Affordable Care Act State Action Newsletter 53

Patient Protection and Affordable Care Act: State Action Newsletter

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April 5, 2013

Ohio Considers Market-Based Medicaid Expansion; HHS Issues Guidance

Ohio’s Governor John Kasich is promoting an alternative, market-based approach to Medicaid expansion, similar to the Arkansas proposal described in the March 8 issue of this newsletter.  The proposal would use federal Medicaid funds to buy private health insurance through the state’s Health Benefit Exchange for the expansion population. The legislature is carefully weighing all options and has until June to finalize the budget.

The U.S. Department of Health and Human Services (HHS) recently released guidance in the form of a Q and A document, titled “Medicaid and the Affordable Care Act:  Premium Assistance.”  HHS states that it “will consider approving a limited number of premium assistance demonstrations since their results would inform policy for the State Innovation Waivers that start in 2017.” Among other requirements, demonstration proposals must show cost effectiveness, a choice of two or more plans for beneficiaries, and comprehensive coverage (including wraparound coverage where appropriate, which means the state would arrange and pay for any required Medicaid services not covered by the private plans.) In addition, the guidance says that states “may increase the opportunity for a successful demonstration by choosing to target within the new adult group individuals with income between 100 and 133 percent of FPL.”

Cost will be a major consideration in these market-based expansion proposals. The Congressional Budget Office estimates that annual per capita Medicaid costs will be $6,000, while coverage under the exchanges will cost $9,000. Arkansas contracted a firm to conduct a cost-benefit analysis for the state.  The findings estimate that the exchanges would cost up to 14 percent more than traditional Medicaid.  The guidance indicates that HHS will consider “states’ ideas on cost effectiveness that include new factors introduced by the creation of Health Insurance Exchanges and the expansion of Medicaid.” For example, HHS would allow state proposals to quantify and account for the savings realized from reduced churning between Medicaid and the exchange of individuals whose income is near the Medicaid eligibility threshold.   For these people, small earnings fluctuations could force them to change plans several times a year, adding inconvenience – and cost – to the program. Two new reports provide  more information on the premium assistance option for the Medicaid expansion.   

Inside This Issue

Action on Indiana’s Medicaid Expansion Proposal

This week the Indiana House Public Health Committee passed SB 551, which would authorize enrollment of the Patient Protection and Affordable Care Act (PPACA) Medicaid expansion population in the state’s Healthy Indiana Plan (HIP), a Medicaid 1115 demonstration waiver project. “Indiana’s response to the Affordable Care Act’s Medicaid expansion will hinge largely on whether or not the federal government allows Hoosiers to implement a health care program of our own choosing that is more cost-effective than Medicaid and promotes personal responsibility. Our state already operates such a program. The Healthy Indiana Plan has seen a great deal of success, providing more than 100,000 low-income Hoosiers with health insurance since its inception in 2008,” said the bill’s author, Senator Pat Miller. She is concerned that amendments added by the House committee “will reduce the executive branch’s ability to negotiate with the federal government,” but is looking forward to the “legislative process so the House and Senate can come to a final agreement on the right approach.” Indiana Governor Mike Pence supports the plan. “Our administration would predicate any expansion of Medicaid in Indiana on our ability to promote Hoosier innovation in the Healthy Indiana Plan to the expanded population,” he said in a letter to Kathleen Sebelius, Secretary of the Department of Health and Human Services (HHS).  

Not only is the state asking for approval to use the demonstration to cover the Medicaid expansion population, it is also asking for approval to continue the demonstration when it expires this December. The Healthy Indiana Plan, which began in January 2008, covers certain low-income adults with an emphasis on consumerism and personal responsibility. HIP features a comprehensive high deductible health plan. Enrollees are given personal Wellness and Responsibility (POWER) accounts, much like a Health Savings Account, to encourage them to be good “consumers” of health care. Currently, the POWER accounts are funded through an income-based sliding scale enrollee contribution and contributions from the state and participating managed care organizations. The enrollee contribution can be reduced by contributions from employers and nonprofit organizations. In keeping with the Center for Medicare and Medicaid (CMS) rules, the program ensures that no participant pays more than 5 percent of his or her income. Enrollees can be terminated if they fail to make the required contribution to their POWER account. Between January 2008 and December 2011, HIP served 90,034 Hoosiers and, according to the governor, “94 percent of them say they are satisfied with the program and 99 percent say they would re-enroll.”

Small Business Health Options Program (SHOP) Delayed Until 2015

On March 11, the U.S. Department of Health and Human Services (HHS) released a new final rule that delays employee choice and premium aggregation in the federally facilitated Small Business Health Options Program (FF-SHOP) until at least Jan. 1, 2015. 

During the one-year delay, qualified employers will have only a single qualified health insurance plan option through FF-SHOPs, instead of multiple plans to choose among. The delay in premium aggregation means that employers will not be able to receive and pay a single monthly bill that covers all employees, as called for in the PPACA.

SHOP Exchanges are designed to serve as a marketplace for employers with one to 100 employees or up to 50 workers if a state prefers to designate that number. The one-year delay applies to the 33 states where health insurance exchanges will be run by the federal government. The 16 states (and the District of Columbia) that are building their own exchanges may continue to offer employee choice and premium aggregation in their state run SHOP exchanges beginning on or after Jan. 1, 2014.  Small employers with fewer than 50 full-time equivalent employees are not required to offer health coverage.

Studies Project Some Premiums Will Go Up, Some Down

News about premium rates for 2014 will be the much-anticipated next step in the implementation of expanded health insurance. These rates can vary by state and, as in past years, are affected by provider reimbursements and commercial market forces, as well as rate reviews by regulators. The PPACA-approved health plans will be sold through the exchanges to individuals and small groups, as well as outside the exchanges through the commercial markets in all 50 states.

California released its own study titled Factors Affecting Individual Premium Rates, on March 28. While specific to that state, it can provide insight on premium cost factors that will apply to many states.  One finding that grabbed media headlines is the potential 30 percent increase in premiums for people with annual incomes above the threshold to qualify for a federal subsidy (400 percent of the poverty level for individuals, which is $45,960 in 2013). The report cited several contributing factors for this increase, including an influx of sicker people into the individual insurance market and the requirement for health insurance plans to offer richer benefits and cover more of the cost of care than is now typical for individual insurance policies.

For four out of six income groups analyzed, the estimates showed substantial savings. Robert Cosway, principal actuary and lead author at Milliman observed, "For consumers who are eligible for subsidies, they stand to see their premium decrease substantially." Overall, the authors attributed an increase of 4.8 percent to the required "essential health benefits” and a reduction of 4.5 percent related to reduced administrative expenses. The table summarizes estimated changes, as well as the effect of the consumer tax credit subsidy for individuals with incomes up to 400 percent of the poverty level.

A separate 83-page report  released in March by the Society of Actuaries, predicts PPACA-driven changes "in the individual health care market could drive up costs, with as many as 43 states experiencing a double-digit claims cost increase," over four years, averaging slightly less than 8 percent annually.

The actual premium rates in each state will be announced by individual insurers and regulators by summer 2013.

Table Adopted from the California Report, Figures 1 & 2

For individuals with current (2013) coverage: Summary of Potential Rate Changes

Annual income
Based on Federal Poverty Level = $11,490 in 2013
Premium Change
Tax credit
co-pay subsidies
Total cost
of care
More than  $45,960 >400% + 30% 0% 0% + 20%
$28,725 to $45,960 250-400 - 46% - 47% 0% - 40%
$11,490 to $28,724 <250 - 83% - 89% - 47% - 76%

For individuals currently uninsured: Summary of Hypothetical Rate Changes

More than  $45,960 >400% - 1% 0% 0% (0%)
$28, 725 to $45,960 250-400 - 59% - 65% 0% - 55%
$11,490 to $28,724 <250 - 88% - 89% - 47 -90%
* Numbers rounded to nearest 1%


LegisBrief Highlights Oral Health Workforce

Dental care remains one of the greatest unmet health care needs in the United States. More than 14.5 million low-income children went without seeing a dentist in 2011. The Patient Protection and Affordable Care Act (PPACA) aims to reverse this trend by requiring pediatric oral coverage as an “essential health benefit” in health exchanges and prohibits cost-sharing for certain preventive services. As many children gain access to oral health care in 2014, states are working to expand the workforce to ensure they are able to meet the demand. Shortages will likely be most acute in rural communities and inner cities where adequate services are already lacking. States are pursuing many options to expand the workforce, including encouraging enrollment in dental schools, expanding the services that can be performed by mid-level providers, and increasing Medicaid reimbursement rates for oral health services. This year, Mississippi enacted House Bill 776, creating the Rural Dentists Scholarship Program to support students who commit to work in rural, underserved areas. Nebraska enacted Legislative Bill 484, eliminating the requirement for dental hygienists to have 3,000 hours of clinical experience before they may perform public-health related services for children. Some states have also increased Medicaid reimbursement for oral health services to encourage more providers to treat low-income children.

The PPACA authorized other initiatives to boost the oral health workforce, however many were not funded. These include establishing a dental faculty loan repayment program and a five-year demonstration project to train and evaluate alternative dental providers.  For more information about state and federal initiatives to bolster the oral health workforce, see NCSL’s LegisBrief.

NCSL’s Task Force Meets May 4

NCSL’s Task Force on Federal Health Reform Implementation will hold its next meeting at NCSL’s Spring Forum in Denver on Saturday, May 4 from 10:30 a.m. to 4 p.m.  The agenda, “Countdown to Health Reform,” features national and regional experts, including Joshua Goldberg, National Association of Insurance Commissioners; Christopher Watts, Mercer Health and  Benefits; Steven Wojcik, National Business Group on Health; Steve ErkenBrack, Colorado Health Benefit Exchange and Rocky Mountain Health Plan. 

NCSL staff speakers will be Joy Johnson Wilson, Dick Cauchi, Laura Tobler and Martha Salazar. 

The latest Task Force member list and agenda are online. The meeting is open to all NCSL members and Spring Forum attendees.

HHS Issues Rule for Newly Eligibles

On April 2, the U.S. Department of Health and Human Services released a final rule with request for comment on the Federal Medical Assistance Percentage (FMAP) for newly eligible adult Medicaid beneficiaries, effective Jan. 1, 2014.  While that might seem an easy task on the surface, each state’s unique Medicaid program and the differing data collection practices make it complex.  The rule interprets the new FMAP and provides guidance for states that will expand Medicaid eligibility under the PPACA to claim the increased rates for newly eligible populations.

The rule defines and determines “newly eligible” Medicaid beneficiaries, describes the expanded FMAP for “expansion states,” which expanded eligibility before the law was enacted and describes the “threshold methodology,” to help states determine which people will qualify as “newly eligible” and therefore which FMAP to use for which Medicaid enrollees. For newly eligible enrollees, states will receive a 100 percent matching rate through 2016. The subsidy will scale back to 90 percent by 2020. For people who already qualified for Medicaid, the state’s usual FMAP will apply.

On a conference call this week, HHS officials Allison Orris and Richard Strauss assured state officials that although HHS is requesting comments, these rules are final and states may move forward with confidence. They also told state officials that states are not required to maintain two sets of eligibility rules or to solicit information from applicants that is not necessary to determine eligibility. A HHS fact sheet about this new rule can be found here.

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