Public Comment #1

February 22, 2022
Ms. Rebecca Burch-Mack
Mr. William N. Parham, III
Office of Strategic Operations and Regulatory Affairs
Division of Regulations Development
Centers for Medicare and Medicaid Services
7500 Security Boulevard, Room C4-26-05
Baltimore, MD 21244-1850
Via electronic submission to www.regulations.gov
Re: CMS-10398 (#37) / OMB control number: 0938-1148
Dear Ms. Burch-Mack and Mr. Parham:
Medicaid is an essential program in the landscape of American health care, and Medicaid
managed care organizations (MCOs) are committed to ensuring Medicaid is effective,
affordable, and accountable. With that commitment in mind, AHIP 1 and its member Medicaid
health plans appreciate the opportunity to provide comments on the draft 2022-23 Medicaid
Managed Care Rate Development Guide (the “Rate Guide”).
In 40 states, Washington DC, and Puerto Rico, Medicaid programs contract with Medicaid MCOs
to serve their enrollees. Nationwide, Medicaid MCOs enroll and serve more than 60 million
people, nearly three-quarters of all Medicaid enrollees. Although states administer Medicaid
eligibility and enrollment processes, Medicaid MCOs manage a full range of other functions for
states and provide a variety of services to meet the unique needs of Medicaid enrollees. MCOs
implement programs that coordinate and improve care and health outcomes; offer services that
promote prevention and healthy living and connect enrollees with non-medical supports, such as
social services or transportation; and carry out functions that include customer service, claims
processing, reporting, and program integrity. Medicaid MCOs improve quality for enrollees and
achieve cost savings for states and the federal government. Medicaid MCO enrollees are more
likely to receive preventive services, have fewer hospital admissions, and better access to primary
care than enrollees in fee-for-service programs. 2

1

AHIP is the national association whose members provide health care coverage, services, and solutions to hundreds of millions
of Americans every day. We are committed to market-based solutions and public-private partnerships that make health care better
and coverage more affordable and accessible for everyone. Visit www.ahip.org to learn how working together we are Guiding
Greater Health.
2 “The Value of Medicaid: Providing Access to Care and Preventive Health Services”; AHIP, 2018; accessed at
https://www.ahip.org/documents/ValueMedicaid_Report_4.4.18.pdf

Letter to CMS February 22, 2022 – page 2

Federal law and regulations require states contracting with MCOs to set actuarially sound rates,
and CMS has responsibility for reviewing and approving those rates. This process is critically
important: it ensures that federal funds are used effectively and efficiently, and that Medicaid
MCOs have adequate resources to ensure their contracted provider networks are accessible and
deliver all contracted services to the low income and vulnerable populations they serve.
CMS updates the Rate Guide each year as a key resource for state Medicaid programs to ensure
the actuarial soundness of rates. As with last year’s Rate Guide, the 2022-23 version includes
guidance regarding rate-setting flexibilities provided to states in response to the COVID-19
public health emergency (PHE).
We believe the 2022-23 Rate Guide would benefit from further revisions to incorporate the
requirements described in the various guidance documents promulgated over the past year in
order to provide states and stakeholders with a coordinated package that provides necessary
clarity on federal standards for Medicaid rate setting. We also urge CMS to ensure the Rate
Guide reflects any additional changes in its rate review process adopted in light of the ongoing
actuarial uncertainties caused by the COVID pandemic and to improve the overall process of
developing rates. The remainder of this letter presents our comments and recommendations on
these key issues.
1. Accounting for Effects of COVID-19 on Base Period Data. We are pleased to see that, in
the draft Rate Guide sections on Rate Development Standards and Documentation, CMS is
requiring detailed information as to how states are accounting for impacts of COVID-19 on
costs and utilization, such as testing, treatment and vaccines covered on a non-risk basis
outside of capitation rates. However, we note that the draft Rate Guide still requires base
period data to be within the most recent three-year period. We are concerned that using 2020
and 2021 experience and associated trends as base periods without additional analysis or
specific guidelines may significantly compromise the integrity of utilization and cost
projections and the actuarial soundness of proposed rates for 2022 and 2023.
As we noted in our comments last year, the COVID-19 PHE is a sustained event that is
unprecedented in the history of the Medicaid program and has resulted in significant
anomalies in cost and utilization data for 2020 and 2021. While the Rate Guide requires
actuaries to describe the evaluation conducted and the rationale for COVID-related
assumptions included in rate development, this approach places state actuaries in the position
of making their own judgments regarding the relevance or irrelevance of various factors. We
believe that CMS should be more proactive in providing detailed, specific requirements and
expectations as to how actuaries must account for COVID-19 impacts so as to avoid those
actuaries reaching different conclusions based on their own judgments and interpretations.
Another aspect of rate setting likely to be affected by COVID-related utilization changes is
that of quality measures and related financial impacts. MCOs may be hampered in their ability
to meet historical thresholds for quality standards during quality measurement periods that

Letter to CMS February 22, 2022 – page 3

have overlapped with the pandemic due to pandemic-related reduced utilization. We urge
CMS to consider requiring that certifications for rate proposals that include quality bonuses or
withholds evaluate the impacts of COVID on the quality measures and the measurement
period, and certify that such quality measures are reasonable and attainable. We also urge
CMS to require that these analyses are disclosed to MCOs prior to the rating period.
2. Clarifying Standards for Risk Mitigation Mechanisms. Medicaid MCO regulations at 42
CFR 438.6 (b)(1) provide that “…all applicable risk-sharing mechanisms, such as
reinsurance, risk corridors, or stop-loss limits, must be documented in the contract and rate
certification documents for the rating period prior to the start of the rating period, and must
be developed in accordance with § 438.4, the rate development standards in § 438.5, and
generally accepted actuarial principles and practices. Risk-sharing mechanisms may not be
added or modified after the start of the rating period.” Over the course of the COVID-19
PHE, states took various approaches to introducing or modifying risk sharing mechanisms.
We are pleased to note that CMS includes additional guidance on this topic in the draft 202223 Rate Guide, emphasizing the regulatory requirement that risk mitigation strategies be
prospective and included in contracts and rate certifications prior to the start of a rate period,
and specifying required documentation and issues to be addressed in rate filings. We ask
CMS to consider expanding the guidance to include criteria or market conditions that states
must consider when implementing risk sharing mechanisms.
We note that CMS has taken actions to waive this regulatory requirement and approve
retroactive state risk mitigation proposals under Section 1115 demonstration authority for
rating periods that overlap with the COVID PHE. The CMS approvals reference various state
proposals for retroactive rate and risk mitigation changes, but neither the CMS approvals nor
the proposals themselves include details on the specific changes. We have previously shared
with CMS our serious concerns about flexibilities CMS granted states relating to retroactive
rate and risk mitigation provisions in response to the PHE. We continue to believe a number
of these proposals are inconsistent with actuarial soundness, such as asymmetric risk
corridors, and retroactive changes extending to periods prior to the beginning of the COVID19 PHE. The lack of easily accessible information about the proposed changes makes it even
more difficult to assess the implications of these waivers. And as the PHE continues, we are
concerned that ongoing approvals of rates and risk mitigation techniques proposed earlier in
the pandemic may result in additional requests for retroactive rate and risk mitigation
provisions and cause confusion and an expectation in some states that CMS has effectively
rescinded the regulatory requirements entirely. Therefore, we ask that CMS include in the
final 2022-23 Rate Guide a detailed discussion of the risk mitigation strategies approved in
these waivers, the context of the approvals within the PHE, and the limits of these waivers in
the context of the PHE.
In its approval letters, CMS notes that it approved these risk mitigation proposals “to test
whether, in the context of the current COVID-19 PHE, an exemption from the regulatory
prohibition in 42 CFR § 438.6(b)(1) promotes the objectives of Medicaid.” CMS states it

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“will investigate how providing this authority results in either increased or decreased
payments to plans, given the significant fluctuations in utilization that may occur during a
pandemic. In addition, CMS’s managed care oversight efforts will include an assessment of
whether and how payments under the retroactive risk mitigation arrangements, which must
be developed in accordance with all other applicable requirements in 42 CFR § 438,
including §§ 438.4 and 438.5, and generally accepted actuarial principles and practices, are
sufficient to cover costs under the managed care contract.” The implications of these waiver
are significant, so we encourage CMS to examine and publicize its assessments of these
waivers and incorporate those findings as requirements and restrictions in future editions of
the Rate Guide.
Also, we again recommend that CMS convene a technical expert panel (TEP) to develop
consensus standards for key elements of risk sharing mechanisms, such as: calculating
uncertainty in prospective rate setting, width and symmetry of risk corridor bands,
calculating MCO obligations, and use of federal MLR definitions in risk corridors. Such a
TEP ideally would include representatives from CMS, state Medicaid agencies, consulting
and MCO actuaries, and the American Academy of Actuaries and Society of Actuaries.
3. Encouraging Best Practices that Include MCOs in the Rate Development Process. As
noted, Medicaid MCOs now serve nearly three quarters of Medicaid enrollees in 42 Medicaid
programs, providing operational capacity and expertise that connects members with care,
coordinates care among providers, administers payments to providers, and reports on the
results of operations to states. Despite the prominent role that MCOs play in working on
behalf of states to deliver Medicaid coverage to the people who rely on it, states vary
considerably in their levels of engagement and consultation with MCOs, including rate
setting. While some states are very transparent in their communications with MCOs on
details of rate proposals, such as base data, assumptions, and calculations, and solicit MCO
input so that resulting proposed rates have been generally vetted prior to submission to CMS,
others offer much less transparency and communication.
We believe that Medicaid programs and their stakeholders – enrollees, providers, states, CMS
and Medicaid MCOs – are best served when states and MCOs engage and consult openly on
rate issues. In finalizing the draft Rate Guide, at a minimum, we ask CMS to expand the
requirement on page 12 – “to provide adequate detail such that CMS is able to determine
whether or not regulatory standards are met” – to include disclosure of the same materials and
level of detail to the state’s contracted MCOs. We again urge CMS to expand the Rate Guide
to highlight best practices in collaboratiion on rate setting and convey its expectation to states
that they engage and consult more directly with MCOs in developing rates.
In addition, we request again that CMS publish the draft Rate Guide each year with a 30-day
comment period, given the significance of Medicaid rate setting. We very much appreciate
the opportunity for comment, but additional time to review the draft Rate Guide and develop

Letter to CMS February 22, 2022 – page 5

comments would be helpful in identifying additional areas for clarification and highlighting
guidance applicable to emerging trends or issues in specific states.
4. Clarifying the Use of Minimum Medical Loss Ratio (MLR) Requirements in Rate
Setting. While the draft Rate Guide makes a number of important references to MLR
requirements, it would benefit from clarifications on two important rate setting implications.
a. Operational costs. Under 42 C.F.R. § 438.4(a), actuarially sound capitation rates are
“projected to provide for all reasonable, appropriate, and attainable costs that are
required under the terms of the contract and for the operation of the MCO, PIHP, or
PAHP for the time period and the population covered under the terms of the
contract.” In § 438.4(b)(9), the regulations further clarify that capitation rates need to
be developed to achieve a minimum MLR that provides for “reasonable, appropriate,
and attainable non-benefit costs.” The draft Rate Guide mentions these regulatory
requirements, but we believe it needs to further emphasize and clarify for states that
actuarial soundness also applies to adequate coverage of non-benefit costs (e.g.,
administrative costs, quality improvement activities, and underwriting gain).
b. Social Barriers to Health. CMS, states, and Medicaid MCOs have increasingly taken
steps to address impacts of social barriers to health on the health status and outcomes
of Medicaid enrollees. These efforts include contracting with Medicaid MCOs to
conduct social barriers identification and mitigation. MCOs have been working with
community organizations and offering value-added benefits to meet the social needs
of their enrollees, focusing on issues such as food insecurity, physical activity,
transportation, and housing. We recommend that the Rate Guide clarify requirements
and conditions under which these expenditures qualify as quality improvement
activities in capitation rates and minimum MLR remittance calculations. In turn, this
will encourage greater investments in services that reduce health disparities and
promote health equity and reduce long-term Medicaid program costs.
5. Withdraw or Delay Accelerated Rate Review. AHIP continues to have concerns with the
Accelerated Rate Review process first introduced in 2020 and continued in the draft 2022-23
Rate Guide. The Accelerated Rate Review process may compromise CMS’ statutory
obligation to oversee and ensure state payment rates are actuarially sound, and that potential
continues to be compounded by the significant impacts of the ongoing COVID-19 PHE on
patterns of care and costs. As long as COVID impacts on cost and utilization remain a factor
in base period data and projections to future years, comprehensive reviews of full rate
certifications and documentation remain necessary. We urge CMS to reconsider the
accelerated review process. At a minimum, we strongly recommend that a moratorium be
imposed on accelerated reviews until COVID-related impacts are no longer significant
factors in base period costs and utilization.
6. CMS Oversight of Federal Investments in Medicaid. In our comments on last year’s Rate
Guide, we noted that on average, the federal government pays over two-thirds of the cost of

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Medicaid and that CMS has a compelling interest in overseeing and ensuring the
effectiveness, sustainability, and integrity of federal investments in the Medicaid program.
However, the guidance in the draft Rate Guide appears to continue to reflect a perspective
that Medicaid capitation rates are primarily a contractual matter between states and Medicaid
MCOs, without a significant federal government interest. We continue to believe this
perspective is inconsistent with federal financial investments in Medicaid and CMS’
obligations under the Social Security Act to ensure rates are actuarially sound. We are also
concerned, as a practical matter, that limited oversight fails to recognize that many states lack
the national perspective, actuarial expertise, and analytical resources available to CMS.
Therefore, we again urge CMS to ensure that the Rate Guide, other CMS guidance, and the
agency’s internal processes all clearly support CMS’ active role in assessing the data,
assumptions, calculations, and projections included in state rate proposals.
We want to thank you again for the opportunity to comment on the 2022-23 Rate Guide and for
considering our comments and recommendations. AHIP is committed to maintaining a strong
working relationship with CMS to ensure the long-term viability and effectiveness of the
Medicaid program for the people it serves and the taxpayers who support it. Please let us know if
you have any questions; we would welcome the opportunity to discuss in more detail.
Sincerely,

Rhys W. Jones, MPH
Vice President, Medicaid Policy and Advocacy
Cc: Anne Marie Costello, CMCS