Patient Protection and Affordable Care Act: State Action Newsletter

CBO Releases Updated Estimates of Coverage Provisions in PPACA
 

The Congressional Budget Office (CBO) recently released a report with updated cost estimates of the insurance coverage provisions of the Patient Protection and Affordable Care Act.  The report takes into account the Supreme Court’s ruling, which essentially makes the expansion of Medicaid optional for states. The largest changes to the pre-ruling estimations are for costs of Medicaid and the Children’s Health Insurance Program (CHIP) and of exchange subsidies and related spending. 
CBO estimates that the ruling will reduce the number of new people who will be covered by Medicaid and CHIP by 6 million; increase by 3 million the number of people covered by insurance exchanges and increase the number of people who will be uninsured by 3 million.  These changes result in an estimated net reduction of $84 billion in federal spending. The new analysis projects that the insurance coverage provisions of the ACA will have a net cost of $1,168 billion over the 2012–2022 period—compared with $1,252 billion projected before the ruling. According to the report, states’ spending for Medicaid and CHIP will also be affected by the Supreme Court’s ruling—the new estimation is roughly $41 billion over the 2012–2022 period, compared with the roughly $73 billion estimated before the ruling.
In conducting this analysis, CBO determined that there are three types of choices that states must make: whether or not to expand eligibility for Medicaid, the degree to which eligibility is expanded, and when eligibility expansions will occur.  They projected that by 2022 about one-third of the potential newly eligible population based on the ACA will reside in states that choose to fully extend coverage up to 138 percent of the federal poverty level. About one-half of the potential newly eligible population will reside in states that partially extend Medicaid coverage to an income threshold less than 138 percent of the FPL. About one-sixth will reside in states that do not extend Medicaid coverage at all in the next decade.
According to the report, “After the Supreme Court’s decision, there are many questions about how the new state option for Medicaid will be administered. For example, final regulatory guidance is not yet available regarding whether states will be allowed to begin their expansion after 2014, to expand eligibility to a threshold below 138 percent of the FPL, or to cover only certain groups of people.”

Steps toward Essential Health Benefits
 

Since the U.S. Department of Health and Human Services (HHS) announced last December that states could choose their “essential health benefits,” the results have come in small steps.  States determine which existing insurance plans would be the model or “benchmark” for services and benefits included in most small group and individual health insurance policies as of 2014.  HHS expects the selection of an “Essential Health Benefit” package to be final for all states by Sept. 30. PPACA requires plans both inside and outside of the health insurance exchange to offer a comprehensive package of “essential health benefits.” In July, HHS released a list,  “The Largest 3 Small Group Products by State,” naming current plans that each state can use as a benchmark; alternatively the state can select one of three existing state employee health plans or Federal Employee Health Benefit Plans (FEHBP). The list reveals that Alabama, Georgia, Illinois, North Dakota, New Hampshire, Oklahoma, Oregon, South Carolina,  Utah, Washington and West Virginia each have just a single insurance company selling the top three small group plans.  
With all but a half-dozen state legislatures finished for the year or in recess, some states are scrambling to pick a plan, which will affect their market for the next two years.  During the past month, several states have taken visible strides: California bills A1453 / S951 passed their respective chambers  (last action July 2);  Colorado held public workshops with an early August deadline for input; Connecticut released the latest options; Maryland posted new comparisons of benefits, mandates and premiums; Oregon presented final recommendations; and Utah published an overview in June.  NCSL has an updated tally of additional state-specific steps.

State Officials Seek Clarification on Supreme Court Ruling  

Virginia Governor Robert McDonnell, chairman of the Republican Governors Association, submitted a letter with “critical questions that must have answers before states can determine best how to proceed in light of the Court’s decision”  to the U.S. Department of Health and Human Services (HHS).  He received a response from Marilyn Tavenner, acting administrator, Centers for Medicare and Medicaid Services. Tavenner’s response included these answers:

• “ There is no deadline for a state to tell our Department its plans on the Medicaid eligibility expansion.”

• “A state can receive extra funding for Medicaid IT costs and Exchange implementation costs even if it has not yet decided whether to expand Medicaid eligibility or run its own Exchange.”

• “If a state decides not to run its own exchange or expand Medicaid, it will not have to pay those (federal) resources back.”

The response from Tavenner comes after HHS Secretary Kathleen Sebelius issued a letter to governors addressing some questions posed by the National Governors Association and the National Association of State Medicaid Directors.

HHS Announces New Initiative for States

Last week, the U.S. Department of Health and Human Services announced the State Innovation Model Initiative to “help states design and test improvements to their health care systems that would bolster health care quality and decrease costs.” This initiative will provide support for states to design or test delivery and payment system reforms to health care systems for Medicare, Medicaid, and the Children’s Health Insurance Program.
States can apply for federal awards that will help build on existing innovative models or explore new ones, in the first round of funding.  A second round is expected to come next year.
The National Association of Medicaid Directors released a statement in response to the HHS announcement calling the new initiative “a good first step towards reinvigorating and modernizing the federal-state partnership to examine new ways to ensure Medicaid delivers high quality, cost effective health care that meets the varied needs of states’ low income residents.”

Announcements

• State Actions Newsletter is online: Archive newsletters are available on NCSL’s website.
• See latest NCSL information and analysis at U.S. Supreme Court and the Federal Health Law.
• Check out NCSL’s webpage on State Actions to Implement Health Insurance Exchanges.
• The 2012 Federal Health Reform: State Legislative Tracking Database continues to track state actions.