Commonwealth Care Recommended Bid Specs

1. CommonwealthCare Recommended Bid Specs Board of Directors Meeting December 13, 2007

2. Outline of Presentation • Review Goals of Bid Process • Discussion of staff recommendations to be included in CommCare Bid Specs

3. Bid Process - Goals • Develop bid structure to allow for more aggressive bids across all four MCOs • Mitigate expected cap rate increase in Plan Types III & IV due to current risk selection • Grow enrollment and improve risk selection for enrollees between 150.1% to 300% of FPL • Ensure continued development of strong case management and utilization programs • Simplify plan type choices to meet the needs of enrollees • Strengthen program integrity

4. Summary of Key Levers

5. Summary of Key Levers (con’t)

6. 1. Auto-assignment Recommendation • To encourage competitive bidding and to allocate positive risk across all four MCOs, continue with auto-assignment for Plan Type I members only • Expand the number of geographic regions in which to apply the auto-assignment logic to 5 • Will not weight bids. Based on lowest composite rate • Allocate according to the logic on the following slide

7. 1. Auto-assignment(con’t)

8. 2. Provider Reimbursement Rates Recommendation • Develop actuarial rate range for FY09 that reduces estimated level of provider reimbursement by 3-5% • Goal is to eventually reduce the provider unit price in program to approximate Medicaid levels

9. 3. Co-pays and OOP Maximums Recommendation • Goal is to address the concerns of equity, sustainability and crowd-out • In support of this goal, need to bring co-pays more in line with the generous end of Massachusetts commercial insurance • Allow for more time and information to be available before voting on co-pay and OOP Max levels • Propose the following for the bid specs: • MCOs bid on current co-pay levels • Bid specs will provide an example of Co-pay levels (see Slide #11) • Board to vote on co-pay and OOP Max levels in February 2008

10. 3. Co-pays and OOP Maximums (con’t) • Propose the following for the bid specs (con’t): • Bid Specs to include language that MCOs must accept Connector actuaries’ value of co-pay/OOP levels • Connector actuary to assign value to Board-approved levels in February 2008 • Adjustment to be applied uniformly to all bids

11. 3. Co-pays and OOP Maximums (con’t)

12. 4. Dental Benefit Recommendation • For members above 100% of the FPL • Encourage MCOs to offer a preventive dental benefit • Would not be a required benefit, therefore, not included in the capitation rate (no cost to the Commonwealth) • Would allow those MCOs that choose to offer to differentiate on a “value-added” benefit basis • No change to Plan Type I – Mandatory benefit already included in the capitation rate

13. 5. Eliminate Plan Type IV(PT III (Higher co-pay) & IV (Lower co-pay)) Recommendation • Eliminate Plan Type IV and replace with Plan Type III benefits (services, co-pays, OOP Max) • Necessary due to clear selection issue emerging in Plan Type IV relative to Plan Type III • Will reduce member confusion

14. 6. Contract Review / Audit Recommendation • Include in bid specs full contract review and audit provision • Monitoring access to care standards • Accuracy of claims payments • Review of provider contracts • Chronic Care - assessing impact of • Utilization and • Chronic care management programs

15. 7. Rx Management Recommendation • Leverage existing MCO pharmacy workgroup • Collaborate with MassHealth Rx Initiatives • Develop targeted programs most likely to impact cost trend • Examples: • Management of suboxone/subutex • Controlled substance abuse programs • Step therapy

16. 8. CommonHealth Population Recommendation • Continue to work with MassHealth to evaluate ability / cost of moving population to more appropriate program • If determined feasible, will adjust capitation rate accordingly

17. 9. Tiering of Academic Medical Center rates Recommendation • This issue would create a rate structure in which AMCs would be paid more for a high intensity inpatient admit and less for services more commonly serviced at a community hospital • Continue to work closely with EOHHS on this initiative • Include provision in FY2010 bid specifications if rate structure in place

18. 10. Enrollee Contribution – (100.1 – 150% FPL) Recommendation • For Plan Type IIA (100.1 – 150% of FPL), member will pay 50% of the differential for selecting an MCO other than the lowest priced • Member paying 50% of cost is for FY09 only

19. 11. Coordination with Other State Agencies Recommendation • Connector will include in bid specs a “placeholder” that ensures coordination with other state agencies around Cost / Quality initiatives • Multiple goals in implementing various state programs • Eliminate inefficiency and control administrative costs for MCOs • Improve quality of care and member satisfaction

20. 12. Reinsurance PT III (& IV) Recommendation • Maintain existing aggregate risk sharing • Develop an additional risk-sharing mechanism at the individual member level • This would lower capitation payments to offset the cost of risk-sharing at the member level • Underlying assumption is that the individual mandate will attract better risk in 200 – 300% FPL • Is a shift of funds

21. 12. Reinsurance PT III & IV (con’t) • In this example, the Connector would cover 75% of plan expenditures in the $10,000 to $80,000 total paid claims range for any PT III/IV enrollee in a year. Diagram is illustrative for discussion purposes only.

22. 12. Reinsurance PT III & IV (con’t)

23. 13. Risk Adjusted Premiums Recommendation • Will be implemented in FY10 • Will model effects of a risk-adjusted capitation payment in FY09 to determine MCO-specific impact