Arkansas Gov. Mike Beebe is expected to sign a bill expanding Medicaid eligibility through the state's federal-partnership health insurance exchange – one of the most unusual evolutions in Affordable Care Act policy, if also one HHS hopes will bring insurance to some 250,000 working class Arkansans who otherwise might continue to go uncovered amid the politics of Mediciad expansion.
But some insurance analysts and actuaries are left scratching their heads looking at the so-called Private Option, which would offer premium subsidies for private insurance to Arkansas residents not currently eligible for Medicaid who make up to 138 percent of the federal poverty level.
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In a Milliman paper on the Arkansas proposal, Robert Damler, Kaitlin Shaw and Seema Verma examine some of the known unknowns with the policy: Will Medicaid-eligible exchange buyers be able to pick any plan – bronze, silver, gold or platinum – when the premium subsidies are tied to the silver plan?
Will Medicaid pharmaceutical drug rebates that save some state Medicaid programs as much as 40 percent of the cost apply to drug benefits for Medicaid-eligible exchange purchasers?And will the entrance of perhaps relatively-less-healthy Medicaid eligible consumers into the greater HIX risk pool affect premiums for other buyers?
Those and some other questions may persist, although perhaps with some clarifications. The bill, called the Health Care Independence Act, gives the Arkansas Department of Human Services the task of designing the program, while offering some specific stipulations and general guidance.
Damler, a principal consulting actuary at Milliman, wonders if – since HIX premium subsidies are pegged to the second-lowest silver plan – Medicaid-subsidized HIX consumers will have to choose only silver plans. "Will they just receive that much premium, and they can choose across any plan? Can they choose a more expensive plan, or will they have to pay for that out of their own pocket?" Damler asked.
Based on the bill's language, that's still not clear, but it does offer some guidance on cost-sharing, directing the state DHS to align it with silver-level plans.
"Healthcare coverage shall be achieved through a qualified health plan at the silver level as provided in [ACA essential health benefit rules and reduced cost-sharing rules] that restricts cost sharing to amounts that do not exceed Medicaid cost-sharing limitations," the bill reads.
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The bill also directs the state DHS to "include allowable cost sharing for eligible individuals that is comparable to that for individuals in the same income range in the private insurance market and is structured to enhance eligible individuals' investment in their health care purchasing decisions."
Another question Damler has on cost-sharing is if Medicaid-subsidized HIX buyers want to choose the bronze plan over the silver plan: "Maybe their coinsurance amounts increase because of that, but what if the member then is unable to pay those coinsurance amounts? Does that then create uncompensated care issues for certain providers?"
A co-author of the Milliman paper, Seema Verma, who runs the Carmel, Ind.-based consultancy SVC Inc., said she's curious more broadly about HHS' outlook on Medicaid-HIX integration.
"I'm a little confused, honestly, at where CMS is and how they'll develop their cost effectiveness piece, because typically in commercial plans, the reimbursement is higher, so that makes the cost of the plan through an exchange or a private plan more expensive," said Veema, who helped design Indiana's Healthy Indiana Program, the first state program to offer Medicaid members health savings accounts (something the Arkansas private option offers as well).
Whether or nor the private option is both cost-effective and comprehensive in its coverage is perhaps the main question CMS will be asking when evaluating the Arkansas experiment. When the agency finally gave tentative approval of the plan, it said it would consider a select number of similar proposals from states to test different policies, ahead of offering state innovation waivers in the coming years.
That CMS is even considering the private option – which is said to be of interest to Republican governors in Tennessee and Pennsylvania – suggests the agency is trying to be "as flexible as possible, to give states the ability to try different approaches," as CCIIO director Gary Cohen told a Senate hearing recently.
For Verma, the debate begs a larger question of state health policy: "Why are we sort of forcing that demarcation at 138 percent of poverty, if it really makes no difference to the federal treasury whether people are on Medicaid or on the exchange? If there's really no difference between providing a tax credit and providing Medicaid, then why don't they just allow states to expand Medicaid to 100 percent of the poverty level, and then just put everybody above 100 percent of poverty in the exchange?"