Insurers back CMS proposal to relax network adequacy rules for state Medicaid managed care programs

Insurers voiced their support Monday for a Centers for Medicare & Medicaid Services proposal that would allow states more flexibility in determining the network adequacy of their Medicaid managed care providers.

But they raised concerns about changes in that proposal that would make technical changes in federal rate setting standards they said could be inconsistent with actuarial soundness requirements and ultimately result in Medicaid managed care plans having inadequate resources.

Their comments came in response to a proposed rule (PDF) from CMS Administrator Seema Verma to update a 2016 regulation, giving states more control over setting rates for capitated payments and providing a three-year transition period for pass-through payments to shift providers from fee-for-service to managed care.

Under Medicaid managed care, states contract with insurers to administer coverage. The program makes up a huge chunk of overall Medicare spending with more than two-thirds of beneficiaries enrolled in managed care in 2016.

The Trump administration said it wanted to give more freedom to states overseeing Medicaid managed care and shift network adequacy standards. Additionally, the proposed rule would strengthen program integrity by preventing states from retroactively changing risk-sharing mechanisms to boost federal reimbursement. The Government Accountability Office has previously said CMS needs to do a better job of auditing state managed care contracts that represented half of all Medicaid expenditures in 2017.

Among changes in the rule is a proposal to reform state network adequacy standards by replacing the current time and distance standards with “a more flexible requirement that states set a quantitative minimum access standard for specified health care providers” including long-term care. 

Those quantitative standards could include minimum provider-to-enrollee ratios, maximum travel time or distance to providers, a minimum percentage of providers accepting new patients or maximum wait times for an appointment.

RELATED: CMS floats new network adequacy requirements for Medicaid managed care programs

"We appreciate the Administration’s efforts to increase flexibility, reduce administrative burden, and ensure the Medicaid program’s ongoing ability to serve millions of Americans and support many provisions in the Proposed Rule that would advance these goals," America's Health Insurance Plans (AHIP) officials wrote in a letter (PDF) to Verma.

AHIP also expressed its support for the rule when it came to allowing pass-through payments. But AHIP cautioned about suggested changes (PDF) when it came to rate-setting.

"CMS proposes significant restrictions on certain standard actuarial rate development practices that would also impair actuarial soundness," AHIP said. "Proposed limits on accounting for differences in targeted underwriting margins, fee schedules, or medical loss ratio thresholds when setting rates for expansion enrollees and other populations with different federal financial participation rates fail to recognize the actuarially and operationally appropriate reasons those assumptions can differ from other covered populations."

The insurance group also said it had concerns regarding rate ranges, restrictions on midyear risk-sharing arrangements and CMS' collaboration with managed care plans.

RELATED: Verma puts Medicaid insurers on notice, says CMS will begin ‘targeted audits’

Comments from the Medicaid Health Plans of America (MHPA), a national trade association representing 93 private-sector health plans that contract with state Medicaid agencies in 39 States and Washington, D.C., echoed their statements.

The MHPA also raised concerns about actuarial soundness standards (PDF), pointing to a change that would require rate ranges must conform to a number of parameters including an upper bound rate range that does not exceed the lower bound by 5%. MHPA suggests this range should be narrower.

"We are concerned that without further guardrails this proposal could lead to rate levels that are actuarially unsound when used in competitive bidding situations," MHPA officials wrote in their comments.