December 1, 2016

Geoff Bartsh, Vice President & General Manager

State Public Programs
Medica Health Plan
401 Carlson Parkway, CP340
Minnetonka, MN 55305
Dear Mr. Bartsh:
The Minnesota Department of Human Services (DHS) received your letter dated November 30, 2016 and
acknowledges Medicas non-renewal of the 2016 Families and Children Contract. Therefore, pursuant to
section 5.2.1(2) of the 2016 contract Medicas written notice is less than 150 days prior to the end of the
contract term and the 2016 contract will end at 11:59:59 p.m. on April 30, 2017. The terms and rates of the
2016 contract will continue through April 30, 2017.
As Commissioner Piper indicated to CEO Tilford yesterday, given Medicas notice, our joint focus must be on a
smooth transition to other health coverage for the people impacted by Medicas decision to non-renew its
contract with the state. It is my hope we can continue to work together to ensure that this happens.
Regarding the assertions made in your nonrenewal letter, DHS disagrees with several items you noted, and
observes some relevant omissions. The 2017 rates for all regions except the north region and Ramsey County is
based on Medicas bid with adjustment for medical trend, acuity changes in the population, and legislative
adjustments. This represents an increase of 5.1% for PMAP and 3.5% for MinnesotaCare over 2016 rates and is
actuarially sound and certified by the DHS contracted actuaries. Your letter also asserted that emerging 2016
experience was ignored in the 2017 rates. That is simply not true. Federal regulations require that states use the
most current and complete information available. During contracting, it was shared that the medical costs for
the past three complete years (2015, 2014, and 2013), showed consistent negative trends. If we were to use that
experience, a negative trend could have been applied to your 2016 bid rate for 2017. However, as we indicated
DHS and its actuaries assumed that the competitive bids would have already accounted for this negative trend
and that some plans may have already undertaken initiatives in anticipation of the competitive bid. As a result,
no negative trend was built into the 2017 rates. In fact, an upward adjustment was made for medical trend based
on analysis of other health care market trends.
Further, based on review of the 2016 emerging experience, upward adjustments to the rates were made where
appropriate such as the pharmacy trend and also to acknowledge changes in acuity of the Medical Assistance
families and children population between 2015 and 2016. While DHS cannot base rates on an incomplete year
that also likely includes some temporary changes related to transition of enrollees or managed care initiatives
that are not fully implemented, appropriate consideration was given to early 2016 experience.

PO Box 64983 St. Paul, MN 55164-0983 An equal opportunity and veteran-friendly employer

Geoff Bartsh, Vice President & General Manager

December 1, 2016
Page 2

At all times, we must ensure fairness in our process. The offers made by Medica, including reducing your
service area to regions or counties where Medica believes the rates are more favorable, are unfair to other
companies and unfair to our enrollees. The counties Medica wishes to withdraw from are in large measure
counties for which the rate is based on the bid Medica submitted. This withdrawal is a similar tactic that Medica
employed last year during the contract negotiations for Special Needs Basic Care (SNBC). Without sufficient
data to support what was driving reported high cost cases or why the rates offered were not sufficient, Medica
removed themselves from several counties, leaving those counties without a SNBC plan which necessitated a
mid-year procurement. Medica was able to accomplish their aim of leaving the counties they wanted to leave,
while other plans had to step in to help serve this vulnerable disabled population. DHS will not conduct a
special procurement in this case and we are hopeful that once again the other health plans will be willing to step
in to ensure our enrollees have options available.
Prior to receipt of Medicas non-renewal letter, Medica has only provided one proposal in writing where
Medica asked for an increase of 13.9% on PMAP and 8.5% on MinnesotaCare. In terms of the most recent
proposals in your letter of non-renewal dated November 30, 2016, these suggestions would also violate the
terms of the 2016 competitive procurement. DHS cannot offer Medica another plans bid rate or allow Medica
to alter their service area after the fact. This would be contrary to the requirements of the request for proposals
that all plans followed and would be inconsistent with the results and scores of the procurement. Moreover, this
would not be fair to other plans who prepared and submitted technical responses and competitive bids in good
faith or to the counties who participated in scoring the plan responses. DHS cannot increase the rates without
credible data and justification to do so and cannot change the structure or nature of the risk-based contract.
Finally, as negotiations took place throughout the last several months, Medica failed to acknowledge in any way
that they have not implemented sufficient efficiencies to help manage utilization and cost or that you would
going forward. The bids submitted by plans all anticipated efficiencies that each plan expected to accomplish,
consistent with their submitted price bid.
In order to comply with its obligation to provide notice of a MCO termination or service area reduction within
five working days, DHS will be notifying the other MCOs in writing, Friday, December 2, 2016 of Medicas
notice of non-renewal which results in a service area reduction.
Upon notification to the other MCOs, DHS will begin the process to plan for the transition of Medicas
enrollees covered under the Families and Children Contract and will be working directly with Medica on the
notification to enrollees, transfer of enrollee records and data and any other information necessary to ensure
continuity of care.
If you have any questions regarding the information contained in this letter, you may contact me directly.
Sincerely,

Marie Zimmerman
State Medicaid Director