, Botelho, Administrative Services Director Byron Diamond and Attorney General Doug Peterson.

Aetna contends the state's rescoring process was flawed, ignored standard procedure and violated the law. The company also claims state officials infringed on its constitutional due process rights by contracting with WellCare and two other organizations before Aetna could fully protest the decision.

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Among Aetna's complaints about the scoring process:

* The five-person committee chosen to determine the new scores included a pair of Administrative Services employees who had no experience with Medicaid managed care and had never reviewed bids for state contracts before.

* That committee was given just 48 hours to review and rescore 1,500 pages of proposal materials, when the original scoring took a different committee nearly three weeks.

In addition, Aetna says WellCare shouldn't qualify for the contracts because of legal issues it has encountered in other states, and because it will use subcontractors in India to process claims.

A WellCare representative couldn't be reached for comment late Wednesday.

The state already rejected many of Aetna's arguments after it protested to Administrative Services in March.

State policy gives agencies discretion in awarding contracts, Botelho wrote in an April letter to Aetna's lawyers. He said only contractors themselves must be within the United States.

Aetna's argument that the rescoring committee didn't have enough time to do its job correctly is merely "their perception," Botelho told the Journal Star on Wednesday.

"We believed it was sufficient time," he said.

Reach the writer at 402-473-7234 or zpluhacek@journalstar.com. On Twitter @zachami.


Assistant city editor

Zach Pluhacek is an assistant city editor.

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