In response to recent and upcoming Medicaid policy changes, CalOptima Health said it is tapping nearly $430 million of its reserve funds to boost its payments to hospitals and specialists over the next 30 months.
CalOptima is a publicly funded Medicaid insurer that covers nearly 830,000 low-income residents of Orange County, California. Its rate decision, which takes effect July 1 and runs through Dec. 31, 2028, comes about two years after the publicly funded Medicaid insurer had approved another large-scale rate increase of $526.2 million.
Both rate increases were made to bolster the financial stability of providers staring down reduced payments through Medi-Cal (California’s Medicaid program) and an influx of patients who no longer qualify for safety-net coverage, the insurer said.
The elevated specialty provider rates will also keep the health plan’s contracting competitive, helping it retain or attract physicians in hard-to-recruit specialties, it said. The insurer’s network currently includes 9,600 primary care doctors and specialists as well as 43 acute and rehab hospitals.
“As a Board, we made a concerted effort to increase our reserves in anticipation of growing pressures on our healthcare system, knowing we would need the flexibility to support the providers and hospitals who serve CalOptima Health members every day,” said CalOptima Health Board Chair and Orange County Supervisor Vicente Sarmiento in the announcement.
“This investment reflects our commitment to our medical partners and our confidence in their vital role in serving our communities. I know this won’t solve all the issues they are facing, but it will offset some of the reductions, impacts and challenges affecting the healthcare industry right now.”
Last summer’s One Big Beautiful Bill Act includes sweeping funding and eligibility changes for Medicaid. Adjustments to provider taxes and state-directed payments ramping up in the coming years have introduced funding shortfalls that are prompting states, including California, to make cuts. Stricter coverage eligibility stemming from work requirements are also expected to heavily reduce enrollment and increase uninsurance. California’s health agency has estimated as many as 2 million Californians could lose state Medicaid coverage due to the bill’s changes.
Sara May, regional vice president of the Hospital Association of Southern California, noted in CalOptima’s rate announcement that almost half of Orange County’s hospitals operated at a loss prior to the policy changes.
“We thank CalOptima Health for taking action that supports hospitals and protects access to emergency and specialty care for Orange County residents,” she said.