Feds might pay $225M to bail out Iowa Medicaid insurers

Through a risk corridor arrangement, Iowa and the federal government will help cushion three insurers' losses tied to running the state's Medicaid program.

The federal government might pay $225 million to help cushion steep financial losses faced by the three insurers that run Iowa’s Medicaid program, leading some to question the sustainability of the state’s privatized program.

The firms that run the state’s Medicaid managed care program—AmeriHealth Caritas, Anthem member AmeriGroup Iowa and UnitedHealthcare Plan of the River Valley—have incurred an estimated $450 million in losses, the Des Moines Register reports.

In response to an open-records request from the newspaper, the state disclosed that it had entered into risk corridor arrangements with the insurers, through which government agencies agree to help the companies cope with steep losses, and they in turn agree return funds to the government if they make large profits.

The Iowa Department of Human Services estimated that the state’s share of payments to the firms would be $10 million, and it added Tuesday that the federal government’s estimated share would be $225 million, according to the Register.

After a rocky rollout of Medicaid expansion in Iowa caused the state to reverse course, it chose instead to move toward a privatized program. But even that choice wasn’t without controversy, as WellCare took issue with the state’s decision to drop its contract.

Now the three remaining firms are struggling—which they blame on a state contractor’s faulty projection of enrollees’ healthcare utilization—one lawmaker thinks the program ought to be scrapped.

“The privatization of Medicaid in Iowa has been nothing but one pitfall after another and it is clear that this hasty and ill-advised experiment has failed," Democratic Rep. Dave Loebsack said in a statement to the Register.

Not all Medicaid managed care firms, though, are struggling. Companies like Molina and Centene have profited handsomely from coverage expansions ushered in by the Affordable Care Act.