July 14, Nursing Home Diversion Program Capitation Rate Development. Dear Keith:

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1 15800 Bluemound Road Suite 100 Brookfield, WI USA Tel Fax milliman.com David F. Ogden, FSA, MAAA Principal and Consulting Actuary Mr. Keith Young Health Care Program Analyst State of Florida Agency for Health Care Administration Medicaid Program Analysis 2727 Mahan Drive Mailstop 21 Tallahassee, FL Re: Nursing Home Diversion Program Capitation Rate Development Dear Keith: Thank you for the opportunity to assist the Agency for Health Care Administration (AHCA) and the Department of Elder Affairs (DOEA) with this important project. Our report summarizes the development of the September 1, 2011 August 31, 2012 capitation rates for the Nursing Home Diversion program. We look forward to discussing the report with you. Sincerely, David F. Ogden, FSA, MAAA Principal and Consulting Actuary DFO/kal Attachment cc: David Oropallo Cheryl Young Jack Shi Offices in Principal Cities Worldwide

2 Milliman Client Report State of Florida Agency for Health Care Administration and Department of Elder Affairs September 1, 2011 August 31, 2012 Capitation Rate Development for Nursing Home Diversion Health Program Prepared for: State of Florida Prepared by: Milliman, Inc. Mathieu Doucet, FSA, MAAA Actuary Dave F. Ogden, FSA, MAAA Principal and Consulting Actuary Bluemound Road Suite 100 Brookfield, WI USA Tel Fax milliman.com

3 Milliman Client Report TABLE OF CONTENTS I. EXECUTIVE SUMMARY... 1 II. BACKGROUND... 4 III. NURSING HOME DIVERSION RATE METHOLOLOGY... 5 IV. CMS RATE SETTING CHECKLIST ISSUES... 9 APPENDICES A Approved Inflation Factors B: Calendar Year 2009 and 2010 Encounter Experience Encounter Method C: September 1, August 31, 2012 Capitation Rates D: Comparison of September 1, August 31, 2011 and September 1, August 31, 2012 Capitation Rates E: Updated Assessment Rating Model Development F: Actuarial Certification of September 1, August 31, 2012 Capitation Rates September 1, 2011 August 31, 2012

4 Milliman Client Report I. EXECUTIVE SUMMARY This report documents the development of rates for September 1, 2011 August 31, 2012 for Florida s Medicaid Nursing Home Diversion program. The Florida Agency for Health Care Administration (AHCA) and the Department of Elder Affairs (Elder Affairs) retained Milliman to document and certify to its capitation rate development. Milliman s role is to develop the encounter data based methodology to calculate the rates and to certify the September 1, 2011 August 31, 2012 capitation rates produced by the current rating methodology are actuarially sound to comply with CMS regulations. The approved inflation factors are displayed in Appendix A. The base period experience used in developing the September 1, 2011 August 31, 2012 capitation rates is included in Appendix B, while the calculations and rates are displayed in Appendix C. Appendix D shows a comparison of the September 1, 2010 August 31, 2011 and September 1, 2011 August 31, 2012 capitation rates. Appendix E contains a discussion of the development of the new ARF. Appendix F contains our actuarial certification. Section II of this report document the Nursing Home Diversion capitation rate methodology using the Nursing Home Diversion program encounter data. Section III of this report discusses issues related to the CMS rate setting checklist. SEPTEMBER 1, 2011 AUGUST 31, 2012 CAPITATIONS RATES AND ACTUARIAL CERTIFICATION On a statewide basis, the capitation rates have decreased by 4.1%, varying by District from a decrease of 13.5% to a 12.8% increase. Table 1 summarizes September 1, August 31, 2012 capitation rates compared to the September 1, 2009 August 31, 2010 capitation rates. The encounter based method produces lower rates than the September 2010 August 2011 rate period. The lower rates are due to the favorable claim experience in CY The September 2010 August 2011 capitation rates were also based on Nursing Home Diversion encounter data. September 1, 2011 August 31, 2012 Page 1

5 Milliman Client Report Table 1 Summary of Results Nursing Home Diversion Capitation Rates September 1, August 31, 2012 District September August 2011 Capitation Rates September August 2012 Capitation Rates Rate Change 1 1, , % 2 N/A N/A N/A 3 1, , % 4 1, , % 5 1, , % 6 1, , % 7 1, , % 8 1, , % 9 1, , % 10 1, , % 11 1, , % Total 1, , % Our actuarial certification of the September 1, 2011 August 31, 2012 Nursing Home Diversion program capitation rates is included as Appendix E. The Nursing Home Diversion capitation rates are reasonable, based on the following information: The 2009 calendar year encounter data and financial statements imply medical loss ratios around 78%. The 2010 calendar year encounter data and financial statements imply medical loss ratios around 81%. The projected medical loss ratio from the financial statement information for the September 2011 August 2012 rate period is 86.6%. It should be emphasized that capitation rates are a projection of future costs based on a set of assumptions. Actual costs will be dependent on each contracted health plan s situation and experience. NURSING HOME RISK The Nursing Home Diversion capitation rate methodology is entirely based on encounter data, so there is no incentive for plans to retain the nursing home risk. It has been shown that Diversion enrollees admitted to a nursing home return to the Medicaid fee-for-service program shortly after admission. The decrease in capitation rates brings the rates in line with the encounter experience which has very little nursing home use. However, the plans continue to have no financial incentive to make efforts to retain the enrollees after nursing home admission since the capitation rate does not include an allowance for it. AHCA and Elder Affairs should review this situation to determine if changes in program structure are necessary to provide a financial incentive to retain nursing home enrollees. This issue may be rectified in the new managed long term care model passed by the legislature. September 1, 2011 August 31, 2012 Page 2

6 Milliman Client Report DATA RELIANCE AND IMPORTANT CAVEATS I, David F. Ogden, am a Principal and Consulting Actuary for Milliman. I am a member of the American Academy of Actuaries and I meet the Qualification Standards of the American Academy of Actuaries to render the actuarial opinion contained herein. This letter is intended for the internal use of AHCA and Elder Affairs and it should not be distributed, in whole or in part, to any external party without the prior written permission of Milliman. We do not intend this information to benefit any third party even if we permit the distribution of our work product to such third party. This letter is designed to develop September 1, August 31, 2012 Nursing Home Diversion capitation rates. This information may not be appropriate, and should not be used, for other purposes. Differences between the capitation rates and actual experience will depend on the extent to which future experience conforms to the assumptions made in the capitation rate calculations. It is certain that actual experience will not conform exactly to the assumptions used. Actual amounts will differ from projected amounts to the extent that actual experience is better or worse than expected. In preparing this information, we relied on information provided by Elder Affairs. We accepted this information without audit but reviewed the information for general reasonableness. Our results and conclusions may not be appropriate if this information is not accurate. The results of this report are technical in nature and are dependent upon specific assumptions and methods. No party should rely on these results without a thorough understanding of those assumptions and methods. Such an understanding may require consultation with qualified professionals. The terms of Milliman s contract with AHCA signed on February 5, 2008 apply to this report and its use. September 1, 2011 August 31, 2012 Page 3

7 Milliman Client Report II. BACKGROUND The Nursing Home Diversion program is a managed care option under a 1915(c) waiver that is designed to provide community-based services to people who would qualify for Medicaid nursing home placement. The objective of the program is to provide elders community-based care to avoid nursing home placement at a cost less than Medicaid nursing home care. Individuals that meet the following criteria are eligible to receive services under the Nursing Home Diversion Waiver: Age 65 and over Dually eligible for Medicaid and Medicare Parts A&B Live in the authorized program areas Be determined by the CARES (Comprehensive Assessment Review and Evaluation for Long-Term Care Services) unit at the Department of Elder Affairs to be at nursing home level of care and meet one or more established clinical criteria The Nursing Home Diversion program, administered by DOEA, differs from the other HCBS waivers in that it covers both medical and LTC services under Medicaid and the services are provided by managed care organizations (MCOs) which receive a capitated rate for all covered services. There are currently 18 Medicaid MCOs participating in Diversion covering over 17,800 seniors throughout more than 35 counties. September 1, 2011 August 31, 2012 Page 4

8 Milliman Client Report III. NURSING HOME DIVERSION RATE METHODOLOGY This section of our report describes the September 1, 2011 August 31, 2012 Nursing Home Diversion capitation rate determination using the Nursing Home Diversion encounter data. The capitation rate determination methodology can be outlined in the following steps: 1. Calculate estimated statewide September 1, 2011 August 31, 2012 encounter costs for the Nursing Home Diversion program. 2. Calculate a Statewide Assessment Rating Factor (ARF). 3. Divide the statewide September 1, 2011 August 31, 2012 cost per eligible by the statewide ARF to obtain a normalized rate. 4. Adjust for incurred but not reported (IBNR) claims. 5. Adjust for administrative expenses using a target loss ratio. 6. Multiply the normalized rate by the ARF for the capitated plans in that county. Each of the above steps is described in detail below. STEP 1: CALCULATE ESTIMATED STATEWIDE SEPTEMBER 1, 2011 AUGUST 31, 2012 ENCOUNTER COSTS In this step, the encounter data experience for CY 2009 and CY 2010 is summarized by eligibility category and covered service category. The Step 1 procedure is summarized below: 1. Summarize the CY 2009 encounter data by service category for all covered service categories. 2. Trend the CY 2009 encounter data to CY 2010 using inflation factors from SFY 0809 to SFY 0910 approved by the Florida Estimating Conference for the covered services. 3. Summarize the CY 2010 encounter data by service category for all covered service categories. 4. Calculate the composite CY 2010 PEPM costs by service category. The composite is calculated as the weighted average of projected CY 2009 costs and actual CY 2010 costs. 5. Trend the composite CY 2010 costs to September 1, August 31, 2012 using the SFY 0910 to September 1, August 31, 2012 inflation factors provided by the Agency for Health Care Administration (AHCA). The trend factors are established by the Florida Estimating Conference to reflect anticipated utilization and allowed charge trend and are used for budgeting as well as rate setting. Milliman reviewed the trend factors for reasonableness. The inflation factors are shown in Appendix A. The encounter data showed a 3.4% increase from CY 2009 to CY 2010 after normalizing to a 1.0 ARF for each year and adjusting for IBNR, while last year it showed a 3% decrease between CY 2008 and CY September 1, 2011 August 31, 2012 Page 5

9 Milliman Client Report Appendix B shows trended values for the State in aggregate. STEP 2: CALCULATE A STATEWIDE ARF This step uses CARES assessment information to match the encounter data period. Blended ARFs are calculated as a weighted average of plans across district and county for CY 2009 and CY 2010, separately. A statewide ARF is then calculated by weighting the plan specific ARF by member months. ARF Model Update and Phase-In The September 2011 August 2012 capitation rates use an updated ARF model that is based on an analysis of the cost experience of enrollees in the Nursing Home Diversion program and based on the relationship of cost to enrollee characteristics derived from CARES assessment data as documented in our April 5, 2010 letter. To avoid large changes in capitation payments to any one plan, the updated ARF adjustments will be phased in over several years. To develop an appropriate phase-in schedule, we analyzed the difference between the risk assessment factors generated by the original and updated ARF model and determined how plan specific revenue may be impacted by a transition to the updated model. Based on our analysis, we determined that limiting the ARF based on the updated model to not change by more than -3% to 9% from the ARF calculated under the original model at the plan level would be appropriate for the September 2011 August 2012 capitation rates. However, the total revenue for a plan can exhibit changes outside these ranges due to the impact of experience data changes. For example, if a particular plan s updated ARF is 5.0% less than the ARF from the original model then the plan and county specific ARFs are adjusted so that the overall revenue for this plan is only 3.0% less than under the original ARF model. However, if that particular plan operates in two counties for example, then the two counties could show an ARF change of -6.0% and 0.0%, respectively, if the enrollment is evenly distributed between both counties. This methodology allows for geographical differences to be reflected now that the ARF model includes such information. The limited change band of -3.0% to 9.0% was chosen to limit downward risk while offering an upward potential. AHCA, DOEA and Milliman will review the assessment data annually to determine the most appropriate phase-in schedule at that time. For example, a future phase-in limit could be -5.0% to 5.0% for a combined two year change of -8.0% to 14.0%. Milliman estimates that most plans will be fully phased-in after the second year the updated ARF adjustments are used. STEP 3: NORMALIZE BASE RATE TO ARF This step adjusts trended historical costs for health status by dividing the Statewide ARF into service categories trended payments. Appendix B details this calculation. September 1, August 31, 2012 Page 6

10 Milliman Client Report STEP 4: ADJUST FOR IBNR We adjusted the estimated September 1, 2011 August 31, 2012 encounter costs by service category to reflect Incurred But Not Reported (IBNR) Claims. We used a adjustment factor for CY 2009 and a adjustment factor for CY 2010 encounter data to account for IBNR. We reviewed the information included in the Report 4 of the Nursing Home Diversion financial statements and developed adjustment factors by quarter corresponding to the run out period for each calendar year used. Several plans did not populate the Report 4 correctly and included incurred claims without showing the outstanding liability portion. Other plans reporting of outstanding claims liability were inconsistent and appeared unreasonable based on typical claims payment patterns. The data used to develop the IBNR factors represent about 30% of the total Nursing Home Diversion enrollment. However, we believe that the volume of data used is sufficient to develop IBNR factors. CY 2010 data showed much slower processing than CY 2009, and the CY 2010 data showed some very unusual patterns that implied no claims were paid between lag 6 and lag 15. Consequently we used judgment in selecting the factors. Appendix B details this calculation. STEP 5: ADJUST FOR ADMINISTRATIVE EXPENSES This step adjusts trended historical costs for administrative expenses using a target loss ratio of 88%. We used an allowance for administration and profit of 12% of revenue. We believe that this assumption will allow plans to achieve a 2% or greater profit margin as required by the Office of Insurance Regulation in order for a health plan to avoid the requirement of filing a corrective action plan. The 2010 financial statements for plans with at least 1,000 member months during the reporting period showed an average administrative expense of $ PMPM consistent with the reported $ in the encounter data. Appendix B details this calculation. STEP 6: MULTIPLY BY CAPITATED PLAN ARF Elder Affairs calculated an ARF for each plan in a specific county using the enrollment in the capitated plans with the updated ARF model. For plans with low or no enrollment, a blending schedule is used to determine to which extent the plan / county specific ARF is credible. For plans with less than 51 enrollees in a county, the calculated ARF is blended with the District (PSA) specific ARF based on May 2009 Nursing Home Diversion enrollment. Table 2 below shows the blending schedule and Table 3 shows the PSA specific ARFs. September 1, August 31, 2012 Page 7

11 Milliman Client Report Table 2 Nursing Home Diversion ARF Blending by County Specific Plan Size Blending Percentage Plan Enrollment Plan ARF Enrolled PSA ARF % 100% % 75% % 50% % 25% % 0% Table 3 Nursing Home Diversion PSA Specific ARFs Assessment Rating Factor Updated PSA Model Statewide The blending schedule was developed after reviewing the standard deviation of the ARF by PSA and plan. The blended ARFs are then adjusted so that the change in ARF from original model to the updated model would be no more than -3% to 9%. Appendix C details this calculation. September 1, August 31, 2012 Page 8

12 Milliman Client Report IV. CMS RATE SETTING CHECKLIST ISSUES This section of the report lists each item in the CMS checklist and either discusses how AHCA and Elder Affairs address each issue or directs the reader to other parts of this report. CMS uses the rate setting checklist to review and approve a state s Medicaid capitation rates. AA.1.0 Overview of rate setting methodology Please refer to Section II of this report. AA.1.1 Actuarial certification Please refer to Appendix E for our actuarial certification of the September 1, 2011 August 31, 2012 capitation rates. Also refer to the discussion of the justification for rate certification in Sections I and II of this report. AA.1.2 Projection of expenditures Based on May 2010 enrollment levels, we expect the Nursing Home Diversion program will realize a statewide 4.1% rate decrease versus September 1, 2010 August 31, 2011 Nursing Home Diversion capitation rates. Rate changes vary by District. AA.1.3 Procurement, prior approval, and rate setting Elder Affairs develops state set rates. Please refer to Sections II of this report for details. Note there is no item AA.1.4 in the checklist AA.1.5 Risk contracts The Nursing Home Diversion program meets the criteria of a risk contract. AA.1.6 Limit on payment to other providers It is our understanding no payment is made to a provider other than the Nursing Home Diversion plan for services available under the contract. AA.1.7 Rate modifications The September 1, 2011 August 31, 2012 rates documented in this report are the initial capitation rates for the September 1, 2011 August 31, 2012 Nursing Home Diversion contracts. AA.2.0 Base year utilization and cost data The base utilization and cost data for the Nursing Home Diversion rates is CY 2009 and CY 2010 encounter data for the Nursing Home Diversion population. It is our understanding only State Plan services that are covered under the Nursing Home Diversion contract have been included in the rate development. September 1, August 31, 2012 Page 9

13 Milliman Client Report AA.2.1 Medicaid eligibles under the contract It is our understanding that data for FFS populations not eligible to enroll in the Nursing Home Diversion program has been excluded from the base data since only encounter data is used in the rate setting process. AA.2.2 Dual eligibles It is our understanding dual eligibles have been handled appropriately. AA.2.3 Spend down It is our understanding the spend down population is excluded. AA.2.4 State Plan services only The base utilization and cost data is CY 2009 and CY 2010 encounter data and includes only State Plan services. AA.2.5 Services that may be covered by a capitated entity out of contract savings Services that may be covered by a capitated entity out of contract savings are not included in the data used to develop the September 1, 2011 August 31, 2012 capitation rates. AA.3.0 Adjustments to base year data All adjustments to the base year data are discussed in Section II and Appendices B-C of this report. In addition, each item in the checklist is addressed in items AA.3.1 AA.3.14 below. AA.3.1 Benefit differences It is our understanding the base data used to calculate the capitation rates only includes services covered under the managed care contracts. AA.3.2 Administrative cost allowance calculations Nursing Home Diversion administrative costs are considered directly in the encounter data based method by the application of a loss ratio. AA.3.3 Special population adjustments The FFS and encounter base data used to calculate the capitation rates is consistent with the managed care population. No special population adjustment was necessary. AA.3.4 Eligibility adjustments We believe the base data eligibility is representative of managed care enrollment since encounter data is used. September 1, 2011 August 31, 2012 Page 10

14 Milliman Client Report AA.3.5 DSH payments DSH payments are not included in the capitation rates. AA.3.6 Third party liability (TPL) The managed care organizations are responsible for the collection of any TPL recoveries. AA.3.7 Copayments, coinsurance, and deductibles in capitated rates It is our understanding the base data does not include cost sharing that is not part of the managed care contract. No adjustment was necessary. AA.3.8 Graduate medical education (GME) It is our understanding the base data does not include GME payments that are not part of the managed care contract. No adjustment was necessary. AA.3.9 FQHC and RHC reimbursement No adjustment was necessary for FQHC and RHC reimbursement. AA.3.10 Medical cost trend inflation AHCA and Elder Affairs are required to use the inflation factors approved by the Florida Estimating Conference. We performed an independent assessment of the reasonability of the approved inflation factors. We reviewed the SFY 0809 to September 1, 2011 August 31, 2012 inflation factors approved by the Florida Estimating Conference in detail. We are comfortable that the inflation factors as adjusted represent the expected change in per capita cost between SFY 0809 and September 1, August 31, AA.3.11 Utilization adjustments Utilization trend is included in AA AA.3.12 Utilization and cost assumptions An Assessment Rating Factor (ARF) is used to risk adjust the rates for each plan in a specific county and is discussed in AA.5.3. We are not aware of any other information that indicates a material difference exists between the relative risk profiles of the two populations other than that reflected by the ARF. This is an issue that may merit additional study in the future as more detailed data becomes available. September 1, 2011 August 31, 2012 Page 11

15 Milliman Client Report AA.3.13 Post-eligibility treatment of income (PETI) Not applicable AA.3.14 Incomplete data adjustment The capitation rates include an adjustment to reflect IBNR claims for the encounter data. AA.4.0 Establish rate category groupings Please refer to Section II of this report. AA.4.1 Age Age is not used as a rating variable. AA.4.2 Gender Gender is not used as a rating variable. AA.4.3 Locality / Region Please refer to Section II of this report. AA.4.4 Eligibility categories Please refer to Section II of this report. AA.5.0 Data Smoothing We did not perform any data smoothing. AA.5.1 Special populations and assessment of the data for distortions We did not identify any material distortions caused by special populations. AA.5.2 Cost-neutral data smoothing adjustment We did not perform any data smoothing. AA.5.3 Risk adjustment Elder Affairs uses Assessment Rating Factors (ARF) to risk adjust the population. These factors are based on recipients required level of assistance in activities of daily living (i.e., ADLs), instrumental activities of daily living (IADLs), the presence of specific chronic conditions (diabetes, etc.), and level of cognitive impairment. Section II of this report explains how the ARF are applied to adjust the rates of the participating health plans. September 1, August 31, 2012 Page 12

16 Milliman Client Report AA.6.0 Stop loss, reinsurance, or risk sharing arrangements None AA.6.1 Commercial reinsurance Elder Affairs does not require entities to purchase commercial reinsurance. AA.6.2 Simple stop loss program None AA.6.3 Risk corridor program None AA.7.0 Incentive arrangements We are not aware of any incentive arrangements in the Nursing Home Diversion program. September 1, August 31, 2012 Page 13

17 Milliman Client Report Appendix A APPENDIX A Approved Inflation Factors September 1, 2011 August 31, 2012

18 Appendix A Florida Agency for Health Care Administration and Department of Elder Affairs Nursing Home Diversion Calculation for September 1, August 31, 2012 Rates Approved Inflation Factors Encounter Service Category Inflation Factors CY CY2010 Inflation Factors CY Sept11-Aug12 Acute Services Clinic Services Dental Services Dialysis Center Emergency Room Services Hearing Services Including Hearing Aids Inpatient Hospital Services Independent Laboratory Or Portable X-Ray Services Nurse Practitioner Services Pharmaceuticals Physical Assistant Physician Services Outpatient Hospital Services Podiatry Rural Health Services Skilled Nursing Facility Services- Rehabilitation Visual Services Including Eyeglasses Other Acute Service Not Listed LTC Services Adult Companion Services Adult Day Health Services Assisted Living Services Attendant Care Services Case Aide Case Management (Internal) Chore Services Community Mental Health Consumable Medical Supplies Counseling Durable Medical Equipment Environmental Accessibility Adaptations Escort Services Family Training Services (Individual) Family Training Services (Group) Financial Assessment/Risk Reduction Services Financial Maintenance/Risk Reduction Services Home Delivered Meals Homemaker Services Mental Health Case Management Nursing Facility Services- Long-Term Skilled Nursing Nutritional Assessment/Risk Reduction Services Occupational Therapy Personal Care Services Personal Emergency Response System Installation Personal Emergency Response System - Maintenance Pest Control - Initial Visit Pest Control - Maintenance Physical Therapy Registered Physical Therapist Physical Risk Assessment And Reduction Private Duty Nursing Services Respiratory Therapy Respite Care - In Home Respite Care - Facility-Based Speech Therapy Transportation Services Other LTC Service Not Listed /14/2011 Milliman Page 1

19 Milliman Client Report Appendix B APPENDIX B Calendar Year 2009 and 2010 Encounter Data Statewide Base Rate Development September 1, 2011 August 31, 2012

20 Appendix B Florida Agency for Health Care Administration and Department of Elder Affairs Nursing Home Diversion Fee-For-Service Equivalent Calculation for September 1, August 31, 2012 Rates Statewide Base Rate Development - Encounter Method Service Category Case Months Total Dollars Base PEPM Claims Experience CY2009 Inflation Factors CY2009-CY2010 Inflation Factors CY2010-Sept11- Aug12 Trended PMPM Composite ARF IBNR & Underreporting Adjustment Target Loss Ratio Final Adjusted PMPM Acute Services Clinic Services 146,750 $3,508 $ $ % $0.02 Dental Services 146, , % 3.20 Dialysis Center 146, , % 2.21 Emergency Room Services 146, , % 3.31 Hearing Services Including Hearing Aids 146, , % 4.10 Inpatient Hospital Services 146,750 4,946, % Independent Laboratory Or Portable X-Ray Services 146,750 11, % 0.09 Nurse Practitioner Services 146,750 6, % 0.07 Pharmaceuticals 146, , % 3.33 Physical Assistant 146, % 0.00 Physician Services 146, , % 3.51 Outpatient Hospital Services 146, , % 4.06 Podiatry 146,750 7, % 0.06 Rural Health Services 146, % 0.00 Skilled Nursing Facility Services- Rehabilitation 146, , % 6.12 Visual Services Including Eyeglasses 146, , % 0.97 Other Acute Service Not Listed 146,750 33, % 0.26 LTC Services Adult Companion Services 146,750 $1,192,296 $ $ % $9.35 Adult Day Health Services 146,750 5,810, % Assisted Living Services 146, ,686, % Attendant Care Services 146,750 14, % 0.11 Case Aide 146,750 11, % 0.09 Case Management (Internal) 146,750 19,137, % Chore Services 146,750 83, % 0.65 Community Mental Health 146, , % 1.01 Consumable Medical Supplies 146,750 3,172, % Counseling 146,750 55, % 0.43 Durable Medical Equipment 146, , % 3.39 Environmental Accessibility Adaptations 146,750 83, % 0.65 Escort Services 146,750 67, % 0.53 Family Training Services (Individual) 146, % 0.00 Family Training Services (Group) 146, % 0.00 Financial Assessment/Risk Reduction Services 146, % 0.00 Financial Maintenance/Risk Reduction Services 146, % 0.00 Home Delivered Meals 146,750 2,612, % Homemaker Services 146,750 5,910, % Mental Health Case Management 146, , % 0.80 Nursing Facility Services- Long-Term 146,750 9,115, % Skilled Nursing 146,750 10, % 0.09 Nutritional Assessment/Risk Reduction Services 146,750 64, % 0.51 Occupational Therapy 146, % 0.00 Personal Care Services 146,750 14,752, % Personal Emergency Response System Installation 146,750 63, % 0.50 Personal Emergency Response System - Maintenan 146, , % 3.01 Pest Control - Initial Visit 146, % 0.01 Pest Control - Maintenance 146,750 8, % 0.07 Physical Therapy 146,750 4, % 0.04 Registered Physical Therapist 146, % 0.00 Physical Risk Assessment And Reduction 146, % 0.00 Private Duty Nursing Services 146,750 11, % 0.09 Respiratory Therapy 146,750 7, % 0.06 Respite Care - In Home 146,750 4,856, % Respite Care - Facility-Based 146,750 85, % 0.67 Speech Therapy 146, % 0.00 Transportation Services 146, , % 1.66 Other LTC Service Not Listed 146,750 1,229, % 9.71 Acute Care Services 146,750 8,880, LTC Services 146, ,308,271 1, , , Total 146, ,188,969 1, , , /14/2011 Milliman Page 1

21 Appendix B Florida Agency for Health Care Administration and Department of Elder Affairs Nursing Home Diversion Fee-For-Service Equivalent Calculation for September 1, August 31, 2012 Rates Statewide Base Rate Development - Encounter Method Claims Experience CY2010 Service Category Case Months Total Dollars Base PEPM Inflation Factors CY2009-CY2010 Inflation Factors CY2010-Sept11- Aug12 Trended PMPM Composite ARF IBNR & Underreporting Adjustment Target Loss Ratio Final Adjusted PMPM Acute Services Clinic Services 193,384 $4,293 $ $ % $0.03 Dental Services 193, , % 2.90 Dialysis Center 193, , % 2.79 Emergency Room Services 193, , % 2.55 Hearing Services Including Hearing Aids 193, , % 5.23 Inpatient Hospital Services 193,384 6,339, % Independent Laboratory Or Portable X-Ray Services 193,384 41, % 0.26 Nurse Practitioner Services 193,384 16, % 0.12 Pharmaceuticals 193, , % 6.83 Physical Assistant 193, % 0.00 Physician Services 193, , % 3.98 Outpatient Hospital Services 193, , % 5.10 Podiatry 193,384 73, % 0.45 Rural Health Services 193, % 0.00 Skilled Nursing Facility Services- Rehabilitation 193, , % 4.08 Visual Services Including Eyeglasses 193, , % 0.97 Other Acute Service Not Listed 193,384 3,641, % LTC Services Adult Companion Services 193,384 $1,355,355 $ $ % $8.34 Adult Day Health Services 193,384 8,133, % Assisted Living Services 193, ,841, % Attendant Care Services 193,384 6,690, % Case Aide 193,384 14, % 0.09 Case Management (Internal) 193,384 22,715, % Chore Services 193, , % 0.82 Community Mental Health 193,384 34, % 0.22 Consumable Medical Supplies 193,384 3,209, % Counseling 193,384 21, % 0.13 Durable Medical Equipment 193, , % 3.74 Environmental Accessibility Adaptations 193, , % 0.71 Escort Services 193, , % 0.62 Family Training Services (Individual) 193, % 0.00 Family Training Services (Group) 193, % 0.00 Financial Assessment/Risk Reduction Services 193,384 2, % 0.02 Financial Maintenance/Risk Reduction Services 193,384 2, % 0.01 Home Delivered Meals 193,384 3,297, % Homemaker Services 193,384 7,053, % Mental Health Case Management 193, , % 0.75 Nursing Facility Services- Long-Term 193,384 14,785, % Skilled Nursing 193,384 56, % 0.35 Nutritional Assessment/Risk Reduction Services 193, % 0.00 Occupational Therapy 193, % 0.00 Personal Care Services 193,384 18,101, % Personal Emergency Response System Installation 193,384 29, % 0.18 Personal Emergency Response System - Maintenan 193, , % 3.65 Pest Control - Initial Visit 193,384 2, % 0.02 Pest Control - Maintenance 193,384 11, % 0.07 Physical Therapy 193,384 11, % 0.07 Registered Physical Therapist 193, % 0.00 Physical Risk Assessment And Reduction 193, % 0.00 Private Duty Nursing Services 193,384 14, % 0.09 Respiratory Therapy 193, % 0.00 Respite Care - In Home 193,384 4,959, % Respite Care - Facility-Based 193, , % 1.09 Speech Therapy 193, % 0.00 Transportation Services 193, , % 1.00 Other LTC Service Not Listed 193, % 0.00 Acute Care Services 193,384 $15,535,907 $ LTC Services 193,384 $219,361,825 $1, , , Total 193,384 $234,897,733 $1, , , /14/2011 Milliman Page 2

22 Appendix B Florida Agency for Health Care Administration and Department of Elder Affairs Nursing Home Diversion Fee-For-Service Equivalent Calculation for September 1, August 31, 2012 Rates Statewide Base Rate Development - Encounter Method Composite Claims Experience CY2009 & CY2010 Service Category Case Months Total Dollars Base PEPM Inflation Factors CY2009-CY2010 Inflation Factors CY2010-Sept11- Aug12 Trended PMPM Composite ARF IBNR & Underreporting Adjustment Target Loss Ratio Final Adjusted PMPM Acute Services Clinic Services 340,134 $7,801 $ $ % $0.02 Dental Services 340, , % 3.03 Dialysis Center 340, , % 2.54 Emergency Room Services 340, , % 2.87 Hearing Services Including Hearing Aids 340,134 1,360, % 4.74 Inpatient Hospital Services 340,134 11,286, % Independent Laboratory Or Portable X-Ray Services 340,134 52, % 0.19 Nurse Practitioner Services 340,134 22, % 0.10 Pharmaceuticals 340,134 1,363, % 5.32 Physical Assistant 340, % 0.00 Physician Services 340,134 1,099, % 3.77 Outpatient Hospital Services 340,134 1,359, % 4.65 Podiatry 340,134 81, % 0.28 Rural Health Services 340, % 0.00 Skilled Nursing Facility Services- Rehabilitation 340,134 1,383, % 4.96 Visual Services Including Eyeglasses 340, , % 0.97 Other Acute Service Not Listed 340,134 3,675, % LTC Services Adult Companion Services 340,134 $2,547,651 $ $ % $8.78 Adult Day Health Services 340,134 13,943, % Assisted Living Services 340, ,527, % Attendant Care Services 340,134 6,704, % Case Aide 340,134 26, % 0.09 Case Management (Internal) 340,134 41,853, % Chore Services 340, , % 0.75 Community Mental Health 340, , % 0.56 Consumable Medical Supplies 340,134 6,381, % Counseling 340,134 76, % 0.26 Durable Medical Equipment 340,134 1,058, % 3.59 Environmental Accessibility Adaptations 340, , % 0.68 Escort Services 340, , % 0.58 Family Training Services (Individual) 340, % 0.00 Family Training Services (Group) 340, % 0.00 Financial Assessment/Risk Reduction Services 340,134 3, % 0.01 Financial Maintenance/Risk Reduction Services 340,134 2, % 0.01 Home Delivered Meals 340,134 5,909, % Homemaker Services 340,134 12,964, % Mental Health Case Management 340, , % 0.77 Nursing Facility Services- Long-Term 340,134 23,901, % Skilled Nursing 340,134 66, % 0.24 Nutritional Assessment/Risk Reduction Services 340,134 64, % 0.22 Occupational Therapy 340, % 0.00 Personal Care Services 340,134 32,853, % Personal Emergency Response System Installation 340,134 92, % 0.32 Personal Emergency Response System - Maintenan 340, , % 3.37 Pest Control - Initial Visit 340,134 3, % 0.01 Pest Control - Maintenance 340,134 19, % 0.07 Physical Therapy 340,134 16, % 0.06 Registered Physical Therapist 340, % 0.00 Physical Risk Assessment And Reduction 340, % 0.00 Private Duty Nursing Services 340,134 26, % 0.09 Respiratory Therapy 340,134 7, % 0.03 Respite Care - In Home 340,134 9,815, % Respite Care - Facility-Based 340, , % 0.91 Speech Therapy 340, % 0.00 Transportation Services 340, , % 1.28 Other LTC Service Not Listed 340,134 1,229, % 4.19 Acute Care Services 340,134 $24,416,605 $71.79 $ $85.87 LTC Services 340,134 $391,670,097 $1, $1, $1, Total 340,134 $416,086,702 $1, $1, $1, /14/2011 Milliman Page 3

23 Milliman Client Report Appendix C APPENDIX C September 1, 2011 August 31, 2012 Capitation Rates September 1, 2011 August 31, 2012

24 Appendix C Florida Agency for Health Care Administration and Department of Elder Affairs Nursing Home Diversion Calculation for September 1, August 31, 2012 Rates Plan Rate Development - Blended Method County Number County Name May 2011 Enrollment Original Blended ARF Percent Change in ARF Statewide Base Rate - Encounter Method Encounter Method ARF Adjusted Base Rate Provider Name PSA New ARF SUNRISE HOME HEALTH CARE 13 Dade % $1, $1, WORLDNET SERVICES 17 Escambia % 1, , WORLDNET SERVICES 57 Santa Rosa % 1, , WORLDNET SERVICES 46 Okaloosa 1 - N/A N/A 1, , WORLDNET SERVICES 66 Walton 1 - N/A N/A 1, , SUNSHINE STATE HEALTH PLAN, INC 06 Broward % 1, , SUNSHINE STATE HEALTH PLAN, INC 29 Hillsborough % 1, , SUNSHINE STATE HEALTH PLAN, INC 51 Pasco % 1, , SUNSHINE STATE HEALTH PLAN, INC 64 Volusia % 1, , SUNSHINE STATE HEALTH PLAN, INC 16 Duval % 1, , SUNSHINE STATE HEALTH PLAN, INC 52 Pinellas % 1, , SUNSHINE STATE HEALTH PLAN, INC 41 Manatee % 1, , SUNSHINE STATE HEALTH PLAN, INC 53 Polk % 1, , SUNSHINE STATE HEALTH PLAN, INC 05 Brevard % 1, , SUNSHINE STATE HEALTH PLAN, INC 48 Orange % 1, , SUNSHINE STATE HEALTH PLAN, INC 49 Osceola % 1, , SUNSHINE STATE HEALTH PLAN, INC 59 Seminole % 1, , SUNSHINE STATE HEALTH PLAN, INC 58 Sarasota % 1, , SUNSHINE STATE HEALTH PLAN, INC 50 Palm Beach % 1, , SUNSHINE STATE HEALTH PLAN, INC 13 Dade % 1, , SUNSHINE STATE HEALTH PLAN, INC 42 Marion % 1, , SUNSHINE STATE HEALTH PLAN, INC 01 Alachua % 1, , SUNSHINE STATE HEALTH PLAN, INC 09 Citrus % 1, , SUNSHINE STATE HEALTH PLAN, INC 27 Hernando % 1, , SUNSHINE STATE HEALTH PLAN, INC 35 Lake % 1, , AMERIGROUP 50 Palm Beach % 1, , AMERIGROUP 43 Martin % 1, , AMERIGROUP 06 Broward % 1, , AMERIGROUP 13 Dade % 1, , AMERIGROUP 52 Pinellas % 1, , AMERIGROUP 29 Hillsborough % 1, , AMERIGROUP 51 Pasco % 1, , AMERIGROUP 53 Polk % 1, , AMERIGROUP 41 Manatee % 1, , AMERIGROUP 36 Lee % 1, , AMERIGROUP 48 Orange % 1, , AMERIGROUP 56 St. Lucie % 1, , AMERIGROUP 49 Osceola % 1, , AMERIGROUP 05 Brevard % 1, , AMERIGROUP 59 Seminole % 1, , AMERIGROUP 31 Indian River % 1, , AMERIGROUP 09 Citrus % 1, , AMERIGROUP 35 Lake % 1, , AMERIGROUP 27 Hernando % 1, , AMERIGROUP 42 Marion % 1, , AMERIGROUP 11 Collier % 1, , AMERIGROUP 08 Charlotte % 1, , AMERIGROUP 58 Sarasota % 1, , AMERIGROUP 16 Duval % 1, , AMERIGROUP 55 St. Johns % 1, , AMERIGROUP 64 Volusia % 1, , AMERICAN ELDERCARE, INC 50 Palm Beach % 1, , AMERICAN ELDERCARE, INC 48 Orange % 1, , AMERICAN ELDERCARE, INC 49 Osceola % 1, , AMERICAN ELDERCARE, INC 59 Seminole % 1, , AMERICAN ELDERCARE, INC 29 Hillsborough % 1, , AMERICAN ELDERCARE, INC 52 Pinellas % 1, , AMERICAN ELDERCARE, INC 05 Brevard % 1, , AMERICAN ELDERCARE, INC 06 Broward % 1, , AMERICAN ELDERCARE, INC 13 Dade % 1, , AMERICAN ELDERCARE, INC 16 Duval % 1, , AMERICAN ELDERCARE, INC 51 Pasco % 1, , AMERICAN ELDERCARE, INC 41 Manatee % 1, , AMERICAN ELDERCARE, INC 58 Sarasota % 1, , AMERICAN ELDERCARE, INC 64 Volusia % 1, , AMERICAN ELDERCARE, INC 36 Lee % 1, , AMERICAN ELDERCARE, INC 08 Charlotte % 1, , AMERICAN ELDERCARE, INC 31 Indian River % 1, , AMERICAN ELDERCARE, INC 35 Lake % 1, , AMERICAN ELDERCARE, INC 53 Polk % 1, , AMERICAN ELDERCARE, INC 55 St. Johns % 1, , AMERICAN ELDERCARE, INC 56 St. Lucie % 1, , AMERICAN ELDERCARE, INC 43 Martin % 1, , AMERICAN ELDERCARE, INC 18 Flagler % 1, , AMERICAN ELDERCARE, INC 01 Alachua % 1, , AMERICAN ELDERCARE, INC 10 Clay % 1, , AMERICAN ELDERCARE, INC 28 Highlands % 1, , AMERICAN ELDERCARE, INC 42 Marion % 1, , AMERICAN ELDERCARE, INC 09 Citrus % 1, , AMERICAN ELDERCARE, INC 27 Hernando % 1, , AMERICAN ELDERCARE, INC 45 Nassau % 1, , AMERICAN ELDERCARE, INC 46 Okaloosa % 1, , AMERICAN ELDERCARE, INC 60 Sumter % 1, , AMERICAN ELDERCARE, INC 17 Escambia % 1, , AMERICAN ELDERCARE, INC 57 Santa Rosa % 1, , AMERICAN ELDERCARE, INC 66 Walton 1 - N/A N/A 1, , PROJECT INDEPENDENCE AT HOME 06 Broward % 1, , /14/2011 Milliman Page 1