Underfunding, other program challenges led to UnitedHealthcare's exit, executive says

Medicaid insurer expected to leave state program June 30

As Iowans brace for another upheaval in the state’s Medicaid managed-care program, state officials and insurance executives still disagree why the partnership to provide health care for Iowa’s poor and disabled fell through.

The loss of millions of dollars due to underfunding of Medicaid put long-term sustainability in question for UnitedHealthcare of the River Valley, which led to the insurer’s decision Friday to exit Iowa’s Medicaid program, said Bror Hultgren, senior vice president of the UnitedHealthcare Community Plan of Iowa, in an interview with The Gazette.

However, state officials maintain that the managed-care organization decided it would depart the program because it did not want to be held accountable to Iowa’s standards.

Iowa DHS Shows United HealthCare Group Letter by Gazetteonline on Scribd

“We decided that it was not in the best interest of the state or the Iowans who are on Medicaid to continue them in this market. We didn’t think it was appropriate for them to stay here,” Department of Human Services Director Jerry Foxhoven said at a news conference Monday afternoon. “We came to that conclusion early afternoon on Friday and we announced that right away.”

Last week, when reporting the Edina, Minn.-based managed-care organization’s intention to leave Iowa’s program, Foxhoven said contract negotiations with the insurer stalled after UnitedHealthcare protested performance metrics set by state officials.

According to the state, the managed-care organization faced financial penalties for this fiscal year for not meeting performance metrics. The program’s metrics include requirements such as reducing emergency room visits by members and paying providers accurately and on time.

In the Monday news conference, Foxhoven echoed these statements and presented a March 27 letter sent to Iowa Medicaid Enterprises from UnitedHealthcare’s Hultgren. In it, the company requested Iowa Medicaid Enterprises “waive all pay for performance requirements” for state fiscal year 2019, “assuming a 100 percent return of the withhold.”


Gov. Kim Reynolds said in a statement Friday she ended negotiations with UnitedHealthcare due to “unreasonable and unsustainable” demands.

“Unfortunately, UnitedHealthcare continued to make additional demands that I found to be unacceptable, including a provision that would remove pay for performance measures that would hold them accountable,” she said in the statement.

Foxhoven on Monday said the decision to end negotiations with UnitedHealthcare was a good one.

“I think that this shows the strength of our program that the governor was willing to say, ‘You know what, if you don’t want to meet the performance measures that we’ve required, that you’ve contracted to do, then we’re not going to bend over backward to keep you in this state.’”

But Hultgren — who had been UnitedHealthcare interim CEO last year — told The Gazette that pay-for-performance “is absolutely, positively not the reason why we exited.”

“The reason we exited was relative to the sustainability of the program going forward,” he said.

The insurer met 99.7 percent of the programs performance measures and was on track to achieve “the vast majority of performance measures this year,” UnitedHealth care said in a statement sent to The Gazette.

Money was an issue during contract negotiations, Foxhoven acknowledged, but said it’s “just dead wrong” for UnitedHealthcare to say the issue wasn’t on the pay-for-performance metrics.

“It’s millions of dollars,” he said. “... It’s totally untenable for them to say that isn’t a big point, and they know that was a huge position of the governor and of mine that the (managed-care organizations) must be held accountable.”


Hultgren maintained that issues with the state went far beyond the pay-for-performance metrics.


“The reason for that exit really comes down to what has been material underfunding of the Medicaid program since it started,” Hultgren said.

UnitedHealthcare had lost $250 million since joining the market in April 2016, he said. It was projected to loose another $150 million this fiscal year due to incoming changes to the Medicaid program.

With the new managed-care organization Iowa Total Care slated to join the program July 1, the state was preparing to redistribute members across all managed-care organizations — a move that “would create significant risks” for UnitedHealthcare, Hultgren said.

“That’s not something we can continue to sustain and continue to provide high-quality health care to the people of Iowa,” he said.

Underfunding has been a continual concern for the managed-care organization, and one officials have had “many, many discussions” with the state of Iowa.

“We certainly appreciate the work of the governor and the administration to begin to try to address some of that underfunding in last year’s state fiscal year,” Hultgren said. “However, the underfunding is continuing.”

UnitedHealthcare was paid about $2 billion in state and federal dollars last year as a managed-care organization, according to Iowa Medicaid Enterprises.

“We have engaged in extensive discussions with your office over the last several months to address the program’s funding level and methodology to ensure the viability of the Medicaid program,” said UnitedHealthcare CEO Alissa Weber in a notice-of-intent-to-exit letter sent to the state Friday and obtained by The Gazette.


“During those discussions, UnitedHealthcare learned about the state’s significant member redistribution decision, leaving those of us who have cared for Iowans most in need of health care services with materially inadequate funding,” Weber wrote. “UnitedHealthcare repeatedly expressed concern over the state’s rate development process, as well as the state’s failure to follow-through with prior commitments to us to manage the overall sustainability of the program.”

The insurer manages health coverage for about 427,000 individuals, or nearly 70 percent of those who rely on Medicaid to pay for their health care in Iowa.

UnitedHealthcare officials plan to withdraw from the program on June 30, a day before a new-to-Iowa managed-care organization — Iowa Total Care, owned by St. Louis-based Centene — is scheduled to take on Iowa Medicaid members.

Amerigroup Iowa continues as the sole managed-care organization in the state’s program since it was implemented in April 2016.

UnitedHealthcare is the second managed-care organization to retreat from the state’s program. It follows AmeriHealth Caritas’s lead, which exited the program in December 2017 “after months of negotiations yielded no agreement on contract rates and terms,” according to a statement released at the time.

AmeriHealth, which had the highest number of Medicaid enrollees, also saw steep financial losses in Iowa’s program. According to Iowa Insurance Division financial disclosures, AmeriHealth reported a loss of $133 million in the first year of operation and an additional $65 million by June 2017.

Hultgren emphasized funding challenges did not reflect on UnitedHealthcare’s care for members and provider networks, and did not drive any clinical- or provider-related decisions.


Looking forward to July, Hultgren and Foxhoven emphasized the insurer and the state were committed to ensuring a smooth transition for UnitedHealthcare members to other insurers.


State Auditor Rob Sand, a critic of Iowa’s Medicaid managed-care program, told a Statehouse news conference on Monday that contract provisions between private insurers and the state ensure the rights of the Medicaid patients are preserved, that health care providers in Iowa are fully paid and that taxpayer dollars are protected during this transition period.

The Democratic state auditor said many Iowans are concerned about the status of their health care going forward and he called for Department of Human Services officials to establish a liaison as soon as possible who can maintain accountability as well as promote an orderly transfer of patient care and patient records to providers throughout the transition process.

Iowa House Democrats, meanwhile, called for an end to Medicaid privatization, offering up two amendments for consideration at the Legislature. The first would move the long-term-needs population of Medicaid under fee-for-service managed by the state, and the second would end Medicaid privatization by the end of the fiscal year, according to a news release.

“With 425,000 Iowans facing another disruption in their health care, it’s time for the Iowa Legislature to act now and end Medicaid privatization. The failed leadership of the Reynolds Administration is putting real lives at risk,” said Rep. Lisa Heddens, D-Ames. ranking member of the House Human Services Budget Subcommittee.

Gazette Des Moines Bureau reporter Rod Boshart contributed to this article.

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