§438.7. Rate certification submission. — Inbound Citations

(8) Be provided to CMS in a format and within a timeframe that meets requirements in § 438.7.

(J) Be developed in accordance with § 438.4, and the standards specified in §§ 438.5, 438.7, and 438.8.

(5) The documentation necessary to demonstrate that capitation rates competitively bid through a procurement process have been established consistent with the requirements of §§ 438.4 through 438.8.

(1) The State must annually submit to CMS a summary description of each report(s) received from the MCO(s), PIHP(s), and PAHP(s) under contract with the State, according to § 438.8(k), with the rate certification required in § 438.7.

(e) An MCO, PIHP, or PAHP may cover, for enrollees, services that are not covered under the State plan in accordance with §§ 438.3(e) and 438.16(b), (d), and (e) of this chapter, except that references to § 438.7, IMDs, and rate certifications do not apply and that references to enrollee rights and protections under part 438 should be read to refer to the rights and protections under subparts K and L of this part.

(e) The State must comply with the requirements related to medical loss ratios in accordance with the terms of § 438.74 of this chapter, except contract arrangements described in § 438.6(c) do not apply and the description of the reports received from the MCOs, PIHPs and PAHPs under § 438.8(k) of this chapter will be submitted independently, and not with the rate certification described in § 438.7 of this chapter.

(i) The State must annually submit the projected ILOS cost percentage to CMS for review as part of the rate certification required in § 438.7(a).

(iv) The State must submit the final State directed payment cost percentage annually to CMS for review as a separate report concurrent with the rate certification submission required in § 438.7(a) for the rating period beginning 2 years after the completion of each 12-month rating period that includes a State directed payment for which the State has obtained written prior approval under paragraph (c)(2)(i) of this section.

(a) As used in this section and § 438.7(b), the following terms have the indicated meanings:

Budget neutral means a standard for any risk sharing mechanism that recognizes both higher and lower expected costs among contracted MCOs, PIHPs, or PAHPs under a managed care program and does not create a net aggregate gain or loss across all payments under that managed care program.

Prospective risk adjustment means a methodology to account for anticipated variation in risk levels among contracted MCOs, PIHPs, or PAHPs that is derived from historical experience of the contracted MCOs, PIHPs, or PAHPs and applied to rates for the rating period for which the certification is submitted.

Retrospective risk adjustment means a methodology to account for variation in risk levels among contracted MCOs, PIHPs, or PAHPs that is derived from experience concurrent with the rating period of the contracted MCOs, PIHPs, or PAHPs subject to the adjustment and calculated at the expiration of the rating period.

Risk adjustment is a methodology to account for the health status of enrollees via relative risk factors when predicting or explaining costs of services covered under the contract for defined populations or for evaluating retrospectively the experience of MCOs, PIHPs, or PAHPs contracted with the State.

(6) The final capitation rate for each MCO, PIHP, or PAHP as described in § 438.3(c) must account for all State directed payments. Each State directed payment must be accounted for in the base data, as an adjustment to trend, or as an adjustment as specified in § 438.5 and § 438.7(b). The State cannot withhold a portion of the capitation rate to pay the MCO, PIHP, or PAHP separately for a State directed payment nor require an MCO, PIHP, or PAHP to retain a portion of the capitation rate separately to comply with a State directed payment.

(3) Contracts that provide for a withhold arrangement must ensure that the capitation payment minus any portion of the withhold that is not reasonably achievable is actuarially sound as determined by an actuary. The total amount of the withhold, achievable or not, must be reasonable and take into consideration the MCO's, PIHP's or PAHP's financial operating needs accounting for the size and characteristics of the populations covered under the contract, as well as the MCO's, PIHP's or PAHP's capital reserves as measured by the risk-based capital level, months of claims reserve, or other appropriate measure of reserves. The data, assumptions, and methodologies used to determine the portion of the withhold that is reasonably achievable must be submitted as part of the documentation required under § 438.7(b)(6). For all withhold arrangements, the contract must provide that the arrangement is—

(i) For a fixed period of time and performance is measured during the rating period under the contract in which the withhold arrangement is applied.

(iv) Does not condition MCO, PIHP, or PAHP participation in the withhold arrangement on the MCO, PIHP, or PAHP entering into or adhering to intergovernmental transfer agreements.

(v) Necessary for the specified activities, targets, performance measures, or quality-based outcomes that support program initiatives as specified in the State's quality strategy under § 438.340.

(D) An assurance the State and its actuary will submit an adjustment to the actuarially sound capitation rate, as needed, to remove utilization and cost of the ILOS from capitation rates as required in §§ 438.4, 438.7(a) and 438.7(c)(2), and a reasonable timeline for submitting the revised rate certification.

(ii) Not modify the capitation rates under § 438.7(c)(3).