Iowa offers Medicaid insurers a hand when it comes to losses

Correspondence shows two insurers had 'deep concerns' over program's future

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Financial strains the three private insurers managing the state’s nearly $5 billion Medicaid program are experiencing are leading the state to step in to help cover the losses.

Correspondence from December 2016 between the Iowa Department of Human Services and the three managed-care organizations, obtained by The Gazette through a public-records request, reveals the state is establishing risk corridors for the Iowa Health and Wellness Plan — or Medicaid expansion population — as well as for the long-term services and supports population, one of the most costly group of beneficiaries.

A risk corridor is a program in which the government steps in to help protect insurers from unexpectedly high losses by paying the difference if an insurer spends more in medical care than it collects in revenue. However, if the insurers bring in more than the state anticipates in revenue, Iowa then can recoup the money.

All three companies have reported losses in excess of $100 million during their first year of operation in Iowa, with AmeriHealth Caritas Iowa suffering the greatest loss of nearly $300 million. Amerigroup Iowa reported a loss of $133 million, and UnitedHealthcare of the River Valley said it lost more than $100 million.

Amy McCoy, Iowa DHS spokeswoman, said in an email that risk corridors help protect the program and allow it to be sustainable for Medicaid members.

“The corridors address the populations with the most uncertainty establishing fiscal guards protecting taxpayer dollars,” she wrote. “That includes (Iowa Health and Wellness Population) — for which there was limited experience to base rates, and long-term services and supports, which requires intensive management of care.”

McCoy said the state is reviewing actual experience to provide sound rates for the Medicaid system while also working to control costs.

“We fully anticipate (the federal Center for Medicare and Medicaid Services) approval of the amendments, and we continue to work collaboratively with the plans to achieve our shared goals of a sustainable program that helps Iowans become healthier and/or remain stable in their condition,” she wrote.

The risk corridors would have no impact on the state’s current budget, the state said. That is expected to be felt in fiscal year 2019 after providers have filed claims and the state has conducted an analysis.

McCoy said the state estimates it has about $10 million at stake in the risk arrangement.

The insurers and the state have disputed the soundness of rates since the start of the transition to Medicaid managed care, nearly one year ago. In records first reported by the Des Moines Register, the MCOs called the program “drastically underfunded,” while the state maintains the rates are actuarially sound.

The financial losses prompted both Amerigroup and UnitedHealthcare to write to CMS on March 1 to express “deep concerns about the sustainability and viability” of the Medicaid program in Iowa, records show.

“Unfortunately our emerging experience in Iowa indicates an unsustainable situation with regard to the capitation rates initially established for the program and approved by CMS,” the two companies wrote.

Meanwhile, the financial strains pushed AmeriHealth to ask the state for “immediate, voluntary suspension of enrollment,” the records revealed, as well as ask the state to redistribute its more costly beneficiaries to the other two insurers. The state denied both requests.

“We believe we are at or beyond capacity for the risk that rates are able to sustain,” AmeriHealth Caritas Iowa’s Market President Cheryl Harding wrote Feb. 3 to Iowa Medicaid Enterprise Director Mikki Stier.

This was about the same time the insurer announced a series of changes to better control costs, including moving case management services in-house and cutting reimbursement rates to home and community based services providers.

AmeriHealth has the highest number of Medicaid enrollees, with more than 212,000 beneficiaries compared with Amerigroup Iowa’s 186,000 and UnitedHealthcare of the River Valley’s 168,000, according to the most recent DHS quarterly report.

The insurer also has the biggest share of the state’s special-needs population — with more than 23,300 beneficiaries receiving long-term services and supports, compared with Amerigroup’s 7,600 and UnitedHealthcare’s 6,200. Long-term includes elderly Medicaid beneficiaries as well as those with disabilities receiving waiver services.

“Based on its over 30 years’ experience in risk-based Medicaid programs, AmeriHealth Caritas knows that risk-adjusted rates are not sustainable if one MCO has a disproportionate share of the membership,” Harding wrote in a second letter on Feb. 15.

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