SPY 2020 CAPITATION RATE DEVELOPMENT TERM SHEET

SPY 2020 Rates

Dear Director Randol:

As we discussed earlier this evening, the following SFY 2020 Capitation Rate Development term
sheet represents the terms that UnitedHealthcare would require to be included in a Letter of
Agreement to continue to operate as an Iowa Health Link Managed Care Organization in SPY
2020. Also as we have discussed, the timing of reaching agreement on these terms is of utmost
importance and we would appreciate your response to these items no later than 12 Noon
tomorrow, March 28,2019:

1. In lieu of (or in addition to) standard risk adjustment methods, ME's actuarial contractor,
Optumas, will implement a Health Plan-spec;ific,- individual, experience-rated
methodology for the SFY2020 capitation rates. Departing from the previous methods of
community-rating by selecting base data compiled of all claims experience gathered from
all Iowa HealthLink members in the period of S.PY2018,: it'is agreed, Optumas is to
create separate base data experience for each of^he three participating health plans.

2. Base period development: , •

a. Each health plan dataset is to be derived from the experience of members enrolled
within each particular health plan as of July 1, 2019, allowing for the potential to
update on a prorated basis as necessary following the member choice period of
July 1, 2019 through September 30,2019. Any member enrolled with a health
plan for which there is no SFY2018 medical experience will be assumed to be of
average risk equal to the SFY2018 statewide average for the particular rate cell as
defined by the member's eligibility on July 1, 2019.

3. Actuarial proj ection assumptions:

a. In order to increase the credibility and adequacy of actuarial assumptions and in

order to ensure the budget neutrality intent of this methodology for the State of
Iowa; all actuarial assumptions to be utilized in the projections of medical costs
for the SFY2020 rate setting process are to be set and applied on a statewide
basis, inclusive of but not limited to trend, conti'actmg, and risk margin. For the
determination of care management and administrative overhead expenses,
Optumas is to utilize UHC's reported per member per month actual expenses as
provided in the recent MRT/Quarterly financial cost submissions. These statewide
actuarial projection assumptions and health plan-specific non-medical loads will
then be applied to each health plans' unique member specific base data as defined
per this MOU

b. Trend is to be set at the midpoint (50 Percentile) of the Optumas trend range
 c. Any efficiency adjustment, including assumed ER reductions, Inpatient admission
reductions, or the previously proposed Prometheus algorithm, will not be included
in the rating period for July 1, 2019 through at least December 31,2019.

4. IME is not to impose additional administrative requirements on the health plans for the
SFY2020 period.

5. The Agency will revise its member Redistribution Assignment Algorithm to ensure that
UHC achieves between 45 and 50% of total Iowa Health Link Membership and will
revise its redistribution exclusion logic to ensure an appropriate distribution of high risk
cohorts. It is understood that final enrollment is subject to member choice.

6. The Agency will provide a Profit / Loss corridor based on the Contractor's profitability
for fhe contract period SFY2020. The Profit / Loss Corridor shall limit Contractor's
losses to no more than 1% and shall limit the Contractor Profit to no more than 3%

7. Rates will be delivered to UHC by April 30, 2019, based on initial 1MB member
assignation.

8. Rates will be updated based on subsequent member movements after choice period ends
on October 31,2019. . .^- '

9. SPY 2019 issues to address:

a. IME is to compensate UHC for previously assumed unattainable program changes

related to DRG reweighting for the period October 1, 2018 through June 30,2019,
of approximately $14,900,000.

b. UVGE is to waive all pay for performance requirements for the period SFY2019,
assuming a 100% return of the withhold.

c. IME is to reimburse the UHC for its mix on LTC rate cells as of June 2018,
entering the SFY2019 rate period.

d. Cash owed to UHC based on revenue accrued will be completed by April 30,
2019.

Sincerely,

Bror Hultgren, SVP

UnitedHealthcare Comnrunity and State