Analysis: health care policy FAQ

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Brian Chilson

GOVERNOR HUTCHINSON

 

Health care policy impacts millions of Americans, including the more than 300,000 Arkansans currently covered by the state's Medicaid expansion program. The details, however, can get confusing quickly. It's hard enough to keep track of all the names — private option, Arkansas Works, Medicaid expansion, Obamacare, ACA, AHCA. On top of that, it seems like every month lawmakers propose to shift the policy ground beneath our feet. The Arkansas legislature met in a special session earlier this month to approve Governor Hutchinson's plan to alter the state's Medicaid expansion, adding work requirements and cutting eligibility. That plan now awaits approval from the federal government. The same day the governor signed that bill into law, the U.S. House passed the American Health Care Act, which would completely undercut the governor's proposal and threaten the very existence of Medicaid expansion in Arkansas. It's now in the Senate, awaiting a vote.

The Medicaid expansion helped cut the state's uninsured rate in half. What would the proposed changes coming from the governor and Republicans in Congress mean for those who rely on that coverage? Let's take a look.

What is the Medicaid expansion? What is Arkansas Works?

The Affordable Care Act (often called Obamacare) provided funding to cover low-income adults under the Medicaid program. This expansion of Medicaid covers people who make less than 138 percent of the federal poverty level — that's $16,400 for an individual or $33,600 for a family of four. The U.S. Supreme Court ruled in 2012 that states could choose whether or not they wanted to accept the Medicaid expansion. Arkansas decided to move forward, but with a twist: The state obtained a special waiver from the federal government to use Medicaid funds to purchase private health insurance for the Medicaid expansion population, a policy that became known as the private option. Later, when Hutchinson became governor and continued the policy, he re-branded it as Arkansas Works. Whatever name it goes by — Medicaid expansion, private option, Arkansas Works — the program covers more than 300,000 Arkansans, with most of the costs covered by the federal government through the ACA.

How will Hutchinson's proposed alterations to the Medicaid expansion change who is eligible?

Hutchinson, with the legislature's backing, is seeking permission from the federal government to limit eligibility for Arkansas Works to households at or below the federal poverty line (that's $11,880 for an individual or $24,300 for a family of four). That would mean that current beneficiaries who make between 100-138 percent of the FPL — more than 60,000 of the state's working poor — would be removed from the program.

Assuming the ACA remains in place, what options will those cut from coverage under the governor's plan have for health insurance?

Most of the 60,000 people who would lose Arkansas Works coverage would be eligible for the ACA's Health Insurance Marketplace, often called the exchange, where they can buy subsidized health insurance. The ACA provides income-based premium tax credits and cost-sharing reduction subsidies that keep premiums, co-pays and deductibles relatively low.

Others will not be able to get subsidized coverage on the exchange, because their employer offers them health insurance (the state Department of Human Services estimates this applies to 20 percent of the beneficiaries in the 100-138 FPL group). If that employer-sponsored insurance (ESI) meets two tests — it's considered "affordable" under the law and meets a "minimum value" standard in terms of coverage — then they are barred from getting the premium credits and cost-sharing reductions that would make coverage on the exchange affordable for them. Those who fall into this category would typically face higher costs and receive less generous coverage if they switch to ESI.

Will the working poor have to pay more under the governor's plan?

The governor has claimed that the 60,000 people being removed from the Medicaid rolls "will not lose access to coverage" and would get "the same level of financial support that they have now." In fact, those beneficiaries will pay more than they do today — sometimes much more — and coverage will be skimpier for many.

Under the terms of its Arkansas Works agreement with the federal government, the state is allowed to charge beneficiaries who make between 100-138 percent of the FPL premiums up to 2 percent of their household income. However, currently, the state charges a flat rate of $13 per month.

On the exchange, premiums for plans equivalent to Arkansas Works are designed to be equal to 2 percent of household income (because of the federal subsidies, that's what this group will have to pay for premiums regardless of whether the unsubsidized premium that insurance companies charge for the plan goes up or down). That's significantly more than $13 per month. An individual right at the poverty line would have to pay up to $20 a month in premiums. An individual who makes 138 percent of the FPL would have to pay up to $27 per month. Meanwhile, larger family sizes will have larger incomes in order to fall in the 100-138 FPL range. So a single mother of three, for example, who is right at the poverty line, would be on the hook for $40 per month premiums on the exchange; if she was at 138 percent of the FPL, she would be on the hook for $56 per month premiums.

For those who have to move to ESI plans, the premium increase will be even more dramatic. For an ESI plan to be deemed affordable, premiums cannot exceed 9.69 percent of household income. That means that a plan could have premiums nearly five times what someone was paying under the 2 percent max allowable under Arkansas Works (and even more than that compared to the flat $13 premiums that the program is imposing this year). Under the Medicaid rules in the Arkansas Works waiver, an individual living at the poverty line could be charged no more than $20 monthly; the most that a single mother of three could be charged is $40. But if those same beneficiaries get insurance through a plan at work, they could face employee-contribution premiums of up to $95 or $195, respectively, and would then not be allowed to shop on the exchange. They would have to find a way to pay those premiums or go without health insurance.

What happens if people don't pay premiums?

If people are unable to pay their premiums under Arkansas Works, they don't lose their coverage; they incur a debt to the state, which likely isn't collectible unless the individual has a state tax refund from which to withhold. On the other hand, if people are unable to pay their premiums on the exchange, they'll be booted off of coverage and become uninsured for the remainder of the year. These premiums are relatively small, but this is a population with almost no disposable income. Forty dollars a month may not sound like a lot, but for a family of four at the poverty line, that could be the difference in getting enough groceries to go around. Currently, only 25 percent of these beneficiaries are paying the $13 premiums each month. If they struggle to keep up with premiums on the exchange, they'll end up without coverage.

Will the working poor get the same level of coverage under the governor's plan?

Those who are sent to the exchange will get plans that have a similar amount of coverage to the plans on Arkansas Works, though that coverage may take different forms (for example, they might have deductibles, whereas Arkansas Works only has co-pays). However, there is one key difference, which will lead to many having to pay more out of pocket on the exchange plans. Under Arkansas Works, Medicaid rules impose a strict limit on the total amount that beneficiaries can be charged between premiums and cost-sharing (it cannot exceed 5 percent of monthly or quarterly income). There is no such rule on the exchange, and while there are out-of-pocket limits, the total amount that beneficiaries have to pay could exceed 5 percent of income.

For example, consider an individual who makes $12,500 a year: If she was being charged premiums at 2 percent of her income, the most that she could be charged in cost-sharing under Arkansas Works on a monthly basis is $35. Over the course of the year, that would work out to $360. If that same individual was on the exchange, the available plans average nearly twice that, $660.94, as an out-of-pocket maximum — and that's only over the course of the year, with no protections for monthly/quarterly charges.

Things look much worse for those who are routed to ESI plans instead of the exchange. For a work-sponsored plan to meet the "minimum value" test, it only has to cover 60 percent of average expected costs, as opposed to 94 percent under Arkansas Works. That could mean $5,000 deductibles or $7,000 out-of-pocket maximums, expenses that many people in this population could not realistically afford to pay.

Will the governor's plan increase the uninsured rate in the state?

Almost certainly, yes. Many will not be able to afford the premiums or the cost-sharing and will have no choice but to go without coverage. Others may struggle to successfully navigate the system and find their way to coverage alternatives in the first place. Moving this population from Medicaid to other coverage is not as easy as flipping a switch. Sixty thousand people will receive a sudden letter that their coverage has been canceled; many of them have no experience purchasing private health insurance. The transition would require a massive outreach and education effort and excellent communication. The Hutchinson administration has often faced criticism for its failures at such outreach, including a botched eligibility renewal process in 2015 that led to tens of thousands of eligible beneficiaries losing coverage. In similar transitions in other states, even with much more extensive outreach efforts than Arkansas has ever done, attrition was significant as people inevitably got lost in the shuffle and ended up with gaps in coverage.

"Our greatest concern is that tens of thousands of Arkansans will become uninsured because they are no longer eligible for Arkansas Works, unable to afford other coverage, or simply fall through the cracks because of the constant policy changes," Marquita Little, of Arkansas Advocates for Children and Families, said. (Arkansas Advocates for Children and Families have provided donations to the Arkansas Nonprofit News Network.)

What happens if Donald Trump and the Republican Congress repeal the ACA and replace it with the American Health Care Act (AHCA)?

The AHCA would completely unravel Arkansas Works, as well as Hutchinson's plan for Arkansas Works 2.0.

The Medicaid expansion would be completely phased out, eliminating the enhanced federal funding for new and returning enrollees starting in 2020. Without that funding, Arkansas could not realistically continue to offer Medicaid coverage for the population of low-income Arkansans reliant on Arkansas Works under current law, now numbering more than 300,000 beneficiaries. Forget about Arkansas Works 2.0; Arkansas Works itself would be dead.

Hutchinson said that he hopes the enhanced match rate for Medicaid expansion will be saved now that the AHCA is in the Senate. But even if it is, the AHCA would still completely undermine Hutchinson's plan for the 100-138 FPL population because of the way it changes the subsidies on the exchanges. Hutchinson's plan presupposes that the 100-138 FPL population can rely on those subsidies. The ACA offers tax credits that ensure that the amount people are charged for premiums on the exchange will not exceed 2 percent of income; the AHCA has no such limit and its tax credits aren't based on income. The Arkansas Works beneficiaries that Hutchinson aims to send to the exchange would find themselves faced with premiums that most of them could not possibly afford if the AHCA passed in its current form. Premiums would be even higher for older people in this population because the AHCA would also allow insurance companies to charge higher amounts based on age than the ACA does. Under the AHCA, regardless of how poor the consumer was, the Congressional Budget Office found that the average monthly premium faced by an individual who is 21 years old would be $120; at 40 years old, $200; at 64 years old, $1,216.

Hutchinson acknowledged this problem. "The governor would like to see the AHCA's tax credits increase for the lower income populations to account for this issue and ensure there are affordable coverage options available outside of Medicaid," his spokesman J.R. Davis said.

In addition to drastically lowering the premium tax credits available to poorer and older Arkansans, the AHCA would also altogether eliminate the ACA's cost-sharing reductions, which offer cost protections from co-pays and deductibles to low-income consumers. Under current law, people in the 100-138 FPL range can sign up for plans that cover 94 percent of the average cost of medical expenses; under the AHCA, those same plans would only cover 70 percent. Under the ACA, someone who was sent to the exchange as part of Hutchinson's plan would face an average deductible across eligible plans of $246 and an average out-of-pocket maximum of $661. Under the AHCA, cost-sharing would skyrocket, with deductibles for those same plans ranging from around $1,500 to $3,500 and the out-of-pocket maximum ranging from around $3,600 to $7,150.

What other impacts would the AHCA have on Arkansas health care?

In addition to eliminating the Medicaid expansion and increasing costs on the exchange for poorer, sicker and older Arkansans, the AHCA would also enact hundreds of millions of dollars in cuts to the state's traditional Medicaid program (the program that existed before the ACA's expansion), covering the elderly in nursing homes, low-income children, very poor parents, the blind, the disabled and other vulnerable populations. Such cuts would put additional burdens on the state budget or force the state to cut services or eligibility for traditional Medicaid.

Work requirements

In addition to cutting eligibility, the governor's proposal would institute work requirements for Arkansas Works beneficiaries. The Obama administration did not allow work requirements for Medicaid because it said such requirements were not consistent with the purpose of the program, which is to increase access to health care. The Trump administration has signaled that it is receptive to the idea of work requirements, so Hutchinson is trying again with the request.

The details of the work-requirement program still need to be worked out between the state's Department of Human Services and the federal Center for Medicare and Medicaid Services, but here is the outline of the governor's plan, according to DHS:

In order to continue receiving coverage, beneficiaries must work 20 hours per week or 80 hours per month. If they are not working, they have to participate in job training programs (or potentially certain approved volunteer activities).

Beneficiaries must be in compliance for nine months out of the year. Otherwise, they will be kicked off of coverage and locked out of the program for the remainder of the year.

People aged 18-49 will be subject to the work requirement, and those older than 50 will be exempt.  The following groups will also be eligible for exemptions:

  • Those deemed "medically frail" — the 10 percent of Arkansas Works beneficiaries who have the most intensive medical needs.
  • Those caring for an incapacitated person.
  • Those caring for dependent children in the home.
  • People receiving unemployment benefits.
  • Those participating in a drug or alcohol addiction treatment program.
  • Full-time students.
  • Pregnant women.
  • DHS projects that around half of Arkansas Works beneficiaries would be eligible for an exemption.

This analysis is courtesy of the Arkansas Nonprofit News Network, an independent, nonpartisan news project dedicated to producing journalism that matters to Arkansans.

 

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