Gov. Hutchinson: ‘Pause’ State Insurance Exchange

The state should not develop its own costly individual insurance exchange and instead should probably continue using the one operated by the federal government, Gov. Asa Hutchinson told members of a Medicaid advisory group Thursday.

Hutchinson sent a letter to U.S. Health and Human Services Secretary Sylvia Burwell Wednesday describing his intention to pause the effort, two days after telling her of his plans in a phone conversation. Hutchinson told the group that the federal exchange is “proven and is working,” while a state-based exchange carries risks.

“I think it’s prudent to put it on pause for now and to recognize that if there’s some justification for it later we can revisit it, but I, quite frankly, don’t anticipate the need for the state-based exchange in Arkansas, and so it’s on pause at this point,” he said.

The state is spending $99.9 million in federal dollars to build a state-based exchange for use in Arkansas to replace the one currently operated by the federal government, healthcare.gov. Created by the Affordable Care Act, the exchange is the online insurance marketplace for individuals and small business employees. The board overseeing that effort had already paused the individual exchange after receiving a letter asking it do so from Sen. David Sanders, R-Little Rock, who is chairman of the committee overseeing the board.

Hutchinson said he supports the small business exchange, which is nearing completion. He does not believe the state exchange for individuals will be necessary as he and the Legislature work to reform health care in Arkansas.

Hutchinson appointed the group, the Governor’s Advisory Council on Medicaid Reform, to solicit input on those reforms. A group of legislators, the Health Reform Legislative Task Force, has been meeting to consider changes to the state’s health system and will issue a report by the end of the year.

In a speech to that group on August 19, Hutchinson unveiled seven changes to the private option, the program that used Medicaid dollars to purchase private health insurance for individuals earning up to 138% of the federal poverty level. He said he briefed Burwell on those seven elements.

“She obviously is cautious, but I appreciate her spirit,” he said. “Secretary Burwell indicated that she is happy to work with us on each of these. Now, I know, I’ve been around government a long time, and I can read between the lines as to what that means, but I think there’s a great deal of genuineness that what we are presenting in that framework is not something that hasn’t been tested or tried or piloted in other states.”

Hutchinson told the group that changes to the private option must make employer-based insurance more relevant, must expand health care for those in need and trying to build a better life, must create incentives to work, and must be affordable in the future.

Those elements would:

• Require employed Arkansans insured by the private option to obtain health insurance through their employers when available, with the state providing assistance to pay for the premiums. That change would impact 7,700 private option recipients and save the state about $29 million annually.
• Require private option recipients earning incomes above 100% of the federal poverty line to pay part of the premium. He advocates that figure being up to 2% of their income.
• Implement work training referrals for unemployed and underemployed private option recipients.
• Eliminate nonemergency medical transportation as a benefit. Hutchinson said that proposal had received a lot of negative feedback. He said certain populations such as pregnant women and the medically frail could be excluded.
• Limit access to private market coverage to working individuals, with the rest served by Medicaid. That idea “raised the most eyebrows and received the most limited response,” he said, adding that if anyone supported it, they should speak up.
• Find cost savings of $50 to $60 million in the program.
• Strengthen program integrity with audits and checks.

Hutchinson said an eighth element should be added: “We’ve got to be able to affirmatively encourage healthy living in this state.”