Anthem hopes for better Medicaid rates with new Iowa governor

Feb. 01--The parent company of one of the three private insurers tasked with managing Iowa's nearly $5 billion Medicaid program hopes a new face in the governor's office will ease rate negotiations.

"As you may know, there has been a transition, or there is a transition now, in process regarding the appointment of a new governor. The lieutenant governor (Kim Reynolds) is moving into the office and we're in dialogue with her office," said Joseph Swedish, chief executive officer of Anthem, the parent company of Amerigroup Iowa, on an fourth-quarter earnings call on Wednesday. "And we're hopeful that continued dialogue in and around the needs that we have for, I guess, call it correcting the inadequacy, will produce results."

The state of Iowa handed over its Medicaid program with nearly 600,000 enrollees to AmeriHealth Caritas Iowa, Amerigroup Iowa and UnitedHealthcare of the River Valley on April 1. By November, Iowa announced it would bump up payments to the insurers by an additional $33 million to better cover rising prescription drug prices and the Medicaid expansion population.

Even with the additional money, in early December two of the three managed-care organizations reported hundreds of millions of dollars in losses in financial reports filed with the Iowa Insurance Division. Amerigroup saw losses of more than $147 million, and AmeriHealth had losses of more than $132 million.

UnitedHealthcare does not have to file financial reports with the state of Iowa, but did say in the second Department of Human Services quarterly report it had a loss of 25 percent.

Correspondence between the MCO leaders and DHS officials reveal that the insurers have been lobbying for increased rates since the start of the transition. The documents, first reported by the Des Moines Register, show the MCOs believed the rates to be inadequate from the start.

Amerigroup's Cynthia MacDonald said in early May that the company "has some lingering important areas of concern regarding rate adequacy" due to the "impact of delays in overall program implementation, transition of (fee for service) to managed-care experience within the data pharmacy savings opportunities and other issues."

And despite the extra $33 million, Kim Foltz, chief executive officer of UnitedHealthcare Community Plan of Iowa, said that "the program remains drastically underfunded." She added that "not only have medical claims exceeded premium rates, but deficits reported do not include administrative costs of managing the (Medicaid) program, which are above and beyond what was included in the rates."

The state has said it believes it's paying the companies "fair," "appropriate" and "actuarially sound" rates.

When asked by one analyst on the Wednesday earnings call to quantify the company's loses in Iowa and what kind of rate increase Anthem anticipates receiving in July -- the start of the second rate period -- Anthem executives played it a bit coy.

"We are still negotiating with the state of Iowa in terms of the rates," said John Gallina, Anthem's chief financial officer. "So it's premature to provide a specific point estimate or data element on that, other than to say that we're requesting actuarially justified rates."

Gallina went on to say that the company spent about 20 percent higher than expected on medical claims in the second quarter.

"It did come down a bit over the rest of the year, in some of our medical management initiatives and some of our other cost-of-care initiatives went into place, but it still ended up at a loss in the 10 to 15 percentage points higher than we would have expected, based on that block of business," he said.

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