The Supreme Court’s 2012 Affordable Care Act (ACA) ruling gave states the option of whether or not to expand their Medicaid program. Some states have significant concerns about adding additional people to the Medicaid program, which they consider to be a broken system. For that reason, there is significant interest in ongoing discussions between the U.S. Department of Health and Human Services (HHS) and the Arkansas Medicaid program about the possibility of buying Medicaid coverage through the Health Benefit Exchange (HBE), also known as premium assistance.
- Consumers maintain their federal Medicaid rights related to benefits and cost-sharing. Unless a state obtains a waiver, they cannot charge premiums to individuals below 150 percent of the federal poverty level (FPL) and cost-sharing may not exceed five percent of family income. The state must either design a Qualified Health Plan (offered through the exchange) that meets benefit and cost-sharing requirements or provide wrap-around benefits.
- States must show that the cost of covering individuals through premium assistance is comparable to the cost of coverage under the Medicaid state plan.
The question of how a state could provide similar benefits at a comparable cost has raised interest among states and advocates, particularly given the Congressional Budget Office
estimate that coverage through the exchanges will cost about 50 percent more than coverage through Medicaid. The Arkansas Department of Human Services recently
released a narrative explanation of their initial cost estimates that made the following points:
- The actual premium cost differential between Medicaid and the HBE is closer to 25 percent in Arkansas.
- Adding 250,000 additional people to the HBE will enable plans to get better prices from providers, driving down the differential by an additional 5 percent.
- Allowable cost-sharing and “sharper consumer health-care decision making” will result in an additional 5 percent reduction.
- Because some of the most costly individuals will not enter the premium assistance program, the federal government would be asked to pay 13-14 percent more using a premium assistance model.
- This higher cost could be driven to near zero if the following factors are also considered:
- Adding more people to the Medicaid program would have required Arkansas to raise rates for providers, increasing the cost of Medicaid above the baseline; and
- Adding more people to the HBE is expected to drive down total premium costs for everyone in the HBE, reducing federal spending for subsidies in that market.
As of this writing, Arkansas has not passed Medicaid expansion legislation nor has it come to agreement with HHS on a plan for implementing premium assistance. Nevertheless, the parameters set by the Arkansas discussion could prove instructive for other states interested in a similar private market model.
The Arkansas model continues to intrigue the health policy community. For other perspectives on the issue, here are a few other articles/commentaries:
