Commonwealth Care FY 2011 MCO Procurement Results Board of Directors Meeting April 8, 2010

1. Commonwealth Care FY 2011 MCO Procurement ResultsBoard of Directors MeetingApril 8, 2010

2. Agenda • Procurement Goals • Summary of Procurement Results • Review of RFP Provisions • RFP Process • Procurement Results • Procurement Impact

3. Procurement Goals • Establish fair and reasonable capitation rates • Remain within budget constraints • Maintain continuity of health plan participation • Preserve and enhance competition among participating health plans • Protect members from large premium increases

4. Overview of Procurement Results • Continued participation from all incumbents • Administrative discounts received from 3 of 5 plans • Estimated budget savings of $20.8 million in FY 2011, which frees up room for enrollment growth • A portion of this savings is offset by anticipated MCO risk sharing payments due in FY11 (for FY 10 results) • Modest average increase to enrollee contributions • Most current members will have a choice of changing plans or face a modest premium increase • Some outliers at high end of the income range

5. Review of Key RFP Provisions • Target capitation rate • $393.67 for medical, $32.00 for admin  • Risk adjustment methodology • Retain risk adjustment method from FY10, with updated adjustment factors • Aggregate risk sharing • Reduce risk sharing corridors from 4% in FY10 to 2% in FY11 • Specific Stop Loss Pool • Retain stop loss pool, but reduce MCO contribution to 1% of premium from 1.25%

6. Review of Key RFP Provisions (Continued) • Administrative Fee Discount • All health plans had to accept target admin fee of $32 PMPM • Health plans were allowed to propose a lower fee • Lowest proposed and accepted admin fee will set the floor for enrollee contributions and auto-assignment, if any • Proposed discounts had to meet several conditions (discussed below)

7. Review of Key RFP Provisions (Continued) • Administrative Fee Discount • Proposed fee had to, at a minimum, cover the health plan’s variable costs. • Variable cost coverage, by itself, not necessarily sufficient to win approval • Additional review criteria addressed impact on overall financial strength • Health plans were required to document for actuarial review their ability to support operations at the lower rate • We reserved the right to request additional information as needed to document proposed fee level

8. Procurement Review Process • Review of Written Proposals • Performed by internal procurement management team • Assess compliance with program requirements, regulations, and overall proposal strength • Financial Bid Evaluation • Performed by external consulting actuary • Evaluate ability of health plan to support proposed administrative fee and impact on overall financial strength

9. Procurement Results • Plan Participation and Geographic Coverage • All incumbent MCO’s will continue to participate in Commonwealth Care • With one exception, all MCO’s will retain current service area coverage • Fallon will no longer participate in Northeastern and Southeastern MA (affects ~3,000 members)

10. Procurement Results (Continued) • Financial Bids

11. Procurement Results (Continued) • SFY11 Budget Impact • Bidding results in estimated $20.8 million favorable variance for FY11 • A portion of this savings is offset by anticipated risk sharing payments from FY10 contract year due in FY11 • Estimate based on recently submitted MCO financial reports

12. Procurement Results (Continued) • Proposal Scoring • Based on independent scores from team of reviewers • Focused on compliance with program requirements and network adequacy.

13. Procurement Impact • Enrollee Contributions • Spread between highest and lowest plans will drop by ~20% across income groups • Modest premium increase faced by majority of PTII and III members if they choose to stay in current plan • Overall average increase of $6.00 for PTII/III • Assumes some member movement • Range of actual increases faced by individual members • Some 7,960 members would experience enrollee contribution increase >$20

14. Procurement Impact: Enrollee Contribution Changes • Assuming no change in membership, 68% of PT II and III members see no increase or increase less than $10 • 10% (7,960) would see increase > $20 dollars (All in PT III)

15. Procurement Impact: Maximum Contribution Spread

16. Procurement Impact: Average Enrollee Contribution • Note: assumes 10% member migration into lowest cost plan.

17. Member Movement • Based on historic information, 8-12% of members facing an increase change plans during open enrollment • Price difference has greater impact on members newly entering program • We are anticipating up to 10% movement in membership to lower cost plan

18. CeltiCare Network Status • 40 of 52 CHCs participating (25%-50% of enrollees use CHCs) • 2,094 PCPs, 27 hospitals and growing (e.g., just signed Beverly Hospital) • Commitment on transition of care support, ala Bridge conversion

19. MCO Transition Monitoring • Goal to monitor member experience and potential member disruption • Elements of oversight • Member satisfaction survey results • CommCare and MCO • Call center data • CommCare and MCO • Grievance and appeal data • Premium payment behavior • Increases in waiver requests or non-payment • NCQA / CAHPs