Final_RFP_746_2600000110_2_SO_FORM.PDF

Document ID: RFP 746 2600000110 Page: 1

Commonwealth of Kentucky

SOLICITATION MODIFICATION

Modification: Yes Version #: 2

TITLE: Actuarial Services C5903

Date Issued:

04/30/2026 Record Date:

04/27/2026

Solicitation Closes Date:

05/14/2026 Time:

14:00

Solicitation No:

RFP 746 2600000110

Reason for Modification

Addendum 1 April 30, 2026

This addendum provides responses to Vendor questions and updates the CHFS Contact. Section 3 Technical Proposal Evaluation has been revised and the total Technical Proposal Evaluation points have been increased to 1,850. Section 4.00 Schedule of Activities has been updated to revise the Proposals Due date from 5/07/2026 to 5/14/2026. The KY NEMT 1915(b) approval letter has been attached. Vendor questions and answers start on page 45.

Online Bidding Prohibited: No

For Information Call:

Travis Mazurek 502-564-7736

Bid Receiving Location:

Bid Receiving

See Terms & Conditions for Bid Submission Instructions

Other KY

Vendor Customer Number:

Vendor Name:

Phone Number:

Fax Number:

Email Address:

Ordering

Address:

City, State, Zip:

Contact Name:

Contact Email:

Contact Phone Number:

Payment

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Ownership Type

__ Sole Proprietorship __ Partnership __ Corporation __ Other_________________________

SIGNATURE OF AUTHORIZED AGENT IS REQUIRED UNLESS RESPONSE

IS SUBMITTED ELECTRONICALLY. FAILURE TO SIGN SHALL RENDER

THE BID INVALID.

Document ID: RFP 746 2600000110 Page: 2

Signature X_________________________________________ FEIN#____________________ Date____________

All offers subject to all terms and conditions contained in this solicitation.

Document ID: RFP 746 2600000110 Page: 3

Line Items

Commodity Group: Actuarial Services

Line CL Description Quantity UOM Unit Cost Line Total or Contract Amnt

1 Actuarial Services

Comm Code Comm Description Manufacturer Model # Manuf Part #

948 HEALTH RELATED SERVICES (FOR

HUMAN SERVICES SEE CLASS 952)

Extended Description Development of actuarially certified rates for managed care organizations (MCOs) and non-emergency transportation brokers.

Requirements for actuarially sound rate ranges are governed by 42 CFR 438.6.

Shipping Information

Billing Information CHFS DMS Division of Fiscal Management dms.invoice@ky.gov 275 E Main Street 6W-C

Frankfort KY 40621

Document ID: RFP 746 2600000110 Page: 4

Submission Checklist

The following items will be required to be submitted with bid:

Item Technical Proposal Cost Proposal Oral Presentation, if necessary

ADDENDUM HISTORY

Addendum 1

April 30, 2026

This addendum provides responses to Vendor questions and updates the CHFS Contact. Section 3 Technical Proposal Evaluation has been revised and the total Technical Proposal Evaluation points have been increased to 1,850. Section 4.00 Schedule of Activities has been updated to revise the Proposals Due date from 5/07/2026 to 5/14/2026. The KY NEMT 1915(b) approval letter has been attached. Vendor questions and answers start on page 45.

Revised February 2026

PROPOSAL SUBMISSION CHECKLIST

The vendor MUST include the following with the proposal submission.

If the items highlighted below are not submitted with the proposal submission, the Commonwealth MUST deem the proposal non-responsive and SHALL NOT consider for award.

All other items MUST be submitted prior to award.

_____ SIGNED AND COMPLETED SOLICITATION –Section(s) 8.00 and 8.10 of this RFP (not required if submitting electronically)

_____ *PROPOSED SOLUTION (TECHNICAL) UNDER SEALED COVER AND BY CLOSING DATE --

Section(s) 8.00 and 8.10 of this RFP

_____ *PROPOSED SOLUTION (COST) UNDER SEALED COVER AND BY CLOSING DATE -- Section(s)

8.00 and 8.10 of this RFP

_____ TRANSMITTAL LETTER – Section 8.20 of this RFP

_____ PROOF OF REGISTRATION WITH SECRETARY OF STATE BY A FOREIGN ENTITY -- Section 8.00 of the Personal Service Contract Terms and Conditions of this RFP

_____ REQUIRED AFFIDAVIT(S) – Section 8.20 of this RFP

*The Commonwealth defines SEALED as “a closure that must be broken to be opened and that thus reveals tampering” (Merriam-Webster Dictionary, https://www.merriam-webster.com/dictionary/seal

Document Phase Document Description Page 5

2600000110 Final Actuarial Services C5903 Total Pages: 56 https://www.merriam-webster.com/dictionary/seal

REQUEST FOR PROPOSAL

FOR

PERSONAL SERVICE CONTRACT

Cabinet for Health and Family Services (CHFS) Department for Medicaid Services, Division of Fiscal Management Actuarial Services

RFP 746 2600000110

This document constitutes a Request for Proposals for a Personal Service Contract from qualified individuals and organizations to furnish those services as described herein for the Commonwealth of Kentucky, Cabinet for Health and Family Services on the behalf of the Department for Medicaid Services, Division of Fiscal Management.

Offerors are advised that any personal service contract resulting from this RFP must comply with all applicable provisions of KRS 45A and KRS 12.210 prior to becoming effective.

A contract, based on this RFP, may or may not be awarded. Any contract award from this RFP is invalid until properly approved and executed by the Finance and Administration Cabinet and filed with the Legislative Research Commission, Government Contract Review Committee.

1.00 Purpose and Background

Kentucky’s Medicaid program transitioned from a fee-for-service basis to managed care on November 1, 2011, with the exception of approximately 115,000 members who remain under fee-for-service. Kentucky is divided into eight (8) medical regions. Initially, approximately 510,000 members who were transitioned from fee-for-service were managed by three Managed Care Organizations (MCOs) who operated under a 1915(b) waiver throughout the state with the exception of Region 3. The remaining 162,000 members were managed by four MCOs within Region 3 that functioned under a 1915(b) waiver which commenced on January 1, 2013. From November 1, 1997, to December 31, 2012, these members were managed by a single entity operating under 1115 waivers. Beginning January 1, 2014, Affordable Care Act (ACA) expansion members were managed by five (5) MCOs who operated under a 1915(b) waiver. Since July 1, 2014, all five (5) MCOs have operated under a 1915(b) waiver in all regions throughout the state for both the non-ACA and ACA populations. Beginning in SFY 19, Kentucky was divided into two (2) medical regions. Starting in SFY 20, the foster care population was served by a single MCO.

Work is required to produce a databook and actuarially-certified rates for managed care organizations operating statewide. Further, actuarially-certified rates must be developed for both the Non-ACA and the ACA expansion populations. Separate databooks are expected to be developed for Calendar Year (CY) 27 rates and CY 28 MCO rates.

The MCOs are currently paid a monthly capitated rate for each of twenty-seven (27) non-ACA eligibility groups and for each of the twelve (12) ACA eligibility groups. Beginning in CY 21, MCOs were paid a monthly capitation rate for each of twenty-one (21) eligibility groups. Capitated rates for each eligibility group differ across regions. The rates are negotiated between CHFS and the MCOs and are based on an actuarial study that conforms to state and federal requirements as identified in 42 CFR 438.6.

When setting actuarially sound rates or rate ranges, the actuary is expected to, adhere to the requirements in 42 CFR

438.6 by applying the following elements or explaining why they are not applicable:

1. Base utilization and cost data that are derived from the Medicaid population, or if not, are adjusted to make them comparable to the Medicaid population.

2. Ensure adjustments made to smooth data and adjustments to account for factors such as medical trend inflation, incomplete data, MCO, Prepaid Inpatient Health Plan (PIHP), or Prepaid Ambulatory Health Plan (PAHP) administration (subject to the limits), and utilization.

3. Develop rate cells specific to the enrolled population, by

a. Eligibility category;

b. Age;

c. Gender;

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d. Locality/region; and

e. Risk adjustments based on diagnosis or health status.

4. Apply other payment mechanisms and utilization and cost assumptions that are appropriate for individuals with chronic illness, disability, ongoing health care needs, or catastrophic claims, using risk adjustment, risk sharing, or other appropriate cost-neutral methods.

5. Implement a value-based payment (VBP) plan consisting of withholds set based on quality targets for the MCOs. The initial value-based payment plan began in CY 24.

Background for Budget Forecasting Services

MCO performance may impact short and long term DMS budgets. MCO rate estimates utilizing the latest encounter data provides a perspective into MCO and DMS fiscal impacts. Additionally, encounter completeness, accuracy and acceptance rates impact not only future capitation rate setting but also CMS reporting.

Background for NEMT Services

Currently, Medicaid’s Non-Emergency Medical Transportation (NEMT) services are provided through the Kentucky Transportation Cabinet’s broker system. The State is divided into 15 regions which are set by the Transportation Cabinet and cover 120 counties, and various brokers are assigned a region based upon the broker winning the region’s bid through the Transportation Cabinet’s bidding process. DMS reimburses the Transportation Cabinet for these services in accordance with yearly negotiated rates established within ranges for each region. The Transportation Cabinet then in turn pays the brokers. CMS has approved a 1915(b) waiver for these services which requires the rates to be certified by an actuary. Separate databooks are expected to be developed for SFY 28 and SFY 29 NEMT rates.

D. Background for Medical Loss Ratio Adjustment

For State Fiscal Year 2016, the total annual capitation payment made to the MCO for Non-ACA Expansion Members and their associated healthcare costs was evaluated against an eighty-five (85) percent Minimum Medical Loss Ratio Requirement to determine whether a Payment Adjustment was warranted. If the MCO had a Medical Loss Ratio of less than 85 percent in State Fiscal Year 2016, the MCO submitted a premium refund to the Commonwealth. The adjustment was computed as eighty (80) percent of the difference between the actual countable Non-ACA Expansion Medical Expenses of the MCO and the 85% MLR requirement.

Beginning with State Fiscal Year 2017 and continuing annually on a state fiscal year basis thereafter, each MCO is required to expend at a minimum ninety (90) percent of Net Capitation Payments for the combined ACA and Non- ACA populations on Allowed Medical Expenses. A Payment Adjustment (premium refund) occurs if:

1. The MCO has a Medical Loss Ratio of less than 90 percent but greater than or equal to eighty-six

(86) percent beginning in State Fiscal Year 2017. The MCO submits a Payment Adjustment (premium refund) to the Commonwealth for seventy-five (75) percent of the difference between the dollar amount corresponding to an 86 percent medical loss ratio and the dollar amount corresponding to a 90 percent Medical Loss Ratio.

2. The MCO has a Medical Loss Ratio less than 86 percent beginning in State Fiscal Year 2017. The MCO submits a Payment Adjustment (premium refund) to the Commonwealth for the sum of: (a) 75 percent of the difference between the dollar amount corresponding to an 86 percent medical loss ratio and the dollar amount corresponding to a 90 percent loss ratio; and (b) one hundred (100) percent of the difference between the actual countable medical expenses for the Contractor and the dollar amount corresponding to an 86 percent medical loss ratio.

The adjustment process begins 12 months after the end of each State Fiscal Year. As part of the financial reconciliation process described above, the MCO is required to prepare and certify supplemental financial schedules to reconcile Medical Expenses reported on the Annual Statement required by the Kentucky Department of Insurance to medical expenses reported to the Department and additional financial schedules describing how reported expenses were directly attributed or allocated to the Non-ACA population prior to State Fiscal Year 2017, and for both the ACA and non-ACA combined for state fiscal years thereafter. These schedules, and any other information the MCO wants to submit for consideration, are due to the Commonwealth 30 calendar days after the end of the 12 month periods described above. In the determination of incurred medical claims, no estimate of claims to be paid more than 12 months beyond the end of the period will be considered.

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Background for Directed Payments

The Department and MCOs recognize the Department’s desire to provide enhanced reimbursement to provider entities through directed payments in order to preserve the ability of the provider entities to provide essential services to Commonwealth residents.

The Department currently makes directed payments in addition to adjudicated claims payments to a number of provider entities. Those categories of providers receiving directed payments are as follows:

1. Intensity Operating Allowance for Pediatric Teaching hospitals

2. A State Designated Urban Trauma Center

3. State Owned or Operated University Teaching Hospital Faculty

4. Psychiatric Access Supplement to a Designated Psychiatric Hospital

State owned or operated university teaching hospitals include a hospital operated by a related party organization as defined in 42 CFR 413.17, which is operated as part of an approved School of Medicine or Dentistry.

Each MCO is currently required to make monthly directed payments to the specified providers on or before the last business day of the month of service for which capitation is paid. Each MCO submits to the Department claims-level cost data for payment verification purposes. Each MCO works with the Department to assure that information is provided to allow for provider entities to remit the state matching portion of the payments to the Department, as applicable.

Directed payments are derived from determining the aggregate payments that can be made during the contract period in accordance with 42 CFR 438.6. These aggregate dollars are then allocated to each region and rate cell based on member utilization of the services in question (dental, physician, inpatient and outpatient hospital) at the specified facilities. These aggregate dollars are then converted to a PMPM by projecting the contract period capitation enrollment.

State-Directed Payments to state hospitals are incorporated into the MCO rates. A separate vendor processes encounter data and determines the discharge counts for determining the directed payments. These directed payments are then incorporated in the PMPM by rate cell. A reconciliation is calculated based on the difference between the directed payment dollars DMS intended to pay out and the directed payment dollars that were paid out monthly to the providers. DMS funds the difference between the directed payment dollars DMS intended to pay out and the directed payments paid to the MCOs (actual enrollment multiplied by the Directed Payment PMPMs). The MCOs funds the difference between the directed payments paid to the MCOs (actual enrollment multiplied by the Directed Payment PMPMs) and the directed payment dollars that were paid out monthly to the providers.

Background for Additional Financial Analysis Activities

There may be times when DMS requires additional financial analysis and recommendations for projects.

Background for Encounter Data Monitoring

Encounter data is one of the most important analytical tools for Medicaid health plans and health programs. Without accurate and timely data, it is not possible to analyze costs, utilization, or trends; evaluate benefits; or determine the quality of services being provided to Medicaid members. Quarterly encounter data monitoring was begun in SFY 22.

2.00 Scope of Work

All Project Deliverables, with the exception of 2.00 H—Additional Financial Analysis Activities, should be listed in the approved Project Work Plan. Project Deliverables require written approval from the State. The actuary should include a minimum of ten (10) business days, per Deliverable, in the Project Work Plan for DMS to review each major Deliverable and document the decisions. Based on the review findings, DMS may approve the document or specify conditional approval with a request that revisions be made to the Deliverable. Deliverable-specific review periods and defining of major Deliverables should be finalized and documented during the Start-Up and Planning phase of the contract project. The Vendor should facilitate the DMS’ review and approval process of all Deliverables.

1. Project Work Plan – Provide to DMS a proposed work plan within ten (10) business days from the contract effective date to include, but not be limited to, a timeline, resource loading, critical path, dependencies and set the

Document Phase Document Description Page 8 schedule of key events and dates for submittal of deliverables for Commonwealth review in the Project Work Plan.

All project deliverables, as well as milestone dates and key dates are contingent upon Commonwealth approval. The project work plan is due at 5 pm EST (Eastern Standard Time) on the 10th business day from the contract effective date. For each business day the project work plan is not received beyond the deadline, DMS may assess a penalty of $100.00 per business day.

2. Managed Care Rates, Certifications, CMS Rate Setting Checklist, and Databooks – Submit MCO rates, a databook, CMS Rate Setting Checklist, and a certification to DMS, in draft form by September 1 at 5 pm EST and final form by the September 30 at 5 pm EST annually unless there is a procurement. During years when there is procurement, a MCO rates, a databook, CMS Rate Setting Checklist, and a certification should be submitted to DMS in draft form by May 1 at 5 pm EST and final form by May 31 at 5 pm EST. One (1) electronic copy in PDF format and one (1) electronic copy in Excel format approved by DMS for both draft and final documents should be submitted to DMS. For any additional work that is required for MCO rates, the same timeframes apply with draft MCO rates, databooks, CMS Rate Setting Checklist, and certifications due 4 months prior to the effective date of the rates at 5 pm EST, and final MCO rates, databooks, CMS Rate Setting Checklist, and certifications due 3 months prior to the effective date of the rates at 5 pm EST. For instance, if an amendment is needed for a policy change effective on July 1, then MCO rates, a databook, CMS Rate Setting Checklist, and a certification are due to DMS in draft form by March 1 at 5 pm EST and final form by March 30 at 5 pm EST. All components of the deliverables must be received by 5 pm EST and satisfy all requirements in Section 2.10. For each business day the draft MCO rates, databook, CMS Rate Setting Checklist, and certification are not received by the deadline, DMS may assess a penalty of $1,000 per business day. For each business day the final MCO rates, databook, CMS Rate Setting Checklist, and certification are not received by the deadline, DMS may assess a penalty of $1,000.00 per business day;

3. Risk adjusted rates and certifications are expected to be produced by September 5 at 5 pm EST for rates effective October 1, by December 5 at 5 pm EST for rates effective January 1, by March 5 at 5 pm EST for rates effective April 1, and by June 5 at 5 pm EST for rates effective July 1. Risk adjustment deliverables include an excel workbook summarizing the risk adjustment with separate worksheets for the Non-ACA and ACA populations, separate MCO-specific workbooks with separate worksheets for the Non-ACA and ACA populations, and a certification document summarizing the risk adjustment process and results. All components of the deliverable must be submitted by the required deadline. For each business day the risk adjustment deliverables are not received by the deadline, DMS may assess a penalty of $500.00 per business day.

4. Implement a value-based payment plan consisting of withholds based on MCO quality targets. These benchmarks are expected to be compared to MCO outcomes by September 30 at 5 pm EST annually. The value-based payment plan deliverables include an excel workbook summarizing the benchmark targets vs. MCO performance, separate MCO-specific workbooks, and a methodology document summarizing the value-based payment plan process and results. All components of the deliverable must be submitted by the required deadline. For each business day the value-based payment plan deliverables are not received by the deadline, DMS may assess a penalty of $100.00 per business day.

5. NEMT Rates, Certifications, and Databooks – Submit NEMT rates, a databook, and a certification to DMS in draft form by February 1 at 5 pm EST and final form by February 15 at 5 pm EST annually. One (1) electronic copy in PDF format and one (1) electronic copy in Excel format approved by DMS for both draft and final documents should be submitted to DMS. For any additional work that is required for NEMT rates, the following timeframes are expected to apply with draft NEMT rates, databooks, and certifications due 4 months prior to the effective date of the rates at 5 pm EST, and final NEMT rates, databooks, and certifications due 3 ½ months prior to the effective date of the rates at 5 pm EST. For instance, if an amendment is needed for a policy change effective on January 1, then NEMT rates, a databook, and a certification are due to DMS in draft form by September 1 at 5 pm EST and final form by September 15 at 5 pm EST. All components of the deliverables must be received by 5 pm EST and satisfy all requirements in Section 2.10. For each business day the draft NEMT rates, databook, and certification are not received by the deadline, DMS may assess a penalty of $1,000 per business day. For each business day the final NEMT rates, databook, and certification are not received by the deadline, DMS may assess a penalty of $1,000.00 per business day;

6. Directed Payments – Submit directed payments to DMS in draft form by March 1 at 5 pm EST and final form by March 31 at 5 pm EST annually unless there is a procurement. During years when there is procurement, directed payments are expected to be submitted to DMS in draft form by November 1 at 5 pm EST and final form by November 30 at 5 pm EST. Directed payments are incorporated into the MCO rates, so all timeframes for directed payments should coincide with the timeframes for MCO Rate setting. Directed payments deliverables include an excel workbook summarizing the directed payments with separate worksheets for the Non-ACA and ACA

Document Phase Document Description Page 9 populations, separate MCO-specific workbooks with separate worksheets for the Non-ACA and ACA populations, separate provider-specific workbooks with separate worksheets for the Non-ACA and ACA populations, and a certification document summarizing the directed payment process and results. All components of the deliverables must be received by 5 pm EST and satisfy all requirements in Section 2.10. For each business day the directed payments deliverables are not received by the deadline, DMS may assess a penalty of $500.00 per business day.

A directed payment reconciliation is calculated based on the difference between the directed payment dollars DMS intended to pay out and the directed payment dollars that were paid out monthly to the providers. DMS funds the difference between the directed payment dollars DMS intended to pay out and the directed payments paid to the MCOs (actual enrollment multiplied by the Directed Payment PMPMs). The MCOs funds the difference between the directed payments paid to the MCOs (actual enrollment multiplied by the Directed Payment PMPMs) and the directed payment dollars that were paid out monthly to the providers. Complete the directed payment reconciliation by September 30 annually at 5 pm EST. Directed payments reconciliation deliverables include an excel workbook summarizing the directed payments reconciliation with separate worksheets for the Non- ACA and ACA populations, separate MCO-specific workbooks with separate worksheets for the Non-ACA and ACA populations, separate provider-specific workbooks with separate worksheets for the Non-ACA and ACA populations, and a certification document summarizing the directed payment reconciliation process and results. All components of the deliverables must be received by 5 pm EST and satisfy all requirements in Section 2.10. For each business day the directed payments reconciliation deliverables are not received by the deadline, DMS may assess a penalty of $500.00 per business day.

7. Budget Forecasting – Submit individual and aggregate MCO rate estimates (all rate cells, all regions) and individual and aggregate rate projections (all rate cells, all regions) by September 30 at 5 pm EST annually. Submit individual and aggregate eligibility estimates (all eligibility groups, all rate cells, all regions) and individual and aggregate eligibility projections (all eligibility groups, all rate cells, all regions) by September 30 at 5 pm EST annually. Submit individual and aggregate MCO trend estimates (all rate cells, all regions) and individual and aggregate MCO trend projections (all rate cells, all regions) by September 30 at 5 pm EST annually. The actuary are expected to update these MCO rate estimates and projections, eligibility estimates and projections, and MCO trend estimates and projections quarterly with deadlines of December 31 at 5 pm EST, March 31 at 5 pm EST, and June 30 at 5 pm EST. Budget forecasting deliverables include an excel workbook with the MCO rate estimates and projections with separate projections for each rate cell/region, an excel workbook with the eligibility rate estimates and projections with separate projections for each eligibility group/region, and an excel workbook with the MCO trend estimates and projections with separate trend projections for each rate cell/region and for each eligibility group/region. All components of the deliverable must be submitted by the required deadline. For each business day the budget forecasting deliverables are not received by the deadline, DMS may assess a penalty of $250.00 per business day.

8. Medical Loss Ratio (MLR) Adjustment – Submit a MLR reconciliation by September 30 at 5 pm EST annually.

The MLR deliverables include an excel workbook summarizing the MLR reconciliation, separate MCO-specific workbooks, and a certification document summarizing the MLR reconciliation process and results. All components of the deliverable must be submitted by the required deadline. For each business day the MLR deliverables are not received by the deadline, DMS may assess a penalty of $100.00 per business day.

9. Additional Financial Analysis Activities –Perform additional financial analysis and fiscal impacts as directed by DMS. All additional financial analysis should be submitted by the deadline set by DMS at 5 pm EST on the due date. Fiscal impacts are expected to be due within 24 hours. All components of the additional financial analysis and fiscal impact work must be submitted by the required deadline. For each business day the additional financial analysis and fiscal impact deliverables are not received by the deadline, DMS may assess a penalty of $100.00 per business day.

10. Encounter Data Monitoring – The vendor is expected to collect encounter and financial data from each Managed Care Organization (MCO) while ensuring it is validated at intake and stored in a consistent format. The vendor is expected to, review each MCO’s encounter data for anomalies, utilization patterns, and services provided. Including reviewing utilization, unit cost, and service mix changes. Monitor each MCO’s encounter data and compare it among the contracted MCOs for the purpose of understanding MCO payment variations, analyze the encounter and financial data from each MCO for the purpose of understanding the efficiency and savings potential of managed care programs. Analyze the encounter and financial data from each MCO for timeliness, completeness, and accuracy.

Monitoring is expected to include comparing summarized encounter data with MCO financial data. Completeness and accuracy should be estimated by summarizing encounter payments per member per month (PMPM) costs and measuring the variance from the PMPM cost reported by the MCOs in their financial data. Work with each MCO and Office of Application Technology Services (OATS) to improve the timeliness, completeness, and accuracy of

Document Phase Document Description Page 10 the MCO’s encounter and financial data. This is expected to include working on barriers to submission/acceptance of encounter data, setting edits for missing or invalid fields on the claim that prevent it from flowing through the state’s encounter system edits, holding providers accountable for ensuring the provider claims can be converted into an accepted encounter, and establishing data dashboard summaries. Provide a report on the timeliness, completeness, and accuracy of each MCO’s encounter and financial data. Timeliness is expected to be measured by days between submitted encounters and paid data. Completeness is expected to be measured by comparing paid claims dollars with accepted encounters. Accuracy should be measured through the percent of encounters accepted. Report details should include information on each MCO’s medical loss ratio, quality measures, network access and adequacy, timely claims payment, claim denial reasons, and validation that services are consistent with the Medicaid State Plan. Complete the analysis for the first quarter by April 30, for the second quarter by July 30, for the third quarter by October 30, and for the fourth quarter by January 30. All components of the deliverables must be received by 5 pm EST and satisfy all requirements in Section 2.10. For each business day the encounter data monitoring deliverables are not received by the deadline, DMS may assess a penalty of $100.00 per business day.

11. Data Extracts – For existing/on-going projects submit a data request five (5) business days prior to requested receipt date. For new projects, coordinate a data request with Cabinet personnel.

12. Transition Document – Provide within ten (10) calendar days after written notification by DMS of the initiation of transition a detailed Transition Document.

2.01 Deliverables

Ensure the services herein are performed in accordance with, as applicable, Actuarial Standards of Practice, the Statements on Standards for Consulting Services, or the Statements on Standards for Tax Services established by the American Institute of Certified Public Accountants. Accordingly, the actuary will not provide an audit or attest opinion or other form of assurance, and will not verify or audit any information, other than a reasonableness check, provided to the actuary. Any spreadsheets or software tools that the actuary provides to the State are for client’s convenience and are provided as is. The actuary will not be responsible for results obtained by anyone other than the actuary from the use of those items.

A. Vendor Responsibilities – Managed Care Services

1. Develop criteria, with the assistance of Department for Medicaid Services DMS and/or DMS Fiscal Agent, to ensure that only eligible members and services are included in the capitation analysis;

2. Analyze and include MCO Financial Reports, MCO Reconciliation Report, and Encounter data for capitation analysis;

3. Provide preliminary analysis of utilization and cost data/trends;

4. Develop and certify capitation rates or rate ranges, in accordance with generally accepted actuarial principles and practices, for the time period requested by DMS based on appropriate eligibility groupings;

5. Evaluate and incorporate best practices in the development of rates to incorporate cost efficiency of managed care.

6. Submit a databook detailing the methodology and results of the capitation rate setting process. Submit draft and final forms to DMS by the deadlines established by DMS. Submit MCO rates, a databook, and a certification to DMS, in draft form by September 1 at 5 pm EST and final form by the September at 5 pm EST annually unless there is a procurement. During years when there is a procurement, a MCO rates, a databook, and a certification is expected to, be submitted to DMS in draft form by May 1 at 5 pm EST and final form by May 31 at 5 pm EST. One

(1) electronic copy in PDF format and one (1) electronic copy in Excel format approved by DMS for both draft and final documents;. For any additional work that is required for MCO rates, the same timeframes is expected to, apply with draft MCO rates, databooks, and certifications due 4 months prior to the effective date of the rates at 5 pm EST, and final MCO rates, databooks, and certifications due 3 months prior to the effective date of the rates at 5 pm EST.

For instance, if an amendment is needed for a policy change effective on July 1, then MCO rates, a databook, and a certification are due to DMS in draft form by March 1 at 5 pm EST and final form by March 30 at 5 pm EST. All components of the deliverable must be submitted by the required deadline. For each business day the draft MCO rates, databook, and certification are not received by the deadline, DMS may assess a penalty of $1,000 per business day. For each business day the final MCO rates, databook, and certification are not received by the deadline, DMS may assess a penalty of $1,000.00 per business day;

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7. Submit a Center for Medicare and Medicaid Services (CMS) Rate Setting Checklist, which is obtained from CMS. Submit a CMS Rate Setting Checklist to DMS, in draft form by September 1 at 5 pm EST and final form by the September 30 at 5 pm EST annually unless there is a procurement. During years when there is a procurement, a CMS Rate Setting Checklist should be submitted to DMS in draft form by May 1 at 5 pm EST and final form by May 31 at 5 pm EST. One (1) electronic copy in PDF format and one (1) electronic copy in Excel format approved by DMS for both draft and final documents;. For any additional work that is required for MCO rates, the same timeframes is expected to, apply with a draft CMS Rate Setting Checklist due 4 months prior to the effective date of the rates at 5 pm EST, and a final CMS Rate Setting Checklist due 3 months prior to the effective date of the rates at 5 pm EST. For instance, if an amendment is needed for a policy change effective on July 1, then a CMS Rate Setting Checklist is due to DMS in draft form by March 1 at 5 pm EST and final form by March 30 at 5 pm EST.

All components of the deliverable must be submitted by the required deadline. For each business day the draft CMS Rate Setting Checklist is not received by the deadline, DMS may assess a penalty of $1,000 per business day. For each business day the final CMS Rate Setting Checklist is not received by the deadline, DMS may assess a penalty of $1,000.00 per business day;

8. Provide explanation of methodology and resulting capitation rates or rate ranges to DMS management, MCOs, and Centers for Medicare and Medicaid Services (CMS), which may include participating in conference calls or preparing written documentation;

9. Provide DMS analysis and recommendations during the MCO contract process;

10. Provide written documentation of analysis, recommendations, and certification for requested changes in capitated rates due to economic or programmatic changes within thirty (30) calendar days after DMS’ request.

Documentation is expected to be submitted by 5 pm EST thirty (30) calendar days after DMS’ request. For each business day the documentation is not received by the deadline, DMS may assess a penalty of $1,000.00 per business day;

11. Develop Health Risks Adjustments (HRAs) for each participating MCO. Separate risk adjustment analyses is expected to, be performed for the non-Affordable Care Act (ACA) Medicaid population and the ACA population.

a. Utilize the current risk adjustment model (Attachment A Approved Risk Adjustment Model), unless a different model is adopted, to determine risk scores for each Medicaid member enrolled in managed care.

Risk scores is expected to, be based on diagnosis codes in fee-for-service (FFS) claims and encounter data, excluding lab and x-ray;

B. Vendor Responsibilities – NEMT Services

1. Develop criteria, with the assistance of DMS and/or DMS Fiscal Agent, Kentucky Transportation Cabinet and brokers, to ensure that only eligible members and services are included in the payment analysis;

2. Analyze and include Financial Reports and Encounter data provided by the Transportation Cabinet and brokers for payment analysis;

3. Provide preliminary analysis of utilization and cost data/trends for each of the transportation regions and comparisons among similar regions within the State;

4. Develop and actuarially certify rates or rate ranges, in accordance with generally accepted actuarial principles and practices, annually based on appropriate transportation regions and/or groupings that may include waiver categories and region risk factors;

5. Provide explanation of methodology and resulting NEMT rates to DMS management, Transportation Cabinet, and CMS, which may include participating in conference calls or preparing written documentation;

6. Provide DMS analysis and recommendations during rate negotiations with the Transportation Cabinet and/or brokers, including but not limited to, participating in conference calls and responding to e-mails when questions arise during negotiations about the actuary’s work product; and

7. Provide written documentation of analysis, recommendations, and certification for requested changes in NEMT rates due to economic or programmatic changes within thirty (30) calendar days after DMS request.

Documentation must be submitted by 5 pm EST thirty (30) calendar days after DMS’ request. For each business day the documentation is not received by the deadline, DMS may assess a penalty of $1,000.00 per business day;

C. Vendor Responsibilities – Budget Forecasting Services

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1. Update MCO rate projections for future periods quarterly or as outlined below utilizing the most recent available encounter and enrollment data. Rate projections are expected to, include the following: Individual and aggregate MCO rate estimates (all rate cells all regions) by September 30, 2027at 5 pm EST for the remainder of SFY 27.

2. Produce individual and aggregate MCO rate estimates (all rate cells all regions) by September 30, 2027 at 5 pm EST for the remainder of SFY 27. These rates may require an actuarial certification and all associated documentation as stated in Section 2.00 B.

3. Update MCO eligibility projections for future periods quarterly or as outlined below utilizing the most recent available encounter and enrollment data. Eligibility projections are expected to, include the following: Individual and aggregate eligibility estimates (all eligibility groups, all rate cells, all regions) by September 30, 2027 at 5 pm EST for the remainder of SFY 27.

4. Produce individual and aggregate eligibility estimates (all eligibility groups, all rate cells, all regions) by September 30, 2027 at 5 pm EST for the remainder of SFY 27.

5. Update trend rates for future periods quarterly or as outlined below utilizing the most recent available encounter and enrollment data. Trend projections are expected to include the following: Individual and aggregate MCO trend estimates (all rate cells, all regions) by September 30, 2027 at 5pm EST for the remainder of SFY 27, SFY 28, and SFY 29. Trend projections are expected to include the following: Individual and aggregate eligibility trend estimates (all eligibility groups, all rate cells, all regions) by September 30, 2027 at 5 pm EST for the remainder of SFY 27.

The vendor is expected to produce separate trend projections for each rate cell and for each eligibility group.

6. Produce individual and aggregate MCO trend estimates (all rate cells, all regions) by October 31, 2027 for the remainder of SFY 27. Produce individual and aggregate eligibility trend estimates (all eligibility groups, all rate cells, all regions) by September 30, 2027 at 5 pm EST for the remainder of SFY 27. The vendor is expected to produce separate trend projections for each rate cell and for each eligibility group.

7. Update individual and aggregate rate projections, individual and aggregate eligibility projections, and individual and aggregate trend projections every quarter thereafter for current and future SFYs.

8. The actuary is expected to update these MCO rate estimates and projections, eligibility estimates and projections, and MCO trend estimates and projections quarterly with deadlines of December 31 at 5 pm EST, March 31 at 5 pm EST, June 30 at 5 pm EST, and September 30 at 5 pm EST. Budget forecasting deliverables include an excel workbook with the MCO rate estimates and projections with separate projections for each rate cell/region, an excel workbook with the eligibility rate estimates and projections with separate projections for each eligibility group/ region, and an excel workbook with the MCO trend estimates and projections with separate trend projections for each rate cell/region and for each eligibility group/region. All components of the deliverable must be submitted by the required deadline. For each business day the budget forecasting deliverables are not received by the deadline, DMS may assess a penalty of $250.00 per business day.

D. Vendor Responsibilities - Medical Loss Ratio Adjustment

1. Determine, within 30 days of receipt of all necessary information from all MCOs, if any adjustment is to be collected.

2. Unless specifically addressed below, the Medical Loss Ratio (MLR) calculation follows guidelines described in the Affordable Care Act. The formula used for the MLR calculation is as follows:

Adjusted MLR = [(i + q - s+ n - r)/{p + s - n + r) - t – f - (s -n + r}] + c

Where, i = incurred claims q = expenditures on quality improving activities s = issuer’s transitional reinsurance receipts p = earned premiums (excluding MCO tax) t = Federal and State taxes (excluding MCO tax) f = licensing and regulatory fees

Document Phase Document Description Page 13 n = issuer’s risk corridors and risk adjustment related payments r = issuer’s risk corridors, and risk adjustment related receipts c = credibility adjustment, if any.

3. Additional guidance regarding financial items to excluded or included in the Numerator or Denominator of the Medical Loss Ratio calculation is as follows:

a. Numerator

1) Incurred Claims

a) Direct claims that the MCO pays to providers (including under capitation contracts with health care professionals) for services or supplies covered under the managed care contract with DMS, provided to enrollees;

b) Incurred but not reported and unpaid claims reserves for the MLR Reporting year, including claims reported in the process of adjustment;

c) Percentage withholds from payments made to contracted providers;

d) Claims that are recoverable for anticipated coordination of benefits;

e) Claims payments recoveries received as a result of subrogation;

f) Changes in other claims-related reserves;

g) Claims payments recoveries as a result of fraud reductions efforts, not to exceed the amount of fraud reduction expenses;

h) Reserves for contingent benefits and the medical claim portion of lawsuits; and

i) The amount of incentive and bonus payments made to providers.

b. Deductions from Claims

1) Overpayment recoveries received from providers;

2) Prescription drug rebates received by the MCO or PIHP; and

3) State subsidies based on a stop-loss payment methodology.

c. Solvency Funds

Payments made by an MCO to mandated solvency funds.

d. Pass through Payments

1) Increased payments for certain Medicaid primary care services provided by certain qualified primary care providers;

2). Directed payments included in MCO capitation rates intended for payment to providers and other entities.

e. Health Care Quality Activities May be included in numerator

Any MCO expenditure that is related to Health Information Technology and meaningful use, and is not considered incurred claims.

f. Excluded from Claims

1) Amounts paid to third party vendors for secondary network savings;

2) Amounts paid to third party vendors for network development, administrative fees, claims processing, and utilization management;

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3) Amounts paid, including amounts paid to a provider, for professional or administrative services that do not represent compensation or reimbursement for State plan services, provided to an enrollee; and,

4) Amounts paid to the State as remittance.

4. Denominator

a. Revenue

1) State capitation payments to the MCO for all enrollees under a risk contract less any unreturned withholds

2) State-developed one time payments, for specific life events;

3) Payments to the MCO for incentive arrangements or payments for the amount of a withhold the MCO earns in accordance with conditions in the contract

4) Unpaid cost sharing amounts that the MCO could have collected from enrollees under the contract

5) All changes to unearned premium reserves.

b. Pass through Payments

1) Increased payments for certain Medicaid primary care services provided by certain qualified primary care providers;

2) Directed payments included in rates intended for payment to providers and other entities.

c. Exclusions

1) Federal and State taxes and licensing and regulatory fees. Taxes, licensing and regulatory fees (e.g. Health Insurers’ Fee)

2) Statutory assessments to defray the operating expenses of any State or Federal department.

3) State taxes and assessments

5. The MLR reconciliation is expected to, be completed by September 30 of each year at 5 pm EST. The MLR deliverables include an excel workbook summarizing the MLR reconciliation, separate MCO-specific workbooks, and a certification document summarizing the MLR reconciliation process and results. All components of the deliverable must be submitted by the required deadline. For each business day the MLR deliverables are not received by the deadline, DMS may assess a penalty of $100.00 per business day.

E. Vendor Responsibilities - Directed Payments

1. Summarize the base period directed payments by provider, region, and population (Existing and ACA Expansion).

2. Summarize the base period utilization and costs for the providers by region, rate cell, provider, and major service category (Hospital and Professional).

3. Allocate the base period directed payments to the rate cell level not to exceed previous fiscal years’ upper payment limits according to the cost distribution for a given provider, region, and population,

4. Add the allocated directed payment amounts to the base period experience in the data books for rate range development.

5. Project the directed payment cost ranges using appropriate trends and adjustments consistent with the trends and adjustments applied to the same rate cell and service category in the data book.

6. Based on the relationship between the selected contract rates and the developed rate ranges, provide the Department with exhibits showing the estimated directed payment Per Member Per Month (PMPM) in the

Document Phase Document Description Page 15 contracted rates by rate cell, as well as the projected unit cost associated with the projected directed payments in the contracted rates.

7. Use the projected unit costs (i.e. the add-on fee schedule) and actual utilization for reconciliation between the actual directed payment incurred and directed payment paid out in the capitation.

8. State owned or operated university teaching hospitals include a hospital operated by a related party organization as defined in 42 CFR 413.17, which is operated as part of an approved School of Medicine or Dentistry. A separate vendor processes encounter data and determines the discharge counts for determining the directed payments. These directed payments are then incorporated in the PMPM by rate cell.

9. The actuary is expected to, submit directed payments to DMS in draft form by March 1 at 5 pm EST and final form by March 31 at 5 pm EST annually unless there is a procurement. During year when there is a procurement, directed payments are expected to, be submitted to DMS in draft form by November 1 at 5 pm EST and final form by November 30 at 5 pm EST. Directed payments are incorporated into the MCO rates, so all timeframes for directed payments are expected to, coincide with the timeframes for MCO Rate setting. Directed payments deliverables include an excel workbook summarizing the directed payments with separate worksheets for the Non- ACA and ACA populations, separate MCO-specific workbooks with separate worksheets for the Non-ACA and ACA populations, separate provider-specific workbooks with separate worksheets for the Non-ACA and ACA populations, and a certification document summarizing the directed payment process and results. All components of the deliverable must be submitted by the required deadline. For each business day the directed payments deliverables are not received by the deadline, DMS may assess a penalty of $500.00 per business day.

10. A reconciliation is calculated based on the difference between the directed payment dollars DMS intended to pay out and the directed payment dollars that were paid out monthly to the providers. DMS funds the difference between the directed payment dollars DMS intended to pay out and the directed payments paid to the MCOs (actual enrollment multiplied by the Directed Payment PMPMs).