On January 8, 2015, Tennessee released a proposal to expand its Medicaid program through an amendment to its current TennCare II waiver under Section 1115 of the Social Security Act. Tennessee’s two-year proposal, called Insure Tennessee, is intended to provide coverage to an additional 200,000 Tennesseans and to address the State’s heavy burden of chronic diseases and their associated risk factors. Insure Tennessee will build upon existing State payment and delivery reform initiatives, including its recent $65 million State Innovation Models grant, to align incentives for providers and patients to achieve better health outcomes.

Insure Tennessee will cover newly eligible adults aged 21-64, including individuals who are medically frail. The demonstration will exclude newly eligible adults who are aged 19 and 20; instead, these individuals will receive coverage through the State’s existing TennCare Medicaid managed care program until they turn 21.

Two options will be available to individuals eligible for Insure Tennessee.

  1. Healthy Incentives Plan. All individuals eligible for Insure Tennessee will be able to enroll in the Healthy Incentives Plan, in which members will be covered by the same managed care organizations (MCO) participating in TennCare and will receive a health reimbursement-like account called a Healthy Incentives for Tennesseans (HIT) account.
  2. Volunteer Plan. Individuals who have access to cost-effective employer-sponsored insurance (ESI) will have the choice of enrolling in the Volunteer Plan, in which the State will use premium assistance to purchase a private plan offered by the individual’s employer. The State will provide a monthly “defined contribution” to cover the cost of the premium and a portion of members’ other cost-sharing obligations. Individuals whose employer offers cost-effective ESI will have access to counseling to help them choose between the Healthy Incentives Plan and the Volunteer Plan. Tennessee estimates that as many as 54% of the newly eligible population may have access to employer-sponsored coverage.

Key features of Insure Tennessee include the following.

Benefits

Healthy Incentives Plan. Individuals enrolled in the Healthy Incentives Plan will receive the alternative benefit plan (ABP). The State will align its ABP with its standard TennCare benefit package. As a result, the Healthy Incentives Plan will provide benefits that may be needed by medically frail individuals, such as long-term services and supports.

Volunteer Plan. Tennessee requests a waiver of the Medicaid requirement to wrap benefits that are not covered by the employer-sponsored plan, including non-emergency medical transportation. Accordingly, the benefit package for enrollees who select this option will include only the benefits available through their employer-sponsored plans. Tennessee notes that certain small group plans (i.e., those that are not self-insured or grandfathered) cover the 10 essential health benefits (EHBs) and large group plans will be asked to attest to coverage of the 10 EHBs.

Premiums

Healthy Incentives Plan. Tennessee has requested a waiver to charge members with incomes above 100% of the federal poverty level (FPL) premiums set at 2 percent of the FPL, which in 2014 was approximately $20 per month. Tennessee will dis-enroll individuals who fail to pay their premiums for 60 days from the Healthy Incentives Plan. The State does not propose a minimum time frame before allowing these individuals to re-enroll, but “reserve[s] the right” to request this provision if CMS grants Indiana a waiver allowing for a “lock-out” period.

Volunteer Plan. The State’s defined contribution will cover the entire portion of the premium not paid by the employer.

Cost Sharing

Healthy Incentives Plan. All individuals enrolled in the Healthy Incentives Plan will be subject to co-payments on prescription drugs at levels consistent with Medicaid law. Members with incomes above 100% of the FPL will also be required to make co-payments for inpatient services, outpatient services, and non-emergency use of the emergency room, all of which will be at amounts consistent with Medicaid law.

Volunteer Plan. After payment of premium, Volunteer Plan members will be permitted to use any funds left over from the State’s monthly defined contribution toward their deductibles and co-payments. If the member’s cost-sharing obligation is greater than the funds remaining in the defined contribution, the member will be responsible for paying these additional amounts, even where the cost sharing exceeds Medicaid levels. The State is seeking to waive Medicaid cost-sharing rules, so that individuals enrolled in the Volunteer Plan can be charged cost sharing greater than Medicaid-permitted levels. The State is also seeking to waive the requirement that it track enrollee cost sharing.

Healthy Incentives for Tennesseans Accounts

Through their MCOs, all Healthy Incentives Plan members will have health reimbursement-like accounts called Healthy Incentives for Tennesseans (HIT) accounts. The State will contribute a “small sum” of credits to each account, which members will be able to use to pay a portion of their premiums and/or co-payments. Individuals will be able to earn additional credits to their accounts by completing healthy behaviors, such as an annual health risk assessment. The State will establish a maximum balance permitted to accumulate in the account, and remaining credits at the end of the year will be eligible to roll over. Other features of the HIT accounts will differ according to whether a member’s income is above or below the FPL.

  • Individuals with incomes at or below 100% FPL will be able to use their HIT accounts for pharmacy co-payments. While individuals in this income band will not be subject to other cost sharing, when these individuals access services, the State will deduct from their HIT account the co-payment amount that the individual would have been charged if their income were above 100% FPL. If individuals with incomes at or below 100% FPL have credits remaining in their accounts at the end of the year, they will be permitted to obtain the remaining amount as an offset for permitted out-of-pocket expenses, such as dental care or over-the-counter drugs.
  • Individuals with incomes above 100% FPL will be able to use their HIT accounts to cover premiums and co-payments. When the balance of the account is depleted, members with incomes above 100% FPL will be responsible for covering their premiums and co-payments going forward until they reach 5 percent of their household income.

Retroactive Coverage

Tennessee is seeking to continue its waiver of retroactive coverage requirements authorized under the TennCare II demonstration. With this waiver, individuals are determined eligible for TennCare II coverage effective from their date of application.

Appeals

The State is requesting a waiver to bar Volunteer Plan members from accessing the Medicaid benefits appeals process; instead, these members would be able to file benefits appeals only through their ESI plan. Members will have the ability to move from the Volunteer Plan to the Healthy Incentives Plan at any time if they are not satisfied with the outcome of their appeal through their ESI plan.1

Post-Eligibility Treatment of Income (PETI) and Estate Recovery

Tennessee is requesting a waiver to apply Post-Eligibility Treatment of Income rules to newly eligible Medicaid beneficiaries requiring nursing facility care.

Funding

Insure Tennessee has been conceived as a two-year program. To cover the increased State share resulting from the decline in the federal match rate from 100% to 95% on January 1, 2017, Tennessee has proposed increasing its State hospital assessment. Hospitals in the State support this proposal.

Moving Forward

Tennessee’s expansion proposal builds on the alternative approaches of earlier states, most notably with respect to its use of premiums, cost sharing, healthy behavior standards and health savings-like accounts. Tennessee is proposing a unique approach to implementing a Health Insurance Premium Payment (HIPP) program – premium assistance for ESI. The State seeks to provide individuals with access to ESI a fixed amount to cover their share of premium costs and some of the cost sharing they may incur. To proceed with this approach, among other things, CMS will have to waive the Medicaid cost-sharing rules. This may be feasible, as the program is voluntary and individuals with higher cost sharing can opt out of the program and into the Healthy Incentives Plan.

Since CMS approved Arkansas’s alternative Medicaid expansion in September 2013, three additional states (Iowa, Michigan and Pennsylvania) have secured approval for and implemented alternative state-specific approaches. With submission of its waiver amendment, Tennessee will join New Hampshire and Indiana with expansion proposals under review at CMS, while the governors of Montana, Wyoming and Utah are in discussions with their legislatures for their own alternative strategies. Other states that are contemplating their own expansion strategies will be closely watching outcomes of CMS-state negotiations on these expansion proposals.