EDITOR’S NOTE: Manatt worked with Arkansas in designing and securing CMS approval for its premium assistance program through which the state would use Medicaid funds to buy Qualified Health Plan (QHP) coverage for newly eligible adults. The article below shares our firsthand insights into Arkansas’s private option, its key features and its implementation.
On September 27, 2013, the Centers for Medicare and Medicaid Services (CMS) approved Arkansas’s waiver to implement the Affordable Care Act (ACA) Medicaid expansion by using premium assistance to purchase QHPs in the Health Insurance Marketplace (“Marketplace”). Referred to as the “Private Option,” Arkansas’s waiver is expected to cover over 200,000 Arkansans who will enroll in the same QHPs through the Marketplace as individuals receiving premium tax credits. As a result, the Private Option is expected to nearly double the size of the Arkansas Marketplace.
Through the Private Option, Arkansas is expanding health coverage to newly eligible adults with incomes up to 138% of the federal poverty level (FPL) using an integrated and market-based approach. Arkansas expects the Private Option to improve continuity of coverage and care for individuals, whose incomes fluctuate, triggering changes in the underlying subsidies for coverage. In traditional expansions (through fee-for-service Medicaid or Medicaid managed care), these fluctuations could drive changes in programs, health plans and provider networks, but such discontinuities between Medicaid and Marketplace coverage are virtually eliminated in the Private Option. The Private Option also will enable Arkansas to equalize provider reimbursement across payers, which the state expects will improve provider access and reduce cost-shifting and cross-subsidization among payers.
Implementation Required “Meshing” Public and Private Coverage Rules and Operations
Implementation of the Private Option required Arkansas to “mesh” public and private coverage rules and operations. Since Medicaid is funding the Private Option, Arkansas had to abide by or seek CMS permission to waive Medicaid rules. Despite the complexity of ensuring that Marketplace coverage comply with Medicaid rules, Arkansas needed only one significant provision of federal Medicaid law waived to enable the State to require that beneficiaries receive coverage through the Private Option (as opposed to making participation voluntary). All other aspects of the Private Option were crafted to comply with Medicaid law. Key features of the private option include the following:
- Eligibility. Arkansas adults eligible to enroll in QHPs through the Private Option include newly eligible, childless adults under age 65 with incomes below 138% of the FPL and parents with incomes from 17% to 138% of FPL. Those adults who are determined to be medically frail are excluded from Private Option enrollment and will be covered through Arkansas’s traditional fee-for-service Medicaid program. The state intends to seek CMS approval to expand the Private Option in to children and other low-income adults at a future date.
- Plans. Private Option eligible individuals will be able to select from any Silver Level QHP offered in their service area and be enrolled in the high value cost-sharing variation of the product they select.
- Benefits. Under the ACA, covered benefits for newly eligible adults in Medicaid (the Alternative Benefit Plan), like benefits for QHP enrollees, are based on ACA-defined Essential Health Benefits. This alignment in benefits facilitated the integration of public and private coverage in Arkansas’s Private Option. Under the Private Option, the only significant benefits that Arkansas Medicaid must provide outside of the QHP benefit are non-emergency transportation, and limited Early Periodic Screening Diagnosis and Treatment1 benefits for 19- and 20-year olds.
- Cost-Sharing. Private Option enrollees with incomes from 100-138% FPL will be subject to the same cost-sharing as QHP enrollees with incomes from 139% to 150% of the FPL. Arkansas developed a cost-sharing standard for the 94% actuarial value plan (the so-called “high-value Silver Plan”) to accomplish this single cost-sharing structure for all consumers at this income level, regardless of whether they are Private Option enrollees or consumers accessing premium tax credits and cost sharing reductions. Arkansas will replicate the federal process to compensate plans for cost-sharing reductions. Since Arkansas will be making cost-sharing reconciliation payments, rather than paying cost-sharing tied to specific services, Medicaid prescription drug rebates will not apply under the demonstration. Finally, to align with Medicaid cost-sharing rules, Arkansas will cover the $150 deductible that would otherwise apply to Private Option enrollees.
- Appeals. Private Option enrollees will retain their Medicaid appeal rights for disputes regarding covered benefits, but Arkansas Medicaid has aligned appeals processes across the Private Option and QHPs through delegation of coverage appeals to the Arkansas Insurance Department. As a result, all consumers will have the same benefit appeal process and that process will meet Medicaid requirements for Private Option enrollees.
Arkansas Continues Readying for Implementation
Short timeframes to develop and implement the Private Option proved challenging but not insurmountable. The Arkansas Legislature provided authority for the program on April 23, 2013—giving Arkansas just over five months to develop and obtain approval of the Private Option. With waiver approval secured, Arkansas now turns to crafting an evaluation plan, including demonstrating cost effectiveness, as well as the complex task of continuing to develop the systems and operational capabilities needed to implement the Private Option for the January 1, 2014 coverage effective date. Early enrollment information from the state indicates that up to 60,000 Arkansans are set to enroll in the Private Option for coverage effective on January 1 based on their eligibility for the State’s SNAP program2.