States are incrementalists – enacting laws, amending them, and building on their successes – and that strategy is clearly visible in Massachusetts Gov. Charlie Baker’s bold and comprehensive legislative proposal, An Act to Improve Health Care by Investing in VALUE, announced last week.
Baker’s proposal calls on payers and providers to increase expenditures on primary and behavioral health care by 30 percent systemwide over the next three years while complying with the state’s cost growth benchmarks, administered by the state’s Health Policy Commission. Baker said his proposal “will change the way the system looks, works and operates,” by prioritizing preventative care and early intervention and managing chronic conditions before patients require costly emergency department services.
The proposal includes initiatives to implement those expanded investments, including changes in workforce policies and scope of practice laws. At the same time, the governor proposes strengthening enforcement of cost-growth benchmarks by authorizing financial penalties on those who exceed them.
Additional proposals tackle affordability by:
- Prohibiting surprise billing for emergency and unplanned services and establishing an out-of-network default rate pegged at a percentage of Medicare and limiting the use of facility fees;
- Advancing insurance market reforms to improve access for small businesses and examining the impact of the state’s law that merges the individual and small group market; and
- Building on last year’s efforts to rein in drug prices. The proposal subjects manufacturers of certain high-cost drugs to Health Policy Commission review, requires those manufacturers to participate in cost trend hearings, expands oversight of pharmacy benefit managers, and most significantly, imposes a penalty on manufacturers that increases a drug’s price by more than 2 percent over the consumer price index in any year.
The proposed legislation includes provisions that address telemedicine, the health information exchange, and investments in safety net providers – including plans to stabilize distressed community hospitals and health centers.
Insurers would also be required to maintain accurate provider directories and be required to cover, with no additional costs, same-day behavioral health visits. Urgent care clinics would also be required to offer behavioral health services.
“For far too long, primary and behavioral health care has not been at the forefront of our health care system,” said Marylou Sudders, Massachusetts’ secretary of the Executive Office of Health and Human Services. “While we know that changing the narrative will take time, we are committed to engaging in a multi-year, multi-pronged approach to create a cohesive system of behavioral health care and strong primary care in the Commonwealth.”
The governor’s bill now heads to the state Legislature where debate is expected to be lively. The National Academy for State Health Policy (NASHP) will track and report on developments. To learn more about the plan, NASHP is planning to host a webinar with Sudders, who also sits on the Health Policy Commission board, soon.
States that control their own insurance marketplaces – called state-based marketplaces (SBMs) – are leaders in providing affordability and choice, outperforming the federal marketplace on notable markers including higher enrollment, lower premium rate hikes, more participating issuers, and successfully attracting a young consumer base. These accomplishments are especially notable given recent federal policy actions that have unsettled insurance markets and a national rise in uninsured rates.
The success of SBMs results from years of hard work spent cultivating their markets while building operational and technical systems tailored to serve their states’ consumers. Thanks to the work of these SBMs and the evolution of new technology, it is now easier (and cheaper) for states currently using the federal platform to switch and adopt the SBM model.
As new states express interest in the SBM model, they can learn much from the leaders who have pioneered implementation of this model.
Earlier this month, the National Academy for State Health Policy (NASHP) hosted a webinar with SBM leaders from Idaho, Nevada, Massachusetts, and Washington, DC to showcase some of their lessons. Highlights are featured below, and a recording and slides from the webinar are available here.
Focus on the Basics (and Avoid Scope Creep)
SBMs provide more than “shop-and-compare” websites for consumers shopping for health insurance — SBMs are dynamic business enterprises. While their main objective is to make sure that individuals have “easy access to health coverage,” SBMs must also:
- Perform a series of complicated eligibility and enrollment functions easily;
- Work with the systems of partner organizations, including carriers, Medicaid, and outreach partners; and
- Be financially sustainable.
Rather than get carried away by bells, whistles, and complex policy aspirations, SBM leaders advise that future SBMs must first focus on building a functional, sustainable system. Once a working SBM is established with a long-term financing strategy, it can always grow and evolve to perform new functions.
Prioritize the Consumer Experience
Much of an SBM’s success depends on its ability to attract and retain consumers. Over the years, SBMs have worked diligently to improve the experience of its consumers. As Massachusetts Health Connector Chief of Policy and Strategy Audrey Gasteier explained, “Marketplaces require a lot of activity on the part of a consumer,” and it is important that consumers feel empowered. Outreach is a major component of this work — from providing educational materials to in-person assistance provided by brokers, Navigators, and certified application counselors. Earned press coverage and social media are also effective tools for SBMs to quickly spread the word about their products and policy changes at low cost. Speakers also noted the importance of call centers and recommended that states equip their centers with self-service capabilities so that consumers can easily resolve common issues over the phone.
Set Clear Expectations and Timelines
Heather Korbulic, executive director of Nevada’s SBM, presented an 18-month timeline for implementation of an SBM — from passage of enabling legislation to the marketplace’s first open enrollment period. While “out-of-the box” technology and adaptable systems make it easier than ever to for a state to build an SBM leaders cautioned states not to be too aggressive in their planning and timetables. As with any large-scale project, states should anticipate delays and challenges. For example, from the start states need to work closely with federal officials from the Center Consumer Information and Insurance Oversight (CCIIO) to establish their marketplace “blueprint.” While CCIIO experts serve as an important resource for states — providing years of technical and policy expertise to help guide states — implementation of an SBM requires strict federal oversight and approvals that may cause delays that are outside of the control of a state.
Throughout the SBM implementation process, leaders emphasized the importance of maintaining transparency so that stakeholders are not deterred by unexpected delays or issues. By keeping stakeholders informed of progress and expectations, an SBM will cultivate trust and maintain relationships critical to the marketplace’s long-term success.
Relationships Are the Foundation of an SBM
Any marketplace cannot function without engagement across a mix of stakeholders, which include:
- State policymakers who will establish the marketplace;
- Federal officials who will oversee and approve its implementation;
- Insurance carriers who will sell products through the marketplace; and
- Consumers whom the marketplace will serve.
Stakeholders will have different — and sometimes conflicting — interests and it is the job of the marketplace to balance those interests in pursuit of mutual goals. Leaders underscored the importance of insurer engagement, recognizing the central role of health plans in the success of the marketplace. Establishment of an SBM will require insurers in the state to establish new business practices. A state should not underestimate the uniqueness of how each carrier operates and the time it may take for each to adapt to the new SBM system.
Establish Clear Leadership that Can Take Quick Action
A state has the flexibility to choose how to establish its SBM — either as a state agency, a non-profit, or a quasi-public-private entity. Because an SBM must be responsive to changing consumer and insurer markets and be able to readily contract with vendors to develop needed services, it is best that an SBM assume a governance structure that can enable it to act quickly. Moreover, leaders directors noted the importance of leadership to any marketplace. While operation of an SBM takes a team, it is important to have one person who is clearly designated to establish priorities, take accountability, and make decisions to get the SBM “across the finish line.”
SBMs Serve as a “Hub” for Health Reform across State Agencies.
Regardless of the specific model chosen, SBMs must be able to work across existing state agencies including Medicaid, insurance departments, and other health policy agencies. SBMs are uniquely positioned to serve consumers who range from those on the cusp of Medicaid eligibility to those accustomed to various types of commercial market coverage. To ensure smooth processes for consumers, SBMs must be able to navigate between agencies to ensure that its policies and operations are consistent with what is being promulgated by its sister agencies.
For instance, SBMs are required to generate many different types of notices to consumers, such as information related to a consumer’s eligibility for coverage programs. SBMs coordinate closely with their Medicaid agencies on the language and process for sending these notices to help reduce confusion for consumers who might otherwise receive duplicative or misaligned information from both agencies. Additionally, because SBMs serve consumers who are eligible for federal tax credits, they serve an important role in informing state and federal policymakers about how policy changes may directly impact their consumers. To serve this role, it is important that SBMs have sufficient analytic capacity to process data on their consumers and advise on the implications of changing federal and state policies.
Let SBMs Adapt Over Time
Insurance markets and marketplace consumers are not static, and SBMs must be able to adjust to changing needs and consumers. They must constantly work to engage new consumers who may be coming in and out of other coverage programs (e.g., leaving parental coverage, employer-sponsored insurance, or Medicaid), while also adapting to evolving expectations as consumers interact more and more with e-commerce and advanced technology. Through consumer surveys and testing, SBMs are constantly learning and adapting their services. One benefit of their flexible structure is that SBMs are also becoming more sophisticated and efficient in navigating this process. Some have even been able to cut operational expenses and lower the assessments they charge to carriers who sell on their exchanges, which, in turn, results in lower consumer premiums. For example, Mila Kofman, executive director of DC Health Link, estimates her SBM was able to save approximately $2 million annually by moving its data servers to a cloud-based system in 2016.
Most notably, leaders point out that each SBM has taken a unique approach in how it has operationalized its marketplace. In the process, each has learned lessons from their SBM peers — from simply sharing effective marketing strategies to full partnerships, like Massachusetts’ adoption of Washington, DC’s technology for its small business marketplace. In this spirit, speakers advised states to learn from their peers as they work through their own challenges on the road to implementing SBMs.
NASHP and the SBMs are ready and eager to help support states as they contemplate establishing their own SBMs. For additional resources about SBM models and implementation, explore NASHP’s State Exchange Resource Hub.
Amara Azubuike and Sandra Wolitzky are assistant attorneys general in the Massachusetts Office of the Attorney General.
A new report released in October 2018 by Massachusetts Attorney General Maura Healey finds that complicated and varied methods used to determine health care payment rates contribute to administrative cost increases and make it difficult for market participants to identify high-quality health care options.
The report identifies factors that have significant implications for the health care marketplace in Massachusetts. First, commercial health care fee-for-service payments are determined using complex and varied methods with little consistency across payers, providers, or insurance products. The report finds that hospital outpatient payment methods are particularly complex, and in many cases this complexity makes it difficult, according to the report, to “predict which hospitals are competitively priced or are likely to be a good value within any particular payer” or “assess value across payers without detailed case-specific information.” Risk contracts — where providers are rewarded if they spend below a negotiated budget to care for a population, or penalized if they spend more — are similarly complex and vary from insurer to insurer. This adds another layer of complexity on top of the fee-for-service framework that underlies alternative payment methods. This varied payment system generates administrative costs that do not appear to add value to patient care. Complexity also serves as an obstacle to price transparency for consumers, employers, policymakers and providers.
The report offers the following recommendations to address these key findings:
- Reduce complexity and explore increased standardization, where appropriate, of the methods for determining fee-for-service payments and the key terms that govern risk contracts.
- Establish real-time, service-level price transparency for employers, consumers, policymakers and providers. A simpler approach to health care payment practices would allow for new transparency initiatives that would enable purchasers and providers to compare options for specific services.
- Further study the administrative costs associated with current approaches to health care payment practices that significantly vary between insurers, insurance products, and providers.
This is the eighth cost trends report issued by the Massachusetts Attorney General’s Office. These reports aim to increase transparency around the forces and conditions that affect health care spending. Prior cost trends reports from the office have focused on inefficiencies in the distribution of health care dollars, including provider price variation unexplained by differences in quality, complexity of services, and other common measures of consumer value. Prior reports have also documented higher per capita spending on commercially insured people in more affluent communities compared to less affluent ones, despite the higher sickness burden found in less affluent communities “Health care costs are one of the highest expenses for Massachusetts families,” Attorney General Healey explained. “This report shows that there is more we can do to reduce administrative costs and make health care price comparisons easier for patients, employers and health care professionals.”
State health policymakers are eagerly waiting to see if Congress’ omnibus budget bill released this week will attempt to stabilize Affordable Care Act (ACA) insurance markets by reinstating ACA’s cost-sharing reduction (CSR) payments. An early proposal by US Sen. Lamar Alexander would fund the cost-sharing subsidies, which reduce a family’s out-of-pocket health care costs, retroactively from 2017 through 2021.
While this is a potential solution to how the federal government can subsidize health insurance for some consumers who purchase insurance through ACA markets, data collected by the National Academy for State Health Policy (NASHP) illustrates the complex interplay between marketplace subsidies and consumer decisions that states face.
States and insurers demonstrated incredible dexterity in quickly redesigning insurance plans in response to the Administration’s late-in-the-game decision to end CSR payments in October 2017. The result was that consumers faced new confusion as insurance plans were revamped and repriced in 2018, resulting in major enrollment shifts both off and within health insurance marketplaces. Below, NASHP presents 2018 enrollment data collected by state-based marketplaces (SBMs), which closely manage their own exchanges, highlight how state actions to address the loss of CSR funding influenced market decisions in 2018. Key findings indicate:
- Decreased enrollment in marketplace silver plans, especially among consumers who no longer had access to CSR subsidies and who did not qualify for tax credits;
- Enrollment growth in marketplace bronze plans;
- Mixed enrollment growth or declines in gold plans; and
- Mixed growth, and some declines in the total number of subsidized enrollees in the marketplaces.
The findings do not provide a complete picture of what has occurred in markets nationwide, as the data represent only 10 states and do not include complete information about off-marketplace enrollment patterns or full consideration of other factors that may have influenced enrollment during the 2018 enrollment period, including shortened enrollment periods and other factors influencing premium costs. However, they provide a glimpse into how states’ markets reacted to federal policy shifts and the serious ramifications of CSR changes wrought by Washington on consumer purchasing behaviors.
Under the CSR program, insurers are required by federal law to cover certain out-of-pocket expenses (e.g., deductibles, copayments, coinsurance) for enrollees with incomes below 250 percent of the federal poverty level (FPL). CSRs are only available through silver-level health plans purchased on the state or federal health insurance marketplaces. Typically, silver-level plans have an actuarial value (AV) of 70 percent, meaning that the plan must cover in aggregate at least 70 percent of the health care costs received under the plan. CSRs change the AV of plans by varying amounts depending on the income of the qualifying consumer (see Table 1).
|Table 1. Qualifying for CSRs|
|To qualify for the ACA’s CSR program, consumers must purchase silver-level health plans and have incomes between 100 to 250 percent of FPL, which in 2018 ranged from $16,642 to $30,150 for individuals and from $33,948 to $61,500 for a family of four.|
|CSR-Eligible Plan||Standard Silver||Silver 73||Silver 87||Silver 94|
|Income||Any||200-250% FPL||150-200% FPL||100-150% FPL|
The ACA designed the CSR program so that insurers would be reimbursed for expenditures incurred under the program, and would be paid back whatever costs were charged to ensure that consumers who received services were only paying out-of-pocket expenses in line with the AV of their CSR-eligible health plan.
Questions about the exact language of the CSR law spurred litigation over whether it was legal for the government to issue reimbursements without an explicit appropriation for the program. Pending the outcome of this litigation, the Administration stopped issuing CSR reimbursements.
Response to Elimination of Federal CSR Reimbursements
After the Administration stopped CSR payments last October, most state regulators directed their insurance carriers to adjust their 2018 premium rates to account for CSR losses. Not responding to the issue would have left insurers exposed to the lost federal funding, possibly resulting in insurers opting to not participate in markets. As CSR payments most directly affected silver-level plans sold on the marketplaces, most states and carriers opted to load premium increases onto silver-level plans offered through their insurance marketplaces. The Congressional Budget Office (CBO) estimated that silver plan premiums increased by 10 percent on average in 2018 in response to elimination of CSR funding. Among the states that operate their own marketplaces, only three did not load the increases onto their silver plans. These included:
- Colorado, which advised its insurers to distribute premium increases across all metal levels to mitigate the effect on silver-level plans;
- Vermont, which similarly distributed premium increases across all metal levels due to uncertainty over the effects of the changes on its uniquely-merged individual and small group markets; and
- Washington, D.C., which calculated that elimination of the CSR payments would have minimal effect on its market due to low enrollment of CSR-eligible individuals.
CSR Loading Had Differing Impacts on Subsidized and Non-subsidized Consumers
Silver-loaded premiums shifted the affordability and value of plans offered through marketplaces, distorting costs and participation in the markets. For consumers who were eligible for premium tax credits to subsidize their coverage (82 percent of marketplace consumers in 2017), some coverage options became even more affordable. This is because the tax credit is calculated based on the second-lowest-cost silver plan available to a consumer. As a result, as silver premium costs increased in response to CSR elimination, so did the total amount of tax credit a qualifying consumer could receive. This increase in tax credits — combined with more marginal increases in premiums for bronze- and gold-level plans than for silver plans — meant that both bronze and gold plans became more affordable for these consumers. Availability of these more affordable plans may have attributed to the enrollment increases seen in some states’ marketplaces.
While the silver-loading strategy served the important purpose of insulating lower-income consumers from CSR losses, it resulted in increases costs for consumers who were ineligible for tax credits. The increased premiums escalated affordability concerns and forced many of these consumers to seek cheaper options, either by enrolling in lower-value bronze plans or by disenrolling from marketplace coverage entirely. These changes had important repercussions for both consumers and insurers participating in the markets.
- Distorted market competition and enrollment. CSR payment elimination had disproportionate effects on marketplace insurers as they adjusted premium rates differently based on the proportion of CSR-eligible consumers enrolled in their plans. Insurers with a greater proportion of CSR-eligible individuals increased premiums by a higher amount than those with fewer CSR-eligible enrollees. In California, for example, CSR-induced premium rate increases ranged from 8 percent to as much as 27 percent. This lead to a distortion of premium prices between insurers and generated shifts in market share as consumers switched to insurers whose plans had smaller premium growth.
- Increased consumer susceptibility to out-of-pocket spending. The lower-cost bronze plans, which offer less coverage, enticed more consumers to purchase them. While this lowered consumers’ annual spending on premiums, the lower AV of bronze plans means that these consumers are at greater risk of higher out-of-pocket spending. This is especially true for consumers who were once CSR-eligible but switched from silver to bronze plans without considering the resulting out-of-pocket costs.
- Complete disenrollment from individual market coverage. While the total impact of CSR changes on enrollment cannot be known without additional data about off-marketplace enrollment, it is highly probable that premium increases and confusion over the changes in premium costs spurred some non-subsidized consumers to drop insurance coverage altogether. These drops in coverage led to altered market risk pools and premium increases.
Consumers Shifted Purchasing Patterns in 2018
While it is not possible to determine the absolute effect of CSR elimination on consumers’ behavior, initial data collected by the 10 SBM states indicate that state and insurer decisions to silver-load influenced consumers’ choices in 2018. Key patterns that emerged include:
- Disenrollment in silver-level health plans, especially among unsubsidized consumers: While the majority of consumers from these states continued to select silver-level health plans, there was an almost a universal drop in the proportion of enrollees selecting silver-level plans (exceptions include Colorado and Vermont, which did not silver-load, and Minnesota, whose Basic Health Program for consumers earning up to 200 percent FPL offset the effect of CSR losses.) As expected, shifts away from silver plan selections were more common among individuals who did not receive tax credits.
- Growth in enrollment in bronze plans: There was almost universal growth across all states in the proportion of enrollees who selected bronze plans, with the exception of Minnesota and Vermont, which only saw marginal reduction in bronze plan selections.
- Varied growth or disenrollment in gold plans: Changes in gold selections vary across states, from Colorado where the proportion of gold enrollments dropped by nearly one-third to Maryland where gold enrollments increased nearly four-fold.
Different trends in enrollment among subsidized and unsubsidized consumers in these states indicate that CSR policies did not by themselves drive shifts in enrollment. It is also likely that the total effect of the CSR issue varied greatly across all states, depending on several factors including:
- The proportion of unsubsidized marketplace consumers in the state — especially those enrolled in silver plans who were most susceptible to silver-loaded premiums; and
- Baseline premium prices of bronze or gold alternatives for consumers seeking to shift away from silver plans.
Investments in education and outreach also affected how consumers responded to CSR-loading in various states. The Massachusetts’ Health Connector, for example, was among several states that took extensive steps to urge its unsubsidized silver-plan enrollees to seek more affordable options either on or outside the marketplace. Connector officials reported that they were successful in moving 82 percent of affected enrollees into new coverage plans. This meant that 18 percent of unsubsidized consumers remained in silver plans, despite its aggressive outreach efforts to inform consumers about the availability of more affordable options.
Outlook for States and Markets Pending Federal Action
While this information provides a snapshot of enrollment patterns in 2018 from 10 states, it indicates that responses to the CSR funding elimination had diverse effects on states’ markets and consumers. Similarly, if CSR funding is reinstated, the effect will reverberate differently across states’ markets and consumers. Significant changes could mean another year of disruption for insurers, who will need to adapt products and rates based on shifting federal policy, and consumers, who may need to once again actively shop around and switch plans next year. The CBO estimates that 500,000 to 1 million consumers would become uninsured from 2020 to 2021 if CSR funding was reinstated. These would mostly impact consumers with incomes between 200 to 400 percent FPL who would no longer would benefit from tax credits, which are larger than CSR subsidies.
While states and insurers rapidly responded to the Administration’s decision to end the CSR program in 2017, an absence of clear policies and continuous last-minute changes will spur unrest in markets. Without sustainable policies to stabilize the individual market, consumers will face higher costs, confusion, and anxiety about whether insurance coverage will be available when they need it.
While CSR funding remains a concern to some states, states are also seeking solutions that could bring immediate stability to markets, such as federal reinsurance funding. Whatever policies are implemented this spring, time is of the essence as state regulators are already in active negotiations with their insurers for 2019 offerings, with rate filings expected in some states as early as May. Ideally, future federal policies will grant states sufficient time and flexibility to respond to policy changes in a manner most appropriate for their markets.
Click here to view a chart comparing marketplace enrollment by metal level in California, Colorado, Connecticut, Idaho, Maryland, Massachusetts, Minnesota, Rhode Island, Vermont and Washington State.
As states reach the midway point of their 2018 legislative sessions, many are looking for ways to stabilize their insurance marketplaces now that Congress has effectively eliminated the individual mandate that required all residents to be insured or pay a penalty. Without guaranteed participation by healthier consumers, marketplaces risk having more high-cost consumers in their pools, which will drive up premiums and destabilize markets.
|How would a state individual mandate work?
View the Feb. 7, 2018, webinar featuring Massachusetts officials explaining how they did it here.
Several states are considering implementing a state-based mandate, with bills proposed in Hawaii, Maryland, New Jersey, Vermont, and Washington. Connecticut recently released a study about the effect of a mandate and a Washington, DC, working group has adopted a recommendation to implement a mandate. Policymakers are looking carefully at how Massachusetts, which has the lowest uninsured rate in the country, implemented its mandate 11 years ago.
Key Lessons Learned from Massachusetts
Earlier this month, the National Academy for State Health Policy (NASHP) hosted a webinar to explore implementation of a state-based mandate. During the event, Massachusetts officials described their mandate and identified three key elements that state policymakers should consider. (View Massachusetts’ webinar slides here.)
- Coverage standards: What is the minimum standard of coverage that individuals must purchase in order to be considered insured and avoid a penalty?
- Affordability standards: Are there limits that should be put in place to exempt consumers from having to purchase coverage that is unaffordable?
- Penalties/exemptions: What should the penalty be for individuals who do not purchase coverage? What exemptions should be offered to avoid the penalty? How should penalty revenue be used?
State officials also discussed operational considerations when crafting a mandate, including:
- Cost and governance: What agencies should have authority over monitoring and enforcement, and at what cost?
- Outreach and education: What educational and outreach efforts are required to ensure that consumers are adequately informed about the mandate? When and how should educational efforts occur?
Massachusetts officials described the mandate as an “integral” part of their overall coverage strategy. They explained that the mandate has provided many indirect benefits to their state. Notably, the detailed information the program has provided about consumers who lack coverage has enabled the state to design effective policies and fine-tune outreach strategies to reach these consumers and enroll them in affordable programs.
Officials also described the benefits of instituting a common benefit “floor” for coverage, which has helped Massachusetts:
- Provide a quality standard of coverage that benefits all consumers; and
- Insulate the state’s insurance market from detrimental fragmentation, and consumer gaming that can be exacerbated by the existence of limited coverage options.
Such system gaming may be of particular concern pending recently proposed federal actions to grant greater flexibility over short-term and association health plans.
Massachusetts officials acknowledged the difficulty of measuring the direct impact of the mandate on reducing the number of uninsured. The state’s mandate evolved over time and did not occur in isolation. It was part of a package of reforms designed to improve affordability and access in Massachusetts. Collectively, these policy decisions have resulted in Massachusetts achieving the lowest uninsured rate in the country (currently at 2.5 percent). Recent data released by Massachusetts’ Health Policy Commission show that Massachusetts has the second-lowest average premium costs for benchmark plans sold through its exchange, a clear sign of market stability.
Ultimately, any state considering a mandate must decide how to balance each of these considerations based on its intent to:
- Improve affordability and stability;
- Establish a quality standard for required coverage; and
- Ensure the program is not overly burdensome on consumers or state systems.
Maryland’s Proposed Health Insurance Escrow Fund
Democratic state legislators in Maryland have sponsored legislation (SB 1011/HB 1167) that would use Maryland’s health insurance exchange to automatically enroll individuals in health insurance plans. The proposal is based on a concept developed by Stan Dorn, a senior fellow at Families USA, under which Maryland would institute an individual mandate and imposepenalties for lack of coverage. Under this model, consumers could use the penalties they owe to purchase future coverage. As described by Dorn, the intent of this proposal is to ensure that penalties are used to help individuals purchase coverage to the maximum extent possible. During NASHP’s webinar, Dorn outlined four phases of this plan:
- Open enrollment “pre-payment:” During the open enrollment season, consumers would come into the exchange and estimate the amount of penalty they would owe during their next tax filing for not purchasing coverage. The consumer can then opt to “pre-pay” this penalty to the exchange, and apply that payment toward the purchase of insurance coverage.
- Tax season: Upon filing tax returns, consumers would be asked to self-identify whether or not they were insured on their tax form. If they were uninsured and owed a penalty, consumers could choose to have the penalty used to purchase insurance. At this point, the exchange would check to see if the consumer was eligible for coverage at zero-cost, meaning that when tax credits and the penalty are applied, the consumer would owe zero in monthly premiums for the plan. If a zero-cost plan is available, the consumer would be automatically enrolled in that plan.
- Post-tax season: If consumers do not qualify for a zero-cost plan, their penalty would be held in escrow until the next open enrollment period. At that point, consumers can apply the penalty toward the purchase of coverage for the following year.
- Continuation of coverage: If consumers decide to drop coverage before the full year, the state keeps any amount of the penalty left after payments are made to insurers for whatever months the consumer was covered. Any penalty funds collected would be used to finance operation of this program, and to help fund a reinsurance program to help defray the cost of insuring high-cost consumers.
The Maryland proposal raises questions about consumer behaviors, underscoring that successful implementation requires the development of sufficient tools and resources to ensure that consumers can adequately make decisions about whether to use of their penalty toward the purchase of coverage. The legislation proposes an ambitious timeline for implementation, mandating that it become fully operational by Jan. 1, 2020. The Maryland exchange have not officially taken a position on the model, though legislators are consulting with them to assess the feasibility of the plan.
Since 2006, Massachusetts has mandated health insurance coverage for all residents. With effective repeal of the federal individual mandate scheduled for 2019, one option state policymakers are exploring to stabilize their insurance markets is mandating insurance for all, similar to Massachusetts.
NASHP invites state officials to join key Massachusetts policymakers from 3 to 4 p.m. (EST) Wednesday, Jan. 10, for a webinar to discuss the mechanics of their mandate. Topics include administration of the mandate, consumer relations, tax filing and compliance, use of penalty revenue, reporting and governance, and lessons learned after a decade of operation. This will be a unique opportunity to ask questions in a closed, states-only forum.
To register click here. Submit questions ahead of time to email@example.com.
Uncertainty about the future of health insurance options and concern about the ability of Affordable Care Act (ACA) marketplaces to offer adequate competition and choice have spurred states to look for new coverage approaches. Among the innovative strategies states are proposing are allowing consumers to buy into state Medicaid programs and developing state-specific coverage options within the ACA’s framework.
State Medicaid Buy-In Proposals
A new strategy some states are examining is to allow individuals who are not currently eligible for Medicaid to buy into the program. Cindy Mann of Manatt Health recently explored this proposal at a session at NASHP’s annual health care policy conference. She outlined some of the key issues that states need to consider to implement this approach.
One approach allows states to offer Medicaid as a new “public option” product in their ACA marketplaces, which could help increase affordability and consumer choice, particularly in areas where there are a limited number of participating plans. To be offered on the marketplace, a Medicaid plan would need to match marketplace coverage standards and be certified as a qualified health plan. Some session attendees wondered if a state could “deem” a Medicaid plan as qualified, particularly in bare counties where no insurance product was available.
Another way states could leverage Medicaid to expand coverage would be to permit individuals with incomes above current Medicaid eligibility levels to buy into the program. States could choose to offer this Medicaid buy-in to consumers either with or without subsidies. However, if they offered subsidies, states would need to seek federal approval through a 1332 Waiver or obtain a Basic Health Program (BHP) state plan amendment. Also, in order for the Medicaid plan to be affordable, the benefit package may need to be less robust than traditional Medicaid benefits.
Both strategies would require state Medicaid and insurance agencies to coordinate closely. Key advantages of Medicaid buy-in proposals include:
- The statewide nature of Medicaid’s provider networks;
- The reach of the program overall; and
- States would have the flexibility to set plan rates.
Potential disadvantages include:
- Medicaid’s lower provider reimbursement rates could diminish provider participation; and
- In some states, it may not be politically feasible to broaden the scope of Medicaid, even if individuals are required to pay premiums for coverage.
State and Federal Action on Medicaid Buy-in
Some states have already moved forward on these concepts . In early 2017, Nevada state Rep. Mike Sprinkle introduced and the state Legislature passed AB 374, which offered a public option on the marketplace. The bill directed the state to contract with insurers to provide a commercial health plan based on Medicaid (though without non-emergency medical transportation coverage), and allow eligible individuals to use ACA’s tax credits to purchase this coverage. While the proposal may have required both a 1332 and a Section 1115 Medicaid waivers, the bill was ultimately vetoed by the governor. If re-elected, Sprinkle indicated he will reintroduce the proposal.
In Minnesota, a bill was introduced in January 2017 that would have allowed individuals with incomes above 200 percent of the federal poverty level (FPL) to purchase coverage through MinnesotaCare, the state’s BHP, and they would have received a tax credit subsidy if eligible. The bill did not move forward in the state Legislature.
In Massachusetts, a provision in a recent bill that passed the state Senate in November proposes to allow any individual to purchase coverage through the state’s Medicaid program.
On the federal level, Sen. Brian Schatz (D-HI) and Rep. Ben Ray Lujan (D-NM) in October introduced the State Public Option Act in the Senate and the House, which would allow states to create a Medicaid buy-in program for all residents earning any income level who are not currently eligible for the program.
Idaho’s Health Care Plan
Idaho did not implement the ACA’s Medicaid expansion, but the state has held many meetings since passage of the ACA to explore alternative options to provide coverage to low-income individuals. Most recently, and as discussed at a NASHP conference session, the Governor’s Health Care Advisory Panel has proposed the Idaho Health Care Plan, designed to both stabilize the individual insurance market and offer coverage to some uninsured individuals.
Specifically, one aspect of the plan permits working individuals with taxable income below 100 percent of FPL to purchase subsidized marketplace coverage. The state estimates that 22,000 of the 78,000 uninsured residents with incomes under 100 percent of FPL would be able to purchase coverage.
The other component of Idaho’s proposal creates a new Medicaid Complex Medical Needs program that allows adults and children with certain complex health conditions with incomes up to 400 percent of FPL to be covered by Medicaid. Individuals would qualify if they were not eligible for Medicaid and did not have access to affordable employer coverage.
The state anticipates that moving individuals with high-cost care needs to Medicaid could reduce premiums in the marketplace and would offer these individuals more comprehensive coverage to meet their needs. The draft waiver indicates that the program would cover individuals in need of ongoing medical support for genetic conditions such as hemophilia or cystic fibrosis as well as individuals with end–of-life care needs. Most enrollees with incomes above 150 percent of FPL would be required to pay premiums for this coverage based on a sliding scale.
The two-pronged plan would require federal approval through both a 1332 waiver and a Section 1115 Medicaid waiver. The state held public hearings in December 2017 and is seeking public comments through Dec. 15, 2017. Idaho’s goal is to implement the plan in mid-2018.
Also in 2018, while there may be new efforts in Congress to modify or repeal the ACA, some states are likely to continue to pursue their own options to provide health coverage to residents. NASHP will continue to monitor and share information about these emerging state health policy proposals.