Insurers boost quality offerings to even out MLRs
Some insurers are getting creative with how they categorize medical and quality improvement costs in an effort to avoid ballooning risk-corridor expenses.
“You’ve seen an uptick in the utilization of the risk corridors in the past year because (states) are looking to recoup some dollars from plans because utilization has gone down, and CMS did put out guidance where they gave states some flexibility to direct plans to make payments to providers to essentially offset utilization losses,” said Anthony Fiori, senior managing director with Manatt Health.
States enact risk-sharing corridors to ensure the majority of what they pay health plans to manage care for their Medicaid members is spent on actual treatment. The amount an insurer spent on a member’s care is measured by its medical loss ratio, or MLR. As consumers continue to avoid their doctors’ offices, insurers are increasingly exposed financially.
In 2020, Molina Healthcare paid $565 million in risk-sharing expenses. Anthem faced $650 million in similar payments, while. Centene Corp. paid $1 billion. This year, UnitedHealthcare is thinking ahead—the Minnetonka, Minn.based insurer has factored risk-corridor expenses as part of the $2 billion it expects to spend on COVID-19.
Because states set their capitation rates for Medicaid managed-care organizations before the COVID-19 pandemic hit, Fiori said that many insurers were left with profits above the maximum allowed under their state contracts. In these instances, states either returned the savings to healthcare providers, kept the cash in their general funds—with the knowledge that the federal government would eventually come back for its share—or directed insurers to pay providers directly. Virginia, for example, told its six managed-care organizations to pay providers an extra $30 million, as a way to prop up their vulnerable bottom lines after the pandemic caused a drop in elective procedures.
While not every state that implements a risk-sharing corridor enforces it—with some bowing to political pressure from insurers, lacking the administrative will or simply trusting payers based on historical performance—Fiori said insurers will likely face some remittance requests from states this year, as utilization continues to remain below normal levels. This has led insurers to increasingly focus on providing preventive services.
Offering members a meal delivery service instead of an in-home aide, can be deemed quality-improvement expenses, he said, and counted toward payers’ MLRs. Insurers can also categorize value-added benefits, like providing an asthmatic with an air conditioner, as quality improvements that chip away at their inflated profits.
While these expenses generally involve wellness items, Cabe Chadick, president of actuarial company Lewis & Ellis, said software development for providers’ telehealth services, discharge program products and internet-based self-management health programs can also be categorized as quality-improvement expenses. Chadick also expects some health plans to front-load the cost of paying for consulting services as a way to stabilize profits.
“The health plans that I know, they want to find every expense they can to put in their MLR calculations because they don’t want to turn the money back over,” Chadick said. “There could be some opportunities because maybe it’s just not something that a CFO, or somebody within an organization who is responsible for the MLR calculation, was thinking about.”
Anthem declined to comment on its risk-corridors, and Molina Healthcare did not respond to an interview request.