On May 15, 2014, Indiana released a draft waiver under Section 1115 of the Social Security Act, requesting approval to implement a Medicaid expansion through the Healthy Indiana Plan (HIP) 2.0, building on its existing Medicaid managed care and health saving account (HSA) programs.
HIP 2.0 would cover individuals in the new adult group as well as parents and caretakers who were previously eligible for Medicaid. The HIP 2.0 coverage mechanism is a high-deductible (Medicaid) health plan. The $2,500 deductible under the plan would be paid by the enrollee’s POWER account, an HSA-like account funded with a combination of enrollee contributions, Medicaid funds and in some instances contributions from employers or nonprofit organizations. The amount an enrollee is expected to contribute varies by income and eligibility category, as do the implications for failing to contribute to the account. The key features of HIP 2.0 include the following.
- POWER Accounts. As noted above, these accounts will pay for health plan deductibles. Medicaid enrollees will be expected to make monthly contributions to the account on an income-based sliding scale, as follows:
- Less than 23% FPL: $3 per month
- 23%-50% FPL: $8 per month
- 51%-100% FPL: $15 per month
- 101%-138% FPL: $25 per month
Enrollees with incomes above 100% of the FPL who fail to make a POWER account contribution will be given a 60-day grace period during which the POWER account will remain active. Thereafter, failure to contribute results in termination of Medicaid eligibility. Individuals who are terminated for failure to contribute to their POWER account will not be able to reapply for Medicaid coverage for six months.
Enrollees with incomes below 100% of the FPL who fail to make the required contribution to the POWER account do not risk loss of Medicaid coverage: their POWER account will remain active, and be fully funded, but these enrollees will receive a less generous benefit package than those individuals who remain current in their POWER account contributions. (See below for details of the three HIP benefit packages.)
Pregnant women, medically frail expansion adults and low-income parents and caretakers will also have the POWER account, but will not be required to make contributions.
- Covered Benefits. Depending on income, eligibility category and contribution to the POWER account, individuals will have access to one of three benefit packages as follows:
- HIP Plus will be available to individuals with incomes above 100% of the FPL and to individuals with incomes below 100% of the FPL who contribute to the POWER account. HIP Plus will cover the 10 essential health benefits (EHBs) plus an expansive pharmacy benefit, dental, vision, TMJ and bariatric surgery – benefits that are currently available under the State’s standard Medicaid benefit package. The State is seeking to waive non-emergency medical transportation (NEMT) for individuals enrolled in the HIP Plus plan.
- HIP Basic, a more limited benefit package, will be available to individuals with incomes below 100% of the FPL who do not contribute to the POWER account. It will cover all benefits required by the ACA for the new adult population, including the 10 EHBs, but will have more limited pharmacy coverage and will not cover dental, vision, TMJ or bariatric surgery benefits. The State is asking to waive the requirements to cover NEMT, and also vision and dental benefits for 19- and 20-year-olds.
- State Plan/Standard will be available to pregnant women, medically frail new adults and low-income parents and caretakers previously eligible for Medicaid. Unlike HIP Basic or HIP Plus, this benefit package includes long-term care services. The State is not seeking to waive NEMT for individuals enrolled in the State Plan/Standard benefit package.
- POWER Account Incentives. Incentives available to enrollees depend on whether they are enrolled in HIP Basic or HIP Plus and whether they meet certain healthy behavior standards.
- Enrollees in HIP Plus who have a balance in their POWER account will be eligible to roll over their unused personal contributions according to a formula developed by the State. If they have received all recommended preventive care services during the year, the rollover amount will be matched by the State. The rollover funds can be used by enrollees enrolled in HIP Plus to reduce or eliminate their POWER account contributions during the next plan year.
- Enrollees in HIP Basic who have funds left in their POWER account at the end of the plan year and have received recommended preventive health services will be eligible for discounted contributions provided they are enrolled in HIP Plus during the next plan year. The amount of the discount will be tied to the percentage of funds remaining in the POWER account and the discount will be no greater than 50% of the amount they would otherwise have been required to contribute.
- Managed care plans will also be encouraged to institute financial incentives that reward individuals for healthy behaviors, with the incentives to be deposited into the individual’s POWER account and used to reduce individuals’ monthly contribution.
- Cost Sharing. Cost sharing will vary based on whether an individual is contributing to the POWER account and also the benefit package in which the individual is enrolled. In all cases, total cost sharing plus contributions to the POWER account will be capped at 5% of the household income, as required by federal Medicaid rules.
- New adults enrolled in HIP Plus will have no cost-sharing obligations, with the exception of a proposed graduated $25 co-pay for non-emergency use of the emergency department. The first non-emergency visit would be subject to an $8 co-pay; thereafter, the co-pay would be $25. These co-pays would be waived if the individual contacts his or her managed care plan’s 24-hour nurse hotline before going to the emergency department.
- New adults enrolled in HIP Basic will be subject to Medicaid-compliant cost sharing for all services; no co-pays will be imposed on preventive care or family planning services. These enrollees will also be subject to the graduated $25 co-pay on non-emergency use of the emergency department, as described above.
- Medically frail new adults and low-income parents and caretakers enrolled in the State Plan/Standard Medicaid benefit will not be subject to cost sharing if they contribute to the POWER account. If these individuals do not contribute to the POWER account, the State will fully fund the account, but they will be subject to voluntary cost sharing consistent with federal Medicaid law and the graduated co-pays for non-emergency use of the emergency department.
- Pregnant women will not be subject to any cost sharing.
- Work Referrals. Unemployed individuals and those working fewer than 20 hours per week will be referred to the State’s forthcoming Gateway to Work program for job training and job search support. These individuals will be required to acknowledge the referral requirement on their application for HIP 2.0.
- Retroactive Coverage. The State is seeking to waive retroactive coverage, proposing that coverage start after payment of the initial contribution to the POWER account for those above 100% of the FPL. For individuals with incomes below 100% of the FPL, the State proposes to start coverage after the determination of eligibility.
How the Indiana Expansion Compares to Other Medicaid Expansions and Waivers
The Indiana demonstration, like the Michigan demonstration, uses Medicaid managed care plans as the coverage vehicle. Both states seek to make greater use of premiums (or, in the case of Indiana, contributions to HSA-like accounts), cost sharing and healthy behavior incentives.
Notably, Indiana proposes to condition coverage for individuals with incomes above 100% of the FPL on monthly contributions into the POWER account, with a 60-day grace period for nonpayment of contributions. CMS approved a similar approach in Iowa, with a 90-day grace period and an exemption for individuals who attest to a hardship that prevents them from making the required payment. Indiana’s proposed contribution of $25 a month for all individuals with incomes between 100% and 138% of the FPL exceeds 2% of income for individuals at the lower end of this income range – meaning these individuals would pay more for their Medicaid coverage than they would have paid in the Marketplace had the State not expanded Medicaid and more than CMS has heretofore approved.
Finally, it is worth calling out Indiana’s proposal to impose cost sharing of up to $25 for non-emergency use of the emergency department. Since non-emergency use of the emergency department is not an EHB, states are not required to cover it at all in the ABP for the new adults. For example, Arkansas is not covering non-emergency use of the emergency department for expansion adults enrolled in Qualified Health Plans through premium assistance. Accordingly, CMS may well approve Indiana’s request to impose this cost-sharing obligation, at least on the new adults.
The Indiana waiver is the latest in a series of innovative proposals from states seeking to tailor Medicaid expansions to drive program reform and personal responsibility. The Indiana waiver will now be subject to public comment and will thereafter be formally submitted to CMS. Key areas of negotiation between CMS and Indiana state officials are likely to include waiver of retroactive coverage and dental and vision services for young adults who do not contribute to their POWER accounts, as well as POWER account contribution level for those enrollees with incomes above 100% of the FPL.