Arkansas can proceed with its “private option” plan for expanding Medicaid to about 250,000 Arkansans, U.S. Health and Human Services Secretary Kathleen Sebelius told Gov. Mike Beebe on Friday.
In official terms, the federal Centers for Medicaid and Medicare Services granted the state Department of Human Services a waiver from federal Medicaid rules. The waiver allows the state to use federal dollars to help the expanded program’s recipients buy private health insurance through the new insurance exchange.
“Instead of putting this new population of folks on Medicaid, this plan uses those Medicaid dollars to purchase private plans,” said Matt DeCample, Beebe’s spokesman.
“It gives working Arkansans who don’t get insurance at work or who don’t make enough money to be able to purchase their own insurance with more options for coverage, co-pays and other things, and it gives those insurees more skin in the game,” De-Cample said.
Initially, the private option will apply only to an estimated quarter-million people not currently eligible for Medicaid as well as some who now get limited Medicaid benefits for specific conditions. Over time, some other groups of Medicaid recipients will be transferred to the midlevel coverage offered on the state’s insurance exchange.
The waiver approval comes four days before the opening Tuesday of Arkansas’ health-insurance marketplace under the 2010 Patient Protection and Affordable Care Act. The Arkansas Legislature in April approved the use of private insurance plans as a way to expand Medicaid, thereby creating the private option, and the Department of Human Services applied for the Medicaid waiver in June.
The state could have offered the Medicaid-subsidized insurance plans through the health exchange even if the waiver had not been approved by the opening date, as long as the waiver came through by the January start date for the plans, said Human Services Department spokesman Amy Webb.
Webb said there were no substantial changes between what the state requested and what the federal government approved.
The approval Friday, however, makes Arkansas the first state to implement this kind of demonstration project to expand its Medicaid program and the first state authorized by the federal government to offer Medicaid-subsidized private health insurance.
Arkansas’ demonstration project is unique and came together quickly in the Legislature, Webb said.
“Politically, the will was not there to just open up the Medicaid rolls,” she said. “But through a bipartisan effort, the Legislature was able to design this unique option, which is being looked at by other states.”
Officials in Iowa are designing a similar model based on Arkansas’ plan, and officials in other states such as Tennessee and Alaska, have inquired about specific elements of the plan.
Arkansas has three years to prove that its alternative program can enroll people in private plans for about the same cost as it would take to enroll those same people in Medicaid.
The federal government estimates the per-person cost caps for Medicaid at $477.63 for 2014, $500.08 for 2015 and $523.58 for 2016.
The state’s waiver application listed the caps under the private option at $472.19 for 2014, $495.79 for 2015 and $520.58 for 2016.
If the plan fails to meet “budget neutrality” over the three years, the state will be responsible for paying the difference, according to waiver rules on the Center for Medicaid and Medicare Services website.
A study released this week by the U.S. Department of Health and Human Services, showed that the midprice plans that will be offered on the Arkansas health exchange are higher that the national average, which includes premiums from 47 states and Washington, D.C.
But the midprice estimates for Arkansas are still well below the caps listed in the waiver application.
“We were aware of that requirement during the design of the program, and we have plans to monitor the costs closely and make prudent choices to achieve that budget neutrality,” Webb said Friday.
To enroll in the program, applicants will sign up for private health insurance plans that will be offered through an exchange set up by the Centers for Medicare and Medicaid Services under a partnership with the state.
Medicaid will pay recipients’ premiums, and their co-payments and deductibles will be reduced or eliminated, depending on income.
Right now, the federal government pays 70 percent of the cost for Medicaid recipients and the state pays about 30 percent.
Under the program, which will be called the Arkansas Healthcare Independence Program, the federal government will pay 100 percent of the private plan costs for2014, 2015 and 2016, DeCample said.
In 2017, 2018 and 2019, the federal government’s contribution will decrease until it is paying about 90 percent of costs and the state is paying 10 percent. Now, that is the plateau where the cost split is expected to stay, DeCample said.
Under the current Medicaid system, the largest populations eligible for the program are children, disabled residents, pregnant women who meet income requirements and elderly residents.
“I don’t think that a lot of people realize that as a single adult who earns a low wage, you were not eligible under Arkansas’ Medicaid plan to receive assistance,” Webb said. “The expansion will do a better job of offering health-care options to between 200,000 to 250,000 Arkansans.”
The federally required expansion will make single adults under 65 years of age who earn up to 138 percent of the federal poverty line, and parents who earn between 17 percent and 138 percent of the federal poverty line eligible for the Medicaid-sponsored private plans. According to the federal income standards, a single person at 138 percent of the poverty line could earn up to $15,860a year, and a family of four could earn $32,500.
People who earn more than 138 percent and up to 400 percent of the poverty line will be eligible for other options under the federal exchange.
Under the private option, an individual whose income increases above 138 percent of the poverty level can stay in the same plan, but Medicaid would no longer pick up the cost of the premium.
The person could still receive help paying the premium, however, through a federal tax credit available to those with incomes up to 400 percent of the poverty level.
People will sign up for the private-option demonstration program through the same exchange website - arhealthconnector.org - but those eligible for the Medicaid-sponsored private option will then be notified how to move forward with their online applications, Webb said.
“Everybody applying will start on the arhealthconnector website, and both processes can be completed online,” Webb said.
“Those people who earn below the 138 percent and are eligible for the private option will be redirected to a separate health screening and will then be able to continue with their sign-up online. We hope to have the private option screening eventually operate in real time just like the marketplace.”
Enrollment in the marketplace will begin Tuesday and continue through March 31. The health plans are to take effect Jan. 1.
Front Section, Pages 1 on 09/28/2013