Low rates could drive in­sur­ers from Med­i­caid man­aged-care plans

Modern Healthcare - - NEWS - By Vir­gil Dick­son

Sev­eral states soon may see an ex­o­dus of man­aged Med­i­caid plan in­sur­ers if they don’t in­crease rates to help com­pa­nies off­set ris­ing ad­min­is­tra­tive costs, ac­cord­ing to a new re­port.

More than 50 mil­lion Med­i­caid ben­e­fi­cia­ries in 39 states re­ceive health­care through man­aged-care pro­grams, but many states aren’t pay­ing in­sur­ers enough money to gen­er­ate an ad­e­quate mar­gin on that busi­ness. Un­less states in­crease Med­i­caid in­sur­ance com­pa­nies’ rates, in­sur­ers may have to re­think man­aged care al­to­gether, ac­cord­ing to a re­port from the So­ci­ety of Ac­tu­ar­ies.

Na­tion­ally, man­aged Med­i­caid mar­gins—the dif­fer­ence be­tween rev­enue and ex­pense—av­er­age around 2%, ac­cord­ing to the re­port. Al­though there’s a temp­ta­tion to call that amount profit, that’s not the case, ac­cord­ing to Sara Teppema, the re­port’s co-au­thor and an ac­tu­ary for Blue Cross and Blue Shield of Illi­nois, Mon­tana, New Mex­ico, Ok­la­homa and Texas.

“It’s about a lot more than just profit,” Teppema said. “There are other things that have to be fac­tored in when we’re talk­ing about mar­gins.”

That in­cludes, for ex­am­ple, in­come taxes and funds to cover un­ex­pected ex­penses, such as a pub­lic health crisis. Com­pa­nies also have had to dip into their mar­gins for tech­nol­ogy to com­ply with new al­ter­na­tive pay mod­els or Med­i­caid re­quire­ments, the re­port said.

“States need to un­der­stand that in­sur­ance com­pa­nies are foot­ing the bill for extra costs,” said Dr. Don McCanne, a se­nior health pol­icy fel­low at Physi­cians for a Na­tional Health Pro­gram, an ad­vo­cacy or­ga­ni­za­tion.

The re­port, which in­cluded data from the Na­tional As­so­ci­a­tion of In­sur­ance Com­mis­sion­ers’ an­nual fil­ings, did not break down ac­tual profit num­bers since that in­for­ma­tion isn’t dis­closed on those re­ports.

“With­out pro­vid­ing an op­por­tu­nity for sus­tain­able mar­gins, states would not at­tract and re­tain man­aged-care or­ga­ni­za­tions in their pro­grams and would be forced to forgo the (sav­ings) that the model prom­ises to de­liver,” the re­port said.

Some states are al­ready see­ing the im­pact of those un­sus­tain­able rates. Min­nesota faced a set­back late last year when Med­ica an­nounced it would not con­tinue its man­aged plan in 2017. Med­ica’s can­celed plan cov­ered more than 300,000 ben­e­fi­cia­ries.

Of­fi­cials at Med­ica said they felt they had no choice but to exit the mar­ket. The com­pany lost $187 mil­lion in 2016 and es­ti­mated it would have lost an­other $100 mil­lion had it stuck around in 2017.

“If we ac­cepted the state’s fi­nal of­fer, we would put the or­ga­ni­za­tion’s sol­vency at risk,” Greg Bury, a spokesman for the com­pany, said in a state­ment. “While serv­ing Med­i­caid en­rollees is an im­por­tant part of who Med­ica is, we can­not risk our abil­ity to serve 1 mil­lion non-Med­i­caid mem­bers if the en­tire or­ga­ni­za­tion is at risk.”

The So­ci­ety of Ac­tu­ar­ies’ find­ings come as Repub­li­can law­mak­ers mull ways to cut Med­i­caid fund­ing to states.

“This doc­u­ment may be de­signed in part to pro­vide a lit­tle bit of a de­fense against po­ten­tial cost-cut­ting mea­sures,” said Kather­ine Hemp­stead, a se­nior ad­viser at the Robert Wood John­son Foun­da­tion. In­sur­ers feel vindicated by the study. “This ends the er­ro­neous as­sump­tion that man­aged Med­i­caid plans are mak­ing money hand over fist,” said Alexan­der Shekhdar, vice pres­i­dent of federal and state pol­icy at Med­i­caid Health Plans of Amer­ica.

The re­port found some plans that had higher mar­gins than the na­tional av­er­age. Tril­ogy Health In­sur­ance, a Med­i­caid plan in Wis­con­sin, had a mar­gin of more than 17% in 2015. How­ever, the re­port in­di­cates the mar­gin is the re­sult of an in­creased pay­ment from the state af­ter the plan had a neg­a­tive mar­gin of 32% in 2014. The plan had en­tered sev­eral new mar­kets that year and the rates didn’t cover the plan’s costs that year.

What hap­pened with Tril­ogy is not an anom­aly, ex­perts say.

“There is room for im­prove­ment on ac­tu­ar­ial sound­ness in man­aged Med­i­caid,” Leerink Part­ners an­a­lyst Ana Gupte said. “Plans typ­i­cally lose money in the first one to two years of new con­tract im­ple­men­ta­tion and seek rate in­creases as they gain med­i­cal claims ex­pe­ri­ence.”

There’s a grow­ing need to en­sure that plans find man­aged care lu­cra­tive as states add more and more res­i­dents to man­aged-care ros­ters. Many of these new pop­u­la­tions pre­vi­ously have been ex­cluded from man­aged care be­cause of their com­plex health needs, ac­cord­ing to Michael McCue, a pro­fes­sor of pub­lic health at Vir­ginia Com­mon­wealth Univer­sity.

This in­cludes peo­ple who need long-term sup­port and ser­vices and dual-el­i­gi­bles, who are el­i­gi­ble for both Medi­care and Med­i­caid and of­ten face mul­ti­ple chronic con­di­tions.

It’s un­clear if the re­port will cause states to act, as states feel they now take mar­gin into ac­count when de­vel­op­ing rates. Not en­sur­ing plans are ad­e­quately paid would be coun­ter­pro­duc­tive to en­sur­ing ac­cess to cov­er­age said Matt Salo, ex­ec­u­tive direc­tor of the Na­tional As­so­ci­a­tion of Med­i­caid Di­rec­tors.

“There’s no value in an un­der­cap­i­tal­ized part­ner in this,” Salo said.

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