The document discusses the impact of government-sponsored health programs on organic growth, highlighting the importance of star ratings, member experience, and risk adjustment in determining reimbursement rates for plans. It emphasizes the relationship between plan offerings, enrollment, and financial outcomes, including risk adjustment calculations and the effects of star ratings on rebates. Lastly, it outlines new opportunities for plans to benefit from changes in regulations and payment adjustments.

1. GOVERNMENT PROGRAMS

2. • Government programs funded directly or contract with health plans
for capitated programs (PMPM)
• Government-sponsored programs biggest source of organic growth
• Disruptive growth and share aggregation
• Star Ratings, member experience, and risk adjustment drive the
market
• Variability and unpredictability in risk adjustment
PAGE 2
OVERVIEW
To understand the opportunity, need to understand
framework, requirements, and how to leverage
changes in regulations to benefit product

3. PAGE 3
NEW GUIDANCE FOR OPPORTUNITIES IN GP
SPACE
Revenue up +6.4%
+3.4% change in payment by CMS
Modifications to risk adjustment
Benchmark increase by 5.28%
Improvements to star ratings
Flexible uniformity for additional benefits
Expansion of supplemental benefit offering
$

4. PAGE 4
• Why does this matter:
• Plans want to make money
• One way is through increased enrollment
• Enrollment is influenced by a number of factors but 1 is benefits offered/engagement activities
• Benefits are heavily dependent on star ratings
• Plans are paid based on their bid.
• Payment varies between local and regional plans.
• Benchmarks are set and it is the maximum a plan will be paid. Bids and payments are derived
off the benchmarks.
• Star Ratings provide the ability for plans to receive a bonus added to the benchmark.
• Risk Adjustment provides additional reimbursement for a plan that assumes a sicker
population.
COMPONENTS TO HOW PLANS ARE PAID

5. PAGE 5
THE PLAN BID AND CALENDAR
• Plans projection of what
it will cost to cover a
single beneficiary (with
a risk score) each
month.
• CMS analyzes for
actuarial soundness
Milliman Report, Regulatory Oversight in Medicare Advantage,
June 24, 2016

6. PAGE 6
PLAN PAYMENT: BID AND BENCHMARK
Grade Target
Plan Bid ($)
Grade Target
Plan Bid ($)
Shopping spree Shopping spree
New Car (Bonus (5%))Actual Grade (benchmark)
Actual Grade (Bonus-Adjusted ($))
Original 5%
65%
75%
Scenario:
Parents reward
for grades
exceeding target
More chores Actual Grade
Grade target
Actual grade
below grade
goal
Actual grade
meets or
exceeds
goal

7. PAGE 7
PLAN PAYMENT: BID AND BENCHMARK
Plan Bid ($) Plan Bid ($)
Rebate
Bonus Payment (5%)CMS Benchmark ($)
New Benchmark
Bonus-Adjusted ($)
CMS Benchmark +5%
65%
75%
Rebate
Charge Premium Original Benchmark ($)
Plan Bid
Bid above
benchmark
Bid below
benchmark

8. PAGE 8
• Annual ratings of Medicare plans that are made available on Medicare Plan Finder and
CMS website
• 2 year data lag; 2017 ratings represent 2015 performance
• Ratings are displayed as 1 to 5 stars
• Almost 2/3 of Medicare Advantage enrollees are in contracts with ratings of 4 or more
stars
OVERVIEW OF STAR RATINGS
Overall
Summary
Domains
Measure
• <4-Star plans on life
support
• ≤3-Star plans dead
• 1/2 Star = ~ $15-$50
PMPM

9. PAGE 9
THE MEMBER EXPERIENCE: COMPRISE HALF OF
RATINGS
Rating of the Plan
Rating of Health
Care/Providers
Rating of the Drug
Plan

10. PAGE 10
STAR RATING IMPACT/IMPLICATIONS
$700
(3 star)
$700
(4 star)
Original Benchmark +5%
Rebate
$700
(3.5 star)
Benchmark $800
Rebate
Star rating
QBP %
MA
Benchmark
Savings
Rebate
Percentage
MA Rebate
3
0%
$800
$100
50%
$50
Benchmark $800
Rebate
3.5
0%
$800
$100
65%
$65
4
5.0%
$840
$140
65%
$91
New Benchmark $840
$700
(5 star)
Rebate
New Benchmark $840
5
5.0%
$840
$140
70%
$98
Bid
Example Plan: $700 bid amount, MA benchmark of $800

11. PAGE 11
STAR RATING IMPACT/IMPLICATIONS
Plan: $700 bid amount, MA benchmark of $800
Overall Star Rating Formula 3.0 Stars or
Lower
3.5 Stars New/Low
Enrollment
4.0 Stars 4.5 Stars or
Higher
Bid Amount A $700 $700 $700 $700 $700
QBP Percentage B 0% 0% 3.5% 5.0% 5.0%
MA Benchmark C = $800 x (1+B) $800 $800 $828 $840 $840
Savings D = C-A $100 $100 $128 $140 $140
Rebate Percentage E 50% 65% 65% 65% 70%
MA Rebate F = DxE $50 $65 $83 $91 $98
• The impact of dropping from a 3.5 star rating to a 3.0 is a 23% reduction in MA rebate revenue (resulting in benefit
reductions or member premium increases)
• The impact of dropping from a 4.0 star rating to a 3.5 results is a 29% reduction in MA rebate revenue
• Marketing
o CMS displays star ratings on the Medicare Plan Finder where beneficiaries shop for plans
o CMS labels certain plans with a “Low Performing Icon” or “High Performing Icon”
o Plans with five-star ratings can enroll beneficiaries throughout the year rather than only during open
enrollment

12. PAGE 12
Key Source of Plan Revenue
• Accounts for ~30% of variation in payment to MA plans
• Similar methodologies adopted in Medicaid
• Diagnostic code-driven provider; goal is complete and accurate data
Prospective Evaluations
• Opportunity to identify eligible early before encounter information; link
home visit data with care management programs, PCPs
• Move to “mobile medical home”: in-home labs, tests, MTM, caregiver
education
• Diagnostic code verification
RISK ADJUSTMENT IN GOVERNMENT
PROGRAMS

13. MEDICARE RISK ADJUSTMENT IMPACT
• Medicare payments capitated rate = base $ amount x beneficiary-specific risk
score (from HCC model of demographic and condition)
Risk Score Coefficient
Age/gender .683
Angina .141
PVD .299
Diastolic HF .368
Total RAF Score 1.491
Result: 1.491 x $9,276.26 = $14,830.90
An 88 year old male has the following chronic
conditions: Angina (HCC 88), Peripheral Vascular
Disease (HCC 108), and Diastolic Heart Failure
(HCC 85), and all are documented in the medical
record.
Risk Score Coefficient
Age/gender .288
CHF .368
DM w/ chronic complications .368
Prol. Diabetic Retinopathy .203
Disease Interaction .182
Total RAF Score 1.409
A 65 year old female with the following chronic
conditions: CHF (HCC85), DM with
complications (HCC18), Diabetic Proliferative
Retinopathy (HCC 122), all appropriately
documented in the medical record.
Result: 1.409 x $9,276.26 = $13,070.25
(Note: If only demographics were used payment would be
$2,671.58)
Example: Plans adjusted payment rate: $9,276.26

14. PAGE 14
COORDINATION OF BENCHMARK, BID, STARS,
REBATE
Milliman Report, Regulatory Oversight in Medicare Advantage, June 24, 2016

15. PAGE 15
NEW OPPORTUNITIES IN GP SPACE
Revenue up +6.4%
+3.4% change in payment by CMS
Modifications to risk adjustment
Benchmark increase by 5.28%
Improvements to star ratings
Flexible uniformity for additional benefits
Expansion of supplemental benefit offering
$
● CAPHS/HOS periodic surveying
● Promoting new benefits
● Social determinants
● Risk adjustment
● Medicaid
● Rich communication services (RCS)
● Consulting

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