Private Option Average Costs Declining, Enrollment Nears 230,000

The number of Arkansans with completed enrollments through the Health Care Independence Program – the private option – has reached 229,599 as of March 31, according to numbers released by the Arkansas Department of Human Services Thursday.

That number includes 205,252 enrolled in private insurance and 24,347 classified as “medically frail” and enrolled in traditional Medicaid. A total of 242,103 Arkansans’ eligibility has been approved.

The private option uses Medicaid funds through the Affordable Care Act to cover Arkansas adults with incomes at 138% of the federal poverty level or below. Eighty-one percent of private option recipients have incomes below that level.

The news comes on the heels of an announcement that UnitedHealth Group has applied to offer plans on Arkansas’ insurance exchange, which includes the private option, for 2016. If approved, UnitedHealth likely would become the sixth carrier offering plans – up from two when the program began.

According to Seth Blomeley, communications and policy research manager with the Arkansas Insurance Department, proposed plans will be reviewed for compliance with federal and state rules before the plans can be certified by the federal Centers for Medicare & Medicaid Services.

Arkansas is required to keep total average monthly costs per recipient below $500.08 in 2015 and $523.58 in 2016 or pay the difference to the federal government. So far this year, January costs were $485.15, while February costs were $486.48. March costs were $481.57, not including wraparound costs such as for nonemergency transportation. That figure is not yet available for March but has been less than $5 each of the past two months.

The caps are based on what would have been expected costs of covering Arkansans through the traditional Medicaid program.

Sen. David Sanders, R-Little Rock, one of the architects of the private option, noted that the monthly costs are lower than they were when the program began last year. He expects the 2014 costs to further decrease because carriers are required to spend 80% on medical expenses with the rest for administrative and profit and must return cost-sharing funding if they don’t meet that 80% mark. Sanders said some carriers have indicated that health care costs are lower than the caps.

“When the numbers are all settled up, which will be later in the summer, we anticipate getting money back,” he said. He later added, “When the reconciliation is done, I think the federal government will be getting money back from the state of Arkansas.”

The addition of UnitedHealth Group into the marketplace should continue to drive down costs, Sanders said. He said that rates for other Arkansans on the insurance exchange have dropped because the private option has brought young and healthy people into the system.

The state will only pay for enrollment in midlevel “silver” plans whose costs are within 10% of the second lowest provider in a particular region, which should further drive down the costs, Sanders said.

Sen. Jim Hendren, R-Sulphur Springs, said the recent good news about the private option does not mean the program is sustainable. He said it’s not surprising that the inclusion of a billion dollars in government spending annually would attract competition to the marketplace.

“While again there’s certainly some welcome things that have occurred because of this huge infusion into our insurance market,” he said, “it still doesn’t answer the question, ‘Where is the state of Arkansas going to come up with $200 million out of our budget to pay for our cost-sharing if that were to continue?’

“So I guess I say all that to say the concerns that many of us had about the sustainability and the affordability of the program are still there, and so I don’t think that the fact that the program is working automatically means that now it’s affordable.”

The federal government pays for virtually all of the private option’s costs until 2017, when the state will pick up 5%, a number that will rise to 10% by 2020.

Hendren sponsored a bill in the recent legislation session creating a task force to study overall health care reform, including the private option, and is co-chairing the task force. The task force meets next week to discuss uncompensated care and then meets three times the first week of May to select a vendor to collect data.