Private-option premiums slip lower for May

Age of average enrollee falls, so cost dips 23 cents

The average payment to insurance companies for providing coverage under the so-called private option is expected to fall slightly this month because of more young people signing up, a spokesman for the Arkansas Department of Human Services said.

The state's Medicaid program on Thursday plans to make a monthly payment of about $62.6 million on behalf of 127,766 private-option enrollees -- an average payment of $490.19 per enrollee.

The average per-enrollee payment is down slightly from the $490.42 the state paid, on average, in April for 101,913 Arkansans who were enrolled at that time.

Department officials have cited a higher-than-expected average age of enrollees as the primary reason the payments to insurance companies have been above the limit of $477.63 set in a federal waiver authorizing the program.

But department spokesman Amy Webb said Tuesday that, "Based on our review, it appears that the age of enrollees has peaked."

"Moving forward, we think that we'll see more younger enrollees, just because they're probably less likely to have enrolled initially as compared to the older people who were more in need of coverage," Webb said.

Under the private option, most people who qualify for coverage under Arkansas' expanded Medicaid program can sign up for a plan on the state's health-insurance exchange, with Medicaid paying the premium.

The expansion, which took effect Jan. 1, extended eligibility to adults with incomes of up to 138 percent of the federal poverty level: $16,105 for an individual, for instance, or $32,913 for a family of four.

The monthly payments to insurance companies also include additional subsidies, based on estimates of recipients' expected claims, to reduce or eliminate any required out-of-pocket spending by the enrollee for medical expenses.

For this month, the average premium is expected to be $355.53, a decrease of 23 cents compared with a month earlier. The average additional payment remained unchanged, at $134.67 per enrollee.

In addition to the payments to insurance companies, the cost of the private option also includes payments for benefits that are required by federal Medicaid rules but not provided by the private plans.

State Medicaid Director Andy Allison said last month that the monthly payments for those "wraparound" benefits have included about $6 per enrollee to companies that provide nonemergency medical transportation and less than 50 cents per enrollee for vision and dental benefits for 19- and 20-year-olds.

Under the terms of the waiver from the Centers for Medicare and Medicaid Services, the federal government will pay the full cost of providing coverage under the private option as long as the state's spending is below the cap. If the spending exceeds the cap, the state will owe the difference to the federal government at the end of a three-year demonstration period.

However, the waiver allows the state to request an adjustment in the cap if it has information indicating that its projections "may underestimate the actual costs."

Last month, state Medicaid officials said they planned to request an adjustment based on a higher-than-expected average age of enrollees. As of last month, the average age was 39, about two years older than Scottsdale, Ariz.-based Optumas, an actuarial consulting firm, predicted when it estimated the program's cost for the Human Services Department.

Webb said Tuesday that the department doesn't expect the average age to drop to what Optumas predicted, meaning the state will still need to request an adjustment to the cap.

Private-option enrollees' medical expenses could also affect the cost of the program. For instance, according to the waiver, the advance payments to insurance companies to reduce enrollees' out-of-pocket costs will be compared with the enrollees' medical expenses at the end of each year.

If the enrollees' costs are below estimates, the insurance companies would owe money to the Medicaid program. If the costs are above estimates, the Medicaid program would owe money to the insurance companies.

"I feel like when utilization comes in, the number's going to spike," said Rep. Joe Farrer, R-Austin, who opposed the private option and the state's expansion of Medicaid.

Farrer also noted that Optumas' projected cost of $477 per enrollee, used to set the spending cap, was an increase of about $40 per enrollee compared with what the firm had predicted in March 2013.

Rep. David Meeks, R-Conway, said the cost of the private option will be a concern even if the spending cap is increased. The state is scheduled to begin paying a portion of the cost of the program in 2017.

Sen. David Sanders, R-Little Rock, a sponsor of the legislation creating the private option, said the program is operating within "acceptable parameters of where we should be operating."

He said he expects the private option to provide coverage at less expense than the traditional Medicaid program while also increasing competition and helping hold down premiums in the state's insurance market.

"Our look at this is not merely month by month but it is looking at year two and year three and what things can be done to make sure we operate it in the manner that we said we'd operate it," he said.

Metro on 05/07/2014

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