The Medicaid Health Plan Secondary Carve-Out Market Landscape – The OPEN MINDS 2017 Annual Update: An OPEN MINDS Market Intelligence Report


In a primary behavioral health carve-out, a state Medicaid program delegates some or all behavioral health benefits to a separate management entity. In a secondary carve-out, Medicaid contracts with a health plan to manage all benefits, including behavioral health. The health plan then sub-contracts with another organization (a behavioral health care management organization) to manage behavioral health services. Management of behavioral health services can include provider organization credentialing, network management, prior authorization, and claims processing. Within the secondary carve-out, a health plan can either use a plan subsidiary to manage benefits or contract with an unrelated external organization.

In 2017, there are 38 states with 312 health plans and more than 450 contracts to provide Medicaid managed care services. Of those 38 states, four (Maryland, New Jersey, Pennsylvania, and Utah) had primary behavioral health carve-outs where are all services except those provided in a primary care setting were excluded from the health plan’s capitation rate. Due to the very limited nature of behavioral health services provided by the health plans, these states were not included in analysis.

Remaining were 34 states with 286 health plans and more than 400 contracts. Of these health plans, 40% (or 113) had a secondary carve-out and 60% (or 173) did not, instead using an internal unit or department for managing behavioral health services. Of those health plans with a secondary carve-out, 60% (or 68) had an external behavioral health vendor and 40% (or 45) had a subsidiary acting as the behavioral health vendor.

The report includes:

  • An in-depth overview of the different types of carve-outs, including primary, secondary, and secondary sub-types.
  • A strategic market landscape overview with key stats on the use of secondary carve-outs
  • The number of lives covered under secondary carve-outs
  • A state-by-state directory of the health plans with secondary carve-outs and their behavioral health organization
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