Arizona’s Coverage Cliff: Three Payer Exits, 2,792 Layoffs, and Families Losing Access To ABA Services

Three Payers, Two Providers, One Crisis

PHOENIX, ARIZONA — Between November 2025 and March 2026, three of Arizona’s Medicaid managed care organizations terminated contracts with the state’s two largest ABA therapy providers, Action Behavior Centers and Centria Healthcare, in a sequence of decisions that left nearly 1,000 children at risk of losing access to care. The terminations were not coordinated in a single policy action. They arrived separately, each compounding the last, and together they produced a coverage cliff that is now the subject of two lawsuits, a class action filing, a Capitol rally, and an unresolved debate about whether Arizona’s Medicaid program can enforce its own network adequacy standards.

The sequence began in late 2025 when Mercy Care, a not-for-profit AHCCCS managed care organization owned by Dignity Health and Ascension and operated under a management agreement with Aetna, terminated contracts with both Action Behavior Centers and Centria Healthcare after a reimbursement dispute. Mercy Care had reduced Centria’s contract payments by 15 percent in July 2025, then imposed a further 25 percent reduction effective October 1, 2025. When Centria proposed counteroffers, including accepting a smaller cut and tying payments to clinical performance metrics, Mercy Care declined to continue negotiations and emailed a termination notice on October 17, 2025. The final termination date was set for March 5, 2026. Mercy Care also terminated its contract with Action Behavior Centers under similar circumstances.

Arizona Complete Health, a Centene subsidiary and one of the state’s largest AHCCCS Medicaid plans by enrollment, separately terminated its contract with Action Behavior Centers around the same time. ABC staff allege that Arizona Complete Health terminated the agreement without cause, according to reporting by the Arizona Capitol Times.

Then, in January 2026, UnitedHealthcare Community Plan announced it would also drop Action Behavior Centers from its Arizona network, effective March 1, 2026. UnitedHealthcare told AZFamily that the company “regularly reviews and refines providers to align with state and federal requirements.” The UHC decision affected families like Sean Markle’s, whose six-year-old son Jett, diagnosed with autism at age two and largely nonverbal, had been receiving ABA at an ABC center for years. Markle had already received a termination letter from Mercy Care in December; the UHC notice was the second disruption in weeks.

“AHCCCS’ decision to allow these private insurers to place their own profits over the treatment of low-income kids with autism is shocking. These companies have never retained enough autism providers for Medicaid beneficiaries, and waiting lists for families with autistic children were already way too long.” — Tim Nelson, attorney for the plaintiff families

The Class Action

On February 6, 2026, parents of 11 children with autism spectrum disorder filed a class action lawsuit against AHCCCS in Maricopa County Superior Court. The complaint alleges that AHCCCS unlawfully approved the managed care organizations’ decisions to eliminate in-network coverage for Action Behavior Centers and Centria Healthcare, in violation of state and federal law requiring adequate provider networks for Medicaid beneficiaries. The suit asks the court for an immediate injunction to suspend or reverse AHCCCS’s approval.

The class action is the second lawsuit over the Arizona ABA terminations. The first, filed on December 15, 2025, was brought by Centria Healthcare and two families against AHCCCS, Mercy Care, and the Arizona Department of Economic Security. Both suits allege that the terminations violate the federal Medicaid Act’s requirements for network adequacy and continuity of care. Attorney Tim Nelson, representing the 11 families in the class action, told the court that waiting lists for ABA providers in Arizona already exceeded the state’s own 45-day access mandates before the terminations. “Many providers’ waitlists far exceed those limits,” he said. “Continuity of care is critical for children with autism, who often struggle to cope with even minor changes in established routines.”

AHCCCS has defended its actions by arguing that the agency does not intercede in contract negotiations between its managed care organizations and individual providers. Agency spokesman Johnny Cordoba told the Arizona Capitol Times that “managed care organizations have discretion to manage their provider networks, provided they ensure members have reasonable and timely access to covered healthcare services.” In court filings, AHCCCS attorneys argued that Mercy Care has openings for more than 1,000 members through its remaining network of over 70 ABA providers, and characterized the families’ objections as “emotionally charged preferences” that “do not rise to the level of irreparable injury.”

Attorneys for the families responded that the resistance to switching providers is not merely a preference. The class action argues that logistical barriers, including transportation, a lack of providers with openings in rural areas, and reduced service hours, make the alternatives functionally unavailable. Attorney Michael Easley Jr. raised the issue of ghost networks, telling the Arizona Mirror that some managed care organizations intentionally list providers in their directories who have no openings, do not accept Medicaid, are closed, or cannot provide the services listed. “The more therapies provided to each client, the less money the managed care organization makes,” Easley said, “and ABA therapy is expensive.”

“This is not a luxury. This is the difference between a child thriving and a child disappearing back into silence.” — Elizabeth Galvez, mother of three boys with autism, two of whom were nonverbal before ABA therapy

The Arizona Autism WARN Notice

Layered on top of the network terminations is a separate but related event: the restructuring of Arizona Autism Pediatric Therapy Specialists, a Phoenix-based provider that filed a WARN notice on October 30, 2025, signaling that up to 2,792 employees may be affected by a reduction in workforce. The WARN filing was the second-largest in the country for October 2025. Arizona Autism operates four ABA centers, in-home pediatric care, in-home therapy, group homes, and developmental homes.

CEO and co-owner Ryker Martin said in an unlisted YouTube video that the company is transitioning its home- and community-based services workers from employees to independent contractors. Martin described the move as offering “more independency and flexibility,” but the shift eliminates the company’s obligations for payroll taxes, health insurance, minimum wage protections, overtime, and workers’ compensation. Martin had previously warned of potential layoffs at a rally outside the Arizona Capitol in September 2025, citing state and federal funding challenges for the Division of Developmental Disabilities.

Arizona Autism said in a public statement that it “recently completed a strategic review of its operations in light of evolving market conditions” and that “targeted organizational adjustments are necessary to align our service model.” The company added that it does not “anticipate material disruption to our services.” For families who depend on Arizona Autism’s in-home care, the restructuring creates uncertainty about whether their children’s therapists will continue under the new contractor model, and whether the quality and consistency of services will be maintained.

The Reimbursement Dispute and Ghost Networks

The proximate cause of the Mercy Care terminations is a reimbursement rate dispute. Mercy Care sought to reduce ABA provider rates by 25 percent. Centria’s lawsuit states that when the company explained the cut was “unsustainable” and “would detrimentally affect available services,” Mercy Care “abruptly terminated its contract with Centria without cause.” Mercy Care told media it “negotiated in good faith but have not been able to reach an agreement” and said it is confident families can find care among its “70-plus remaining in-network ABA providers statewide.” A Mercy Care spokesperson characterized the decision as “made thoughtfully and in alignment with our responsibility to members and network standards.”

The claim that 70-plus ABA providers remain in network is central to AHCCCS’s defense. But the class action argues the number is misleading. Families who spoke at the March 5 Capitol rally described alternatives that are geographically inaccessible, have year-long waitlists, or do not provide the same intensity of services their children need. In at least one case reported by KTAR, an Arizona mother canceled her own health insurance policy to afford the $600 per month it costs to continue ABA therapy for her son out of pocket. Centria reported that at least 260 families were using its services through Mercy Care alone. Action Behavior Centers said it has provided care for thousands of Mercy Care members with autism since 2020.

The PE ownership of the two dropped providers adds a business dimension. Action Behavior Centers, founded in Austin in 2016, is owned by Charlesbank Capital Partners, a Boston-based PE firm that acquired ABC from NexPhase Capital in 2022 at an $840 million valuation. ABC operates more than 200 centers across six states and employs over 1,200 board-certified behavior analysts and clinical psychologists, supported by more than 8,000 paraprofessional behavior technicians. Centria Healthcare, headquartered in Farmington Hills, Michigan, is one of the largest national ABA providers. Both companies have the scale and multi-state optionality to absorb an Arizona contraction. The smaller, independently owned ABA providers that remain in the Mercy Care network may not have the financial resilience to absorb displaced patient volume at the rates Mercy Care is offering.

Where Things Stand

As of this writing, the contract terminations have taken effect. Mercy Care dropped Centria effective March 5, 2026. UnitedHealthcare dropped ABC effective March 1. Arizona Complete Health terminated its ABC contract separately. Centria confirmed it is no longer contracted with Mercy Care but remains in network with other AHCCCS managed care organizations. Action Behavior Centers’ network status continues to shift across individual MCOs.

The class action was pending a ruling on the injunction request in early March, with a decision expected from Maricopa County Superior Court Judge Michael Herrod. As of mid-May 2026, the outcome has not been publicly reported in Arizona media. The first lawsuit, filed by Centria and two families in December 2025, also remains active. Both cases ask the court to compel AHCCCS to hold its managed care contractors accountable for network adequacy standards.

The Arizona situation is structurally distinct from the rate reductions in New York, Georgia, Nebraska, and Indiana. In those states, a state Medicaid agency or managed care organization cut reimbursement rates across the board. In Arizona, the managed care organizations terminated contracts with specific providers after failing to reach agreement on rate cuts, then asserted their remaining networks were adequate. The result is not a general rate reduction but a targeted elimination of the two largest ABA providers from major payer networks, concentrating market power in remaining providers while reducing overall capacity to serve Medicaid-enrolled children with autism.

For the nearly 1,000 families affected, the practical consequence is the same as a service termination: their children have lost access to established providers, face waitlists that exceed state-mandated timelines, and have no guarantee that alternative providers can deliver comparable care. The class action, the Capitol rally, and the ongoing litigation represent the most organized legal challenge to a Medicaid ABA network adequacy decision in the country. Whether the court intervenes or AHCCCS revises its oversight approach will set a precedent that other states, payers, and providers are watching closely.

The convergence of events in Arizona is unique in the national ABA landscape. Other states have experienced rate cuts, provider exits, or workforce reductions individually. Arizona is experiencing all three simultaneously, and from different directions. The Mercy Care and Arizona Complete Health terminations removed the two largest ABA providers from the two largest payer networks. The UHC termination added a third payer to the list. The Arizona Autism WARN notice reduced the state’s independent provider workforce by nearly 2,800 positions at the same moment demand was being redirected from the terminated providers to whoever remained. The timing was not coordinated, but the compounding effect is worse than any single event would have been.

The DDD funding context adds another layer. Arizona’s Division of Developmental Disabilities, which operates under AHCCCS, has seen enrollment growth that outpaced budgeting in recent years. In the 2025 legislative session, lawmakers funded DDD but imposed cuts and additional oversight requirements. Many of those guardrails had not been implemented as of early 2026, according to the Arizona Mirror. The DDD funding pressure is the backdrop against which Mercy Care sought its 25 percent rate reductions from Centria and the backdrop against which Arizona Autism warned its workforce of potential restructuring. The managed care organizations are operating under capitated payment models where they receive a fixed monthly amount per enrollee. When the cost of ABA therapy increases but the capitated rate does not keep pace, the MCO’s incentive structure shifts toward reducing provider costs or terminating high-cost contracts.

For the PE-backed providers at the center of the dispute, the Arizona situation represents a specific category of market risk: the risk that a single managed care organization, exercising contractual discretion, can unilaterally restructure an entire state’s ABA access landscape. Charlesbank Capital’s investment thesis for ABC, and the broader PE thesis for multi-state ABA platforms, depends on the stability of payer relationships. When three MCOs in a single state terminate in rapid succession, the disruption extends beyond the immediate financial impact. It raises due diligence questions about payer concentration risk, network adequacy enforcement, and the willingness of state Medicaid agencies to intervene when managed care organizations make decisions that compromise access.

The families who rallied at the Capitol on March 5 put individual faces on the aggregate data. Kim Powell’s four-year-old son Teddy was nonverbal before beginning ABA therapy. By the time of the rally, he could spell his name into a microphone. Melissa Fernandez’s five-year-old son Colin, diagnosed with Level 3 autism at age two, had made what she called transformative progress with ABA. Elizabeth Galvez, mother of three boys with autism, two of whom were nonverbal before therapy, described ABA access as “the difference between a child thriving and a child disappearing back into silence.” These are not edge cases. They are representative of the roughly 1,000 families whose children’s care was disrupted by decisions made in contract negotiations they were not part of and had no ability to influence.

As AHCCCS develops its response and the courts consider the injunction requests, the Arizona experience is being watched by managed care organizations, ABA providers, PE firms, and state Medicaid agencies nationwide. The central question is whether a state Medicaid program can effectively outsource network adequacy to managed care organizations while simultaneously claiming it has no role in the decisions those organizations make about which providers to retain. The families’ attorneys argue that AHCCCS’s approval of the terminations is itself an act that triggers state and federal liability. AHCCCS argues the opposite: that approval is ministerial and the agency cannot reinstate contracts. The resolution of that question will define the boundaries of Medicaid network adequacy enforcement for ABA services in Arizona and potentially in every other state that relies on managed care to deliver behavioral health benefits.

AT A GLANCE

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