October 27, 2016

Charles M. Palmer
Director
Department of Human Services
1305 E. Walnut Street
Des Moines, Iowa 50319
Dear Mr. Palmer:
This letter is in response to your letter dated October 24, 2016 regarding the amended rates. The
Department states these rates were updated to reflect emerging trends in more recent data and that
experience through 3/31/16 was evaluated. The overall capitation rate increase provided to AmeriHealth
Caritas Iowa approximates 3% or $35 Million for 2016.
In discussions we had with you in early August, and as communicated via letter from your office on
August 15, 2016, the Department committed to using the most recent and complete Fee for Service
(FFS) data available, which is the 2015 State FFS data. The Department also outlined in this August 15,
2016 letter the commitment to obtain the broadest and most accurate picture possible. It is our opinion
the current actuarial review did not meet these commitments.
In our meeting on October 13, 2016 with you and Mr. Bousselot, we communicated that our internal
actuaries as well as the external actuarial firm Wakely Consulting performed a rate review comparing
the State Fiscal Year 2014 FFS data book used for rate development and the Calendar Year 2015 FFS
data set for our membership. After accounting for Millimans prospective trend assumptions, the
Calendar Year 2015 FFS PMPMs remain 24% higher than those implied in the rate development. The
Wakely review will follow under separate cover.
A difference of this magnitude suggests that the 2014 data book used to develop the 2016 capitation
rates is materially inadequate for rate setting to ensure a sustainable Medicaid program. We have
consistently communicated to both the Department and Milliman that the most recent 2015 State FFS
data is the most reliable data source to develop accurate capitation rates for the Iowa Health Link
program. We believe Milliman and the Department have an obligation to address and reconcile the
adjustments implied by the 2015 FFS PMPM (24%) noted above and the Milliman "emerging trend
adjustment" of approximately 3%.
We are extremely disappointed in the amended rate offer as it does not address the significant rate
issue identified and documented. Given the findings from the review completed by Wakely Consulting,
an actuarial firm that is independent of the initial rate development process, the Departments revised
rate offer is not actuarially sound and is not acceptable to us.
Based on the material differences noted above, we believe the rate development process is not
actuarially sound and jeopardizes the sustainability of the Iowa Health Link program. The lack of
transparency and sharing of detailed data during this process is unacceptable. Over the past few

weeks, we requested a meeting with Milliman and statewide claims and encounter data to perform an
independent comprehensive analysis. To date, neither request has been fulfilled.
We have also proposed a risk corridor arrangement as a solution for the existing material rate issue. The
primary intent of Medicaid risk corridors is to protect the State and participating plans against inaccurate
premiums. This is a commonly used tool as Medicaid plans do not have the ability to control premiums
and are at risk for significant pricing uncertainty. It also provides flexibility for the State to spread
payments over multiple budget years
Finally, as requested in your letter, below are requests from our actuarial team:

Please provide the summarized PMPMs for 2015 by service category and rate cell.
Please provide the detailed calculation and assumptions related to the development of the
emerging trend adjustments.
Please provide the previously requested statewide 2014 and 2015 FFS claim detail and eligibility
files.
Please provide a detailed reconciliation between the adjustments implied by the 2015 FFS
PMPM (24%) noted in Wakelys review and the Milliman "emerging trend adjustment" of
approximately 3%.
Please set up a meeting to facilitate a comprehensive and transparent review of the rate
development process to ensure actuarially sound rates.

AmeriHealth Caritas is committed to Iowa and to our shared goals of improving the health of Iowans and
building a sustainable Medicaid program. It is of crucial importance that a resolution of this rate issue be
reached.
Sincerely,

Russell Gianforcaro
Regional President
AmeriHealth Caritas
cc: Michael Bousselot
Mikki Stier