Click here to Download Your Free Primer on Advance Premium Tax Credits (APTCs) and Cost-Sharing Reductions--and Our Complimentary Brief Detailing the Premium Assistance Option.

On September 16, Pennsylvania announced that it would be expanding its Medicaid program using a premium assistance model similar to the one in Arkansas. With Pennsylvania's announcement, 25 states have shared their intentions to expand their Medicaid programs. Many more continue to consider the fiscal and reform implications of expansion and work with the federal government to craft workable approaches. If enacted nationwide, the ACA Medicaid expansion would enroll 21.3 million individuals by 2022.

What Is Premium Assistance?

The Centers for Medicare and Medicaid Services (CMS) has finalized regulations permitting states to use Medicaid and Children's Health Insurance Program (CHIP) funding to purchase coverage for eligible beneficiaries in the individual market, including through Qualified Health Plans (QHPs) in Exchanges. There are several reasons a state might use "premium assistance" to buy Medicaid-eligible adults coverage through an Exchange. Premium assistance has the potential to:

  • Allow an individual to keep the same health plan and provider network, even if his or her income fluctuates above or below the Medicaid eligibility level.
  • Provide Medicaid beneficiaries with the same access to providers as privately-insured patients—and ensure those providers receive the same payment.
  • Facilitate multi-payer patient and delivery reform, driving quality and performance improvements across government and private insurance products.

Premium assistance is not new. Under Section 1906 of the Social Security Act, states have had the authority to use Medicaid premium assistance to “wrap around” employer coverage for Medicaid-eligible adults. Medicaid programs can cover some or all of the premium and cost-sharing obligations of an individual’s employer-based coverage, as well as any additional benefits available through the state’s Medicaid program. In 2006, premium assistance was extended to CHIP.

Although it’s been a long-standing option, states have not widely adopted premium assistance. The opportunity to use premium assistance for purchasing coverage through new Health Insurance Marketplaces, however, has generated new interest in the program.

Manatt worked with Arkansas, the first state to adopt premium assistance, in designing its program. We are now in the process of supporting the state in obtaining CMS approval and fully implementing its premium assistance model.

Trends—and States—to Watch

By signaling its attempt to adopt premium assistance, Pennsylvania becomes the latest state to propose an expansion model that is tailored to its needs and culture. (Arkansas, as well as Iowa with its proposed new Health and Wellness Program, has followed the route of designing plans customized to its state.) Other states to watch for expected innovative approaches to Medicaid reform include Ohio, Tennessee, Michigan and Virginia.

States expanding and reforming their Medicaid programs are relying on 1115 Medicaid waiver authority. Section 1115 of the Social Security Act gives the Secretary of Health and Human Services the right to approve experimental, pilot or demonstration programs that promote the objectives of Medicaid and CHIP. The purpose of the waiver is to give states the flexibility to design and evaluate new approaches for improving their programs.

From the start, 1115 waivers have served as “laboratories” for states and CMS to create innovative ways for enhancing Medicaid coverage and delivery. They are turning to the waiver once again as they fashion and negotiate Medicaid programs under the ACA (Affordable Care Act).

Waiver flexibility in designing and running Medicaid is critical to states. Within the waiver framework, CMS can work to accommodate each state’s specific culture and priorities, helping it craft an expansion program geared to its unique needs and markets.

Once unique approaches to expansion are in place, states will be responsible for monitoring and evaluating their results. They will test a series of hypotheses designed to prove their models have achieved the goal of positively impacting access, cost and outcomes. All eyes will be on the performance and evaluation results coming out of Arkansas, Iowa and other unique models of Medicaid expansion and reform in the coming months and years.