High MLRs inspire insurers to focus on quality improvements


Medicaid managed-care organizations face an increasing number of high risk-corridor expenses from states as consumers continue to avoid their doctors’ offices, and some are finding potential quality impovements that could improve their medical loss ratios.

States enact risk-sharing corridors to ensure the majority of what they pay health plans to manage the care for their Medicaid members is spent on actual treatment. The amount an insurer spent on a members’ care is measured by its medical loss ratio, or MLR.

In 2020, Molina Healthcare paid $565 million in risk-sharing expenses. Anthem faced $650 million in similar payments. Centene Corp. paid $1 billion in risk-corridor requests. 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.

In an effort to avoid these expenses, Anthony Fiori, senior managing director with Manatt Health, said some insurers have gotten creative with how they categorize patient medical and quality improvement costs.

“You’ve seen an uptick in the utilization of the risk corridors in the past year because they are looking to recoup some dollars from plans because utilization has gone down, and the CMS did put out guidance where they gave states some flexibility to direct plans to make payments to providers to essentially offset utilization losses,” Fiori said.

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.

For states that directed payer-provider payments, Fiori said CMS encouraged states to enact risk-sharing corridors as a way to guard themselves and their insurers against paying providers more than they could afford. In 2020, at least eight states—including California, New York and Michigan—all enacted risk-corridors, Fiori said.

“We’ve seen a bunch of states implement risk corridors in the last year to reflect the fact that utilization has certainly changed,” Fiori said. “The challenge I think that payers have here is that the states have some flexibility around how they set the target MLR that the risk corridor is centered around.”

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 preventative services, Fiori said.

Items that were previously thought of in-lieu of a higher-cost service, like offering members a meal delivery service instead of an in-home aide, can be deemed quality improvement expenses, he said, and counted towards 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.

“Social determinants of health is a real focus for a lot of these Medicaid plans,” Fiori said. “If you can try to manage housing instability, food insecurity, transportation needs, members’ health can be the better for it.”

While these expenses generally involve wellness items, Cabe Chadick, president of the Lewis & Ellis actuarial company, 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 plans to front-load the cost of paying for consulting services as a way to stabilize their 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.



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