A Private Option Primer

No two words could define this year’s legislative session more than these: “private option.”

The program, which uses Medicaid dollars to purchase private health insurance through the Affordable Care Act’s state insurance exchange, first was passed by the Legislature in 2013 and then was reauthorized in 2014. More than 200,000 Arkansans have health coverage because of it, and the state is receiving $1.3 billion in federal funds this fiscal year. But opponents fear that long-term costs are unsustainable. It’s still unknown if supporters have the votes to continue it.

Talk Business & Politics has prepared a “private option primer” to break down some of the numbers behind the controversial program.

THE ENROLLEES
1. How many people are enrolled through the private option?

As of Nov. 30, 2014, there have been 213,200, according to Amy Webb with the Arkansas Department of Human Services. Of those, 25,117 were deemed to be “medically frail” and were steered into traditional Medicaid.

2. What are the incomes of recipients?

Eighty-one percent have incomes below the federal poverty line, while 19 percent have incomes above 100 percent. The federal poverty level is $16,105 for an individual and $32,913 for a family of four.

3. What are the demographic characteristics of enrollees?

Sixty-seven percent are ages 19-44, while 33 percent are ages 45-65. Fifty-eight percent are female, and 42 percent are males.

4. How many were previously uninsured?

Unknown.

5. What percentage are employed in a full-time or part-time job or are students?

Unknown.

6. What percentage have no income?

In November, 80,000 people had no income that is counted for eligibility, which would exclude sources such as child support. Webb says DHS is examining the data more closely to determine more of the characteristics of private option recipients.

7. How has the private option affected Arkansas’ ranking for uninsured residents nationally?

A Gallup poll released last summer found that Arkansas had the nation’s steepest drop in its uninsured rate – from 22.5 percent in 2013 to 12.4 percent in 2014. Almost half of Arkansans who were not insured in 2013 are now insured, according to the survey. Arkansas’ insured rate in 2013 had ranked it next to last nationally, just ahead of Texas.

THE MONEY
1. How many federal dollars are coming into Arkansas in fiscal year 2015 because of the private option?

$1.3 billion in federal funds, Webb said.

2. What is Arkansas’ responsibility?

The federal government pays for all program costs through Medicaid until calendar year 2017, when Arkansas is responsible for 5 percent of the cost. The state’s responsibility increases over time to 10 percent by calendar year 2020.

The administrative costs for the private option are estimated to be about $2 million, along with the cost of administering Health Independence Accounts, which are explained below.

According to Webb, the state saves $55 million in state general revenue funds by eliminating or reducing traditional Medicaid eligibility categories requiring a 30 percent match. She said the state is also saving about $33 million on uncompensated care at several agencies, including UAMS and the Department Corrections.

3. What are the average premiums?

The total average monthly cost per member at the end of the first year, including premiums, was $489.85. Insurance carriers are limited in the amount of profits they can keep over medical expenses paid, which is also known as the medical loss ratio. Those whose profits are too high will be required to return money to the Medicaid system, a process known as reconciliation. When that happens, the average monthly cost per member should be reduced.

4. How does this compare to projections?

Projections by year were:
Year 1 – $477.63
Year 2 – $500.08
Year 3 – $523.58

5. At the moment, actual premiums are above projections. What does that mean?

If costs were to remain above projections, Arkansas would be in danger of losing the federal waiver that allowed the creation of the private option in the first place. The Department of Human Services could request adjustments to premium limits based on factors such as the average age of enrollees being higher than projected. Webb said the department did not request that adjustment because premium rates are falling and because of policy decisions that are likely to result in lower costs, including changes to the non-emergency transportation program.

6. What has been the effect on Arkansas hospitals?

The Arkansas Hospital Association released a study in 2014 showing that Arkansas hospitals had a reduction of $69.2 million in uncompensated care during the first six months of 2014 compared to the same time period a year earlier. The study found that the number of hospital visits by uninsured patients fell 46.5 percent – from 9,180 admissions of uninsured patients out of 135,552 total visits in the first six months of 2013 to 4,913 hospital admissions out of 136,436 total visits during the first six months of 2014. Overall hospital admissions rose 0.7 percent. Uninsured emergency room visits were reduced 35.5 percent, while total visits rose 1.8 percent. The number of non-urgent hospital outpatient clinic visits increased 5.8 percent, while the total number of uninsured outpatient visits fell 36 percent.

THE POLICIES
1. What consumer-driven health care reforms have been enacted?

The latest federal waiver allows Arkansas to establish Health Independence Accounts (HIAs). Enrollees earning more than 50 percent of the poverty level contribute up to $15 per month to an account, based on their income level, that can accumulate up to $200. That account pays enrollees’ co-pays while they participate in the private option. If an enrollee’s income increases and he or she shifts to marketplace coverage, up to $200 can be used for private coverage costs. The cost for the contract for the HIAs is about $6 million, split evenly between the state and federal government. The 37,000 enrollees with incomes above the poverty level received their “myindy” cards this month. Another 60,000 enrollees with incomes between 50-100 percent soon will begin receiving educational materials about the program and are expected to start participating this summer. Once they are included, the contract’s cost will be about $12 million. The waiver also will limit nonemergency medical transportation trips for private option enrollees to eight per year.

2. What other consumer-based reforms have been enacted?

DHS is now requiring co-payments for enrollees with incomes that are 50 percent of the federal poverty level and higher. Previously, enrollees below 100 percent were not required to share in the cost.

3. Are there any other consumer-based reforms that have gone through the approval process and are simply waiting to be enacted?

Enrollees in ARKids First B are being transitioned to private coverage. So are parents with incomes at or below 17 percent of the federal poverty level. Previously, they were placed into the traditional Medicaid coverage along with disabled and aged adults.