HHS Issues FAQ Sheet on “Arkansas Option”

by Adrianna McIntyre

Feel free to peruse the whole document here. Key takeaways excerpted below, all emphasis mine.

UPDATE: Yikes, in my excitement, I posted a bunch of stuff about QHPs—not Medicaid—so this may not all directly apply to the Arkansas option.The blockquoted bit below definitely is. I’m a little hazy on how the 1115 waiver demonstrations would (could?) work with Medicaid premium assistance.

2. What is premium assistance in Medicaid?

The Medicaid statute provides several options for states to pay premiums for adults and children to purchase coverage through private group health plans, and in some case individual plans; in most cases, the statute conditions such arrangements on a determination that they are “cost effective.” Cost effective generally means that Medicaid’s premium payment to private plans plus the cost of additional services and cost sharing assistance that would be required would be comparable to what it would otherwise pay for the same services. Similar provisions also apply in the Children’s Health Insurance Program (CHIP).

Under all these arrangements, beneficiaries remain Medicaid beneficiaries and continue to be entitled to all benefits and cost-sharing protections. States must have mechanisms in place to “wrap-around” private coverage to the extent that benefits are less and cost sharing requirements are greater than those in Medicaid. In addition under the statutory options in the individual market beneficiaries must be able to choose an alternative to private insurance to receive Medicaid benefits.

A state may pursue premium assistance as a state plan option without a waiver.

This actually doesn’t tell us much that we don’t already know. It tells us that costs would have to be comparable, but doesn’t explicitly define it for us—the thing is, “cost-effective” has been defined—under the ACA and CHIPRA—to mean “the same or less than covering the individual in the direct Medicaid or CHIP program.” Are they saying here that comparable means cost-effective? I don’t know!

But, if I’m reading this correctly, beneficiaries in a “private option” expansion must retain the capacity to opt into traditional Medicaid. I believe that is a new feature.

***For waiver demonstrations***

Under section 1115 of the Social Security Act, the Secretary may approve demonstration projects that she determines promote the objectives of the Medicaid program. HHS 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.  […]

With regard to premium assistance demonstrations, HHS will consider states’ ideas on cost effectiveness that include new factors introduced by the creation of Health Insurance Marketplaces and the expansion of Medicaid. For example, states may quantify savings from reduced churning (people moving between Medicaid and Exchanges as a result of fluctuating incomes) and increased competition in Marketplaces given the additional enrollees due to premium assistance. As with all demonstration proposals, the actuarial, economic, and budget justification (including budget neutrality) would need to be reviewed and, if approved, the program and budgetary impact would need to be carefully monitored and evaluated. […]

[Demonstration projects must] end no later than December 31, 2016. Starting in 2017, State Innovation Waiver authority begins which could allow a range of State-designed initiatives.

In addition, a state 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. Medicaid allows for additional cost-sharing flexibility for populations with incomes above 100 percent of FPL; this population is more likely to be subject to churning and would be eligible for advance premium tax credits and Marketplace coverage if a state did not expand Medicaid to 133 percent of FPL.

We’ll get back to you with a more thorough take on this in a bit.


Adrianna is a graduate student in public policy and public health at the University of Michigan.
Follow her on Twitter @onceuponA or subscribe to the blog.


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