Community Reinvestment Mandates for MCOs

Top view of stethoscope,magnifying glass,plant and blackboard written with Medicaid on wooden background. Health concept.

State Medicaid agencies are increasingly mandating community reinvestment requirements in contracts with Medicaid managed care organizations (MCOs). These requirements necessitate that MCOs reinvest a portion of their profits back into the communities they serve to improve health outcomes. At least ten states have adopted or are implementing such requirements. Direct Care Innovations provides solutions that help agencies navigate these complex systems.

State Reinvestment Strategies

Most states align reinvestment efforts with local priorities, such as addressing social determinants of health or supporting quality initiatives and workforce development. States typically utilize two strategies for determining required reinvestment amounts:

1. Profit Strategy: States evaluate MCO profits and require a percentage to be reinvested, typically between 3% and 7.5%. States like Arizona, Ohio, and Nevada employ this method.

2. Medical Loss Ratio (MLR) Strategy: If an MCO does not meet minimum MLR requirements, it must either reinvest funds or remit them to the state, as seen in North Carolina and Tennessee.

States provide guidance on how reinvestment funds should be used to address priority areas. Successful community reinvestment often supports initiatives targeting social drivers of health. States also encourage an equitable distribution of funds based on regional needs, balancing flexibility for MCOs to innovate with consistency across funding allocations.

Reinvestment Requirements

When establishing reinvestment requirements, states consider the duration of reinvestment, start dates, and reporting deadlines. Collaboration among stakeholders—including the state, payers, and community members—is vital for developing and implementing these requirements effectively. States can enhance partner engagement and collaboration in funding allocation decisions to maximize the impact of reinvestments. Community reinvestment requirements are increasingly utilized in Medicaid programs, presenting an opportunity for state partners to collaborate and advance shared priorities known to improve community health.

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Manatt, Phelps & Phillips, LLP, "Community Reinvestment: Forging New Partnerships in Medicaid," JDSupra, September 17, 2024