CMS denies Ohio’s Medicaid 1115 waiver request citing the State’s premium proposal; HHS will use 2015 risk corridors collections for remaining 2014 payments; and Alabama closes its Medicaid budget shortfall.

STATE AND FEDERAL MEDICAID EXPANSION AND REFORM ACTIVITY:

Alabama: Governor Signs Bill Closing $85 Million Medicaid Budget Gap

Governor Robert Bentley (R) signed a bill that closed Medicaid’s $85 million budget shortfall for FY 2017 by allocating to Medicaid $15 million of BP oil spill settlement funds and freeing up an additional $70 million through debt repayment. Another $105 million from the BP oil spill settlement funds was allocated to the agency’s FY 2018 budget. The new law also requires the Medicaid agency to restore enhanced primary care reimbursements for Medicaid-participating providers. The passage of the legislation concluded a special session Governor Bentley called to address the State’s fiscal challenges. The State considered eliminating benefits and sought to delay its transition to managed care delivered through regional care organizations (RCOs) due to the shortfall in Medicaid’s funding levels; however, Governor Bentley said the State now aims to begin operating the RCOs in mid-2017.

Illinois: Access to Hepatitis C Drugs Expanded to More Fee-for-Service Medicaid Enrollees

Fee-for-service (FFS) Medicaid enrollees with stage 3 liver scarring will be covered for anti-viral hepatitis C drugs under the State’s new policy, according to the Chicago Tribune; the State previously limited coverage to FFS Medicaid enrollees with stage 4 liver scarring. Approximately 12,000 Medicaid enrollees in the State have a hepatitis C diagnosis, though the State has yet to estimate how many will become eligible for drug treatment based on the policy change. Two-thirds of Illinois Medicaid enrollees are covered by managed care organizations (MCOs) and are not impacted by this policy change. (Each MCO is permitted to have its own eligibility rules for the drugs.) CMS released guidance in November 2015 cautioning against policies that limit access to direct-acting antiviral drugs.

Ohio: CMS Denies Medicaid Waiver Request to Charge Premiums Under Penalty of Disenrollment

CMS has denied Ohio's 1115 Medicaid waiver request, citing concerns about the State’s proposal to charge Medicaid enrollees—with the exception of pregnant women—premiums under penalty of disenrollment, which Ohio officials estimated in their waiver request would lead to a loss of coverage for more than 125,000 enrollees per year. CMS wrote in a letter to the State that the policy "would undermine access to coverage and the affordability of care, and [does] not support the objectives of the Medicaid program." To date, CMS has not approved any 1115 waiver that requires monthly contributions as a condition of ongoing eligibility. The State has not announced whether it will continue to pursue the 1115 waiver with CMS, and, to date, has not indicated that the Medicaid expansion program will be impacted by the denial.

Growth in Prescription Drug Spending Not Linked to Medicaid Expansion, Study Finds

Medicaid expansion was not likely a “major driving force” behind the record high drug spending growth in 2014, despite its association with an increase in the number of Medicaid drug prescriptions that year, according to a study published in Health Affairs. The study’s findings suggest that Medicaid expansion enrollees in states that expanded in 2014 were prescribed drugs at the same rate as enrollees in non-expansion states, but that these drugs were less expensive; hence, expansion was associated with a relative decrease in Medicaid drug spending per enrollee. The authors suggest that prescription drug cost-containment efforts may have limited drug spending growth in expansion states, noting that 19 expansion states but only nine non-expansion states have implemented pharmacy management initiatives.

FEDERAL AND STATE MARKETPLACE NEWS:

All 2015 Risk Corridors Collections Will Be Used for 2014 Payments

HHS anticipates that all risk corridors collections from the 2015 benefit year will be used to make the remaining 2014 risk corridors payments and that no funds will be available for 2015 payments “at this time.” HHS previously announced that 2014 collections would account for 12.6% of total 2014 risk corridors payments and that the agency would use 2015 risk corridors collections to make the remainder of requested 2014 payments. Additionally, the agency noted that collections from 2016 will be used first for remaining 2014 payments, then for 2015 payments, and then for 2016 payments. HHS said it will explore additional funding sources in the event of a shortfall for 2016, including working with Congress. The announcement notes that HHS “will record risk corridors payments due as an obligation of the United States Government for which full payment is required.” HHS is currently being sued by several issuers over failure to make risk corridors payments.

Connecticut: Insurance Department Approves 2017 Rates, Including 25% Increase in Individual Market

The State Insurance Department has approved a 25% average rate increase for the 2017 individual market and a 13% average rate increase for the 2017 small group market. The approved rates impact approximately 300,000 people. According to the Department, key drivers of the rate increases include: increased demand for services due to higher insurance coverage rates, the end of the federal reinsurance program, and “volatility” around the ACA's risk adjustment formula. The average approved rate change the previous year was a 3.5% increase for the individual market and 2.9% reduction for the small group market.

Maryland: State Approves an Average 25% Rate Increase for the Individual Market

The State Insurance Administration has approved 2017 premium rate increases averaging 25.2% for the individual market, which covers approximately 4.4% of the State’s population. The six participating carriers had requested increases ranging from 8.8% to 36.6%. The Administration also approved a 3.3% average rate increase in the small group market, ranging from a 4.5% decrease to a 9.8% increase across 11 carriers. The small group market covers approximately 4.1% of the State’s population.

New Jersey: CO-OP Placed Into Rehabilitation, Will Not Offer Policies in 2017

The Department of Banking and Insurance has placed CO-OP Health Republic Insurance of New Jersey into rehabilitation due to its “deteriorating financial condition,” which the Department attributes in part to the CO-OP’s $46.3 million risk adjustment payment liability. Coverage for Health Republic’s 26,000 individual and 9,000 small group policyholders (totaling 10% of individual and small group market share) will remain in effect through the end of 2016, but enrollees will need to select a new plan when 2017 open enrollment begins on November 1, 2016. The Department of Insurance said it intends to help stabilize the CO-OP so that it can rejoin the market in 2018.

Oregon: Health Authority Requests 56% Funding Increase

The Oregon Health Authority (OHA) is requesting $3.3 billion in funding for the 2017-2019 biennium budget, an increase of 56% from the previous budget cycle. The requested increase is primarily in response to: (1) a projected $1.2 billion shortfall in 2017, the first year that the State begins contributing to the cost of Medicaid expansion, and (2) the upcoming expiration of the State’s 1115 waiver. Since the State’s section 1115 waiver is set to expire next year, the budget does not assume funding from the waiver; however, the State has submitted its waiver renewal and, if approved, the waiver would provide the OHA with an additional $1.3 billion in federal funds. The Health Authority is also seeking funding to expand Medicaid eligibility to undocumented individuals under the age of 18, increase coverage for hepatitis C drugs and to upgrade computer systems and improve health tracking data at local public health departments.

Washington: Marketplace Board Approves Average 2017 Premium Rate Increase of 4%

The Washington Health Benefit Exchange Board approved 2017 Marketplace premium rates for seven of nine issuers, resulting in average increases of 9.9% for gold plans and 3.2% for bronze plans, but an average decrease for silver plans of less than 1%. The average deductible in gold plans will decrease by 8.0%, while it will increase by 14.4% in silver plans and by 5.4% in bronze plans. More than half of the plans (53%) are exclusive provider organizations (EPOs), compared to 34% in 2016. The Marketplace board will vote on the two remaining issuers in the coming weeks.

FEDERAL AND STATE HEALTH REFORM NEWS:

CMS Releases Annual Evaluation of Its State Innovation Models Initiative

CMS released the second annual cross-state and state-specific evaluation of its State Innovation Models (SIM) initiative, which is testing states’ ability to reform their healthcare delivery systems around care coordination and value-based payments. The first round of SIM funding began in April 2013 and was awarded to Arkansas, Maine, Massachusetts, Minnesota, Oregon, and Vermont. The evaluation’s key findings include: payer participation in SIM initiatives varies markedly by test states, which have had varying levels of success in engaging commercial firms; a substantial percentage of primary care physicians in each state is participating in one or more innovation model, though it is unknown how heavily they are engaged in value-based alternative payment models; and most states have substantially increased the populations reached by new delivery system and payment models. However, the report finds that it is too early to determine whether the SIM initiative has yet changed provider behavior or improved care coordination, care quality, and population health. The 580-page report reviews in detail each test state’s SIM model, reporting on topics that include behavioral health integration and health information technology, among others. Quantitative outcomes that are provided for each state include populations reached, quality of care, and healthcare expenditures.

Massachusetts: Healthcare Cost Growth Slowed to 3.9%, Still Surpasses State Target

Healthcare spending per State resident grew 3.9%, to $8,424 in 2015 (totaling $57 billion in spending), surpassing the State’s goal of a 3.6% growth rate, according to the Center for Health Information and Analytics' (CHIA) annual report. Massachusetts’s growth rate remained below the projected national rate (4.6%) and was in line with the per capita growth of the State economy (3.9%). Spending growth among public payers slowed to 3.8% in 2015 compared to 6.8% in 2014. In particular, per member spending on MassHealth (the State’s Medicaid program) declined by 3.1%. Both CHIA and the targeted growth rate were established through the State's 2012 multi-payer healthcare cost control legislation, known as "Chapter 224."

STATE STAFFING UPDATE:

Minnesota: Governor Makes Two Appointments to MNSure Board

Governor Mark Dayton (D) has appointed his senior policy adviser, Lauren Gilchrist, and State Senator, Kathy Sheran (D), to each serve four-year terms on the board of MNsure, the State-based Marketplace. Gilchrist previously served as an assistant commissioner at the Department of Human Services. Senator Sheran is retiring this fall from a decade-long position in the State Senate where she chairs the Health, Human Services and Housing Committees. Gilchrist and Senator Sheran will fill vacancies left by former board members Tom Forsythe and Kathyrn Duevel, who finished their initial terms in May.