KHI News Service

KanCare Confidential

Company and state officials invoke trade-secrets exemption in state Open Records law

By Mike Shields | September 10, 2012

Johnson County commissioners have hit a wall in their effort to learn how much the three insurance companies that have signed contracts to run the Kansas Medicaid program will collect in profit or administrative fees.

State officials told them they would not share the requested financial information because it was “proprietary and confidential,” according to Maury Thompson, director of Johnson County Developmental Supports, a county agency that provides services to the disabled and which initiated the information request.

'Very curious'

“The county’s opinion is that they are public documents and should be disclosed,” Thompson said. “Once any contract is signed by the board of county commissioners, it is a public document. We're very curious to learn on what legal grounds they think they cannot disclose a signed, legal governmental contract.”

Portions of the state’s KanCare contracts with the three managed-care organizations (MCOs) have been posted on a state website. But not included with those postings were contract attachments A and B, which is where Thompson said commissioners believe the information they seek could be found.

“The underlying intent of obtaining this financial information is to determine what the administrative charge will be to the state for their services and what their medical loss ratio or profit will be from this business,” Thompson said. “What sort of money are we pulling out of the system to pay these three MCOs?”

KDHE officials on Tuesday afternoon released the additional information sought by Johnson County commissioners.

Kansas is expected to spend about $3.2 billion on Medicaid services in the coming year, or, on average, about $641 per beneficiary per month. Most of that money would go to the insurance companies and their service providers, assuming federal authorities sign off on Gov. Sam Brownback’s plan to implement KanCare starting Jan. 1.

$1 billion in savings pledged

Brownback officials have said they expect the new system to save the state and federal governments $1 billion over the next five years without cutting services and while improving outcomes for Medicaid patients. The claims have been met with some skepticism by county commissioners and legislative critics because details of how the savings might be realized have not been clearly explained. Administration officials have said the savings will come from better coordination of care.

Johnson County officials filed their disclosure request on Thursday and are awaiting the formal denial from state officials so they can file a counter response, Thompson said. Meanwhile, the matter rests in the hands of the county’s lawyers and could lead to a showdown between the local and state officials over the correct interpretation of the state’s Open Records laws.

Thompson said state officials had agreed to release MCO cost proposal information sought in a separate and earlier information request by the county. That information is expected to the commission early this week, but it won’t include the figures commissioners most want to see, he said. Officials at the Kansas Department of Health and Environments said they sent the county the cost proposal information at 3:30 p.m. on Friday. They made the same information available to KHI News Service upon request on Monday afternoon.

According to those documents, Amerigroup and United Healthcare each proposed non-medical costs of 8.3 percent for 2013 in their final proposals. Sunflower State Health Plan, a Centene subsidiary, proposed non-medical costs of 9.2 percent. The documents did not detail how the companies arrived at the numbers they proposed, nor did they include all the information about the companies' cost assumptions that were stipulated in the state's request for proposals from contract bidders.

Disclosure exemptions

Kansas’ open records laws were intended to make most state and local governmental affairs readily available to public scrutiny. But they include a fairly lengthy list of disclosure exemptions, including some specific to insurance company financial documents, particularly those filed with the Kansas Insurance Department.


Amerigroup Open Records Letter

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There also is a broader exemption in the law for trade secrets. That exemption already has been successfully invoked at least once by one of the managed care companies when the contracts were still being negotiated.

The insurance department rejected a request in April by KHI News Service for financial projections filed by Amerigroup, one of the later successful bidders, after the company asked that the information not be released.

William Sneed, an attorney representing Amerigroup, delivered an April 11 letter to Ken Abitz, director of the insurance department’s financial surveillance unit, citing the trade secrets exemption.

Under that provision of the law, insurance department officials were barred from disclosing the information without the company’s permission.<a name="continued"></a>

Laws and practices slow to catch up

Profit-driven Medicaid managed care companies have become some of the nation’s fastest growing and most sophisticated business enterprises.

Directly or indirectly through subcontractors they employ hundreds of thousands of people, report billions of dollars in annual revenues and now, according to federal statistics, have about half the country’s 62 million Medicaid patients enrolled in their plans.

But federal and state laws and practices in some important ways haven’t kept pace with the growth of the managed care companies, which exist in a regulatory and legal space different from that occupied by commercial health insurers, those that provide plans to employers and other private purchasers.

For example, Brownback officials prepared and issued the voluminous request for proposal to potential KanCare contractors without consulting the state insurance department, even though it was commonly known or expected that major national insurance companies likely would win the awards and despite the fact that only companies certified as HMOs by the department were qualified to bid.

'Increased element of risk'

As early as 1996, the National Association of Insurance Commissioners was talking about the disconnect between Medicaid officials and insurance regulators with respect to the managed care companies. Greater collaboration in dealing with the MCOs might be warranted given that the financial risks of providing Medicaid services were being shifted in large measure from the state governments to the companies, according to an NAIC white paper:


NAIC White Paper

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The increased element of risk to managed care plans requires that states place as much emphasis on the financial stability of Medicaid managed care plans, and their subcontractors, as they do in the regulation of managed care plans which provide for or arrange the provision of care for commercial patients ... Traditionally, state Medicaid agencies have administered the Medicaid program without the assistance of state insurance regulators. Insurance regulators and other state officials have significant experience in licensing commercial HMOs and determining whether they meet solvency and capital requirements. The shift in the Medicaid program to managed care may prompt state Medicaid agencies, departments of insurance or other state agencies responsible for the regulation of managed care plans to capitalize on their respective expertise by collaborating in the evaluation and development of Medicaid managed care program proposals.”

Limited role regulating Medicaid contractors

But that did not happen with KanCare and apparently no one from the insurance department or the Brownback administration proposed a collaborative approach.

Abitz said he and other insurance department officials didn’t see the RFP until it was made generally available to the public but that the department historically has had a limited role dealing with or overseeing the state’s Medicaid contractors.

That oversight responsibility falls largely on state and federal health and welfare officials who write Medicaid program rules but are relatively ill equipped for reviews of an insurance company’s financial condition.

In any event, Kansas law exempts a Medicaid managed care company under contract with the state welfare agency from meeting the net worth requirement that other insurers or HMOs must meet in order to operate in Kansas.

Nor do they have to file statements of fiscal soundness with the insurance department, though they are required to file financial projections, which are closed to public view.

Legal relic?

Abitz, the insurance department’s financial surveillance director, said those exemptions likely were a legal relic of an earlier, simpler time and that given the KanCare developments he has been reviewing the statute books to see if the department will approach the 2013 Legislature with requested changes.

“My thoughts would be to set a minimum net worth requirement for an MCO that administers Medicaid,” he said. “I haven’t made a decision yet whether to go to the Legislature next year. I’m exploring what other states are doing. I’m doing some research on it.”

The contract-winning MCOs were required and each has deposited a $5 million bond with the Kansas Department of Health and Environment, according to agency officials. The insurance department also required each of the new companies registering as a Kansas HMO to pay a $300,000 deposit. And since each of the KanCare MCOs, or at least each parent company, is publicly traded, they must file regular financial reports with the U.S. Securities and Exchange Commission, which are made public and can be reviewed by insurance regulators.

Important distinction

Unlike those in some other states, Kansas’ law does give the insurance commissioner authority to deal with a failed Medicaid MCO as if it were an insurance insolvency rather than a standard corporate bankruptcy, according to insurance department officials.


Overview of MCO Failure Procedures

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That distinction, which apparently remains murky in federal law and in some other states, is important according to legal analysts because it could afford some protections and authorities for state officials in the event something goes seriously wrong with one of the MCOs. For example, in the event one MCO fails, the insurance commissioner could order the surviving MCOs to open their rolls to the failed company’s beneficiaries.

State officials say given the size of the KanCare MCOs they see little likelihood any would experience a financial collapse. But the last few years have offered plenty of examples of corporate giants that unexpectedly teetered or toppled, including Lehman Brothers, one of nation’s largest investment banks, and insurance giant AIG, which survived a 2008 liquidity crisis thanks only to billions of dollars in government loans.

KHI News Service coverage of KanCare

Hutchinson Clinic's letter throws a curve to KanCare open enrollment (1/28/14)
National Disability Council again urges CMS to hold off on Kansas DD carve-in (1/14/14)
DD carve-in not approved for Jan. 1 launch (12/27/13)
National Council on Disability urges one-year delay of KanCare DD carve-in (12/13/13)
KDADS chief describes lessons learned with KanCare (12/5/13)
Other states watching Kansas as it implements ‘unprecedented’ Medicaid model (12/5/13)
KanCare reimbursement problems continue for providers (11/25/13)
Kansas dental program for children on hold because of KanCare MCO (11/11/13)
Kansas Medicaid providers complain to oversight committee (10/7/13)
Wichita hospital execs describe problems with KanCare (8/29/13)
KanCare to adopt “health home” model for treating mentally ill (7/22/13)
Kentucky’s rush into Medicaid managed care: A cautionary tale for other states (7/18/13)
DD groups largely reconciled to KanCare carve-in (7/15/13)
Advocates urge more government oversight of Medicaid managed care (7/8/13)
Independent pharmacists push for KanCare contract enforcement (7/1/13)
Payroll agents for the disabled on Medicaid say they are struggling under KanCare (6/3/13)
Personal Care Attendants: KanCare's unheralded workers (5/20/13)
House GOP leaders pen letter backing DD supports in KanCare (5/17/13)
More than 1,000 rally at Statehouse for DD carve-out (5/8/13)
Nothing to be done about coverage gap in states not expanding Medicaid, feds say (4/29/13)
As KanCare continuity of care period ends, problems persist; legislators starting to hear about it (4/8/13)
Advocates raise concerns over possible reductions in KanCare services (3/28/13)
Conferees agree on KanCare oversight committee (3/28/13)
DD advocates push to extend KanCare "carve-out" (3/20/13)
Safety-net clinics struggling with KanCare (3/4/13)
Major medical provider groups ask for longer KanCare transition (2/13/13)
Lawmakers and providers assess KanCare transition (1/28/13)
Five-part series: "Lower cost and better care: Can KanCare deliver?" (1/14/13)
Independence of KanCare ombudsman questioned (1/7/13)
KanCare special terms and conditions spelled out by CMS in a document (12/28/12)
KanCare workforce shift hampering local agencies (12/10/12)
Governor announces KanCare approval by feds (12/7/12)
More KanCare implementation details outlined (12/3/12)
Federal officials say they hope to act soon on KanCare waiver request (11/28/12)
New KanCare info included on state website (11/20/12)
Groups call for KanCare delay (11/8/12)
Go/no-go date looms this week for KanCare (10/15/12)
KanCare benefit packages outlined (9/26/12)
Provider groups nervous about lack of KanCare details (9/13/12)
KanCare Confidential (9/10/12)
KanCare contracts awarded (6/27/12)
KanCare plan panned again at public hearing (6/20/12)
Wichita KanCare forum draws more than 200 (6/19/12)
Medicaid makeover: Can Kansas learn from Kentucky? (6/11/12)
Hundreds protest inclusion of disability services in KanCare (4/25/12)
Counties weighing in on KanCare (4/9/12)
Hospital administrator to chair KanCare Advisory Council (3/29/12)
Brownback Medicaid makeover an “ambitious” plan (3/28/12)
KanCare bidders heavily courting Medicaid providers (3/19/12)
Legislators push to delay KanCare start (3/7/12)
Brownback announces managed care for all in Medicaid (11/8/11)
Kansas Medicaid makeover in the works (3/7/11)

Full Medicaid and KanCare coverage

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