Costs too high, UnitedHealth to serve private option only in central Arkansas

UnitedHealth Group will be one of five insurance carriers providing services to the state’s Medicaid private option recipients this year, but it will be limited to 13 central Arkansas counties because of a new rule meant to reduce the program’s costs.

Under the private option, the state uses Medicaid dollars to purchase private insurance for adults with incomes up to 138% of the federal poverty level. Silver-level policies, which cover approximately 70% of a patient’s medical expenses, are purchased through the federally operated insurance exchange, with the Medicaid program providing subsidies to cover most or all of the individuals’ medical costs. The program covered 199,000 Arkansans in October.

Individuals last year could obtain coverage through four insurance providers on the exchange: Arkansas Blue Cross and Blue Shield, the Blue Cross and Blue Shield Association, Centene Corps.’s Ambetter Arkansas, and Qualchoice. This will be the first year UnitedHealth Group offers plans on the exchange.

To be provided to private option recipients this year, the plans must be the cheapest or second-cheapest silver-level plan in one of seven regions or have a premium within 10% of the premium for the second-cheapest plan in the region.

UnitedHealth Group’s Silver Compass Plus 4500 met those requirements only in the central region.

In November, UnitedHealth Group announced in a company statement that nationally it is “evaluating the viability of the insurance exchange product segment and will determine during the first half of 2016 to what extent it can continue to serve the public exchange markets in 2017.”

The private option was created in 2013 using a waiver from the federal government, which is paying almost all of the costs until 2017 as long as those costs are below targets set by the waiver. If costs exceed the targets, Arkansas must pay the difference. Costs per enrollee in November were $483.58, which was $16.50 less than than the cap of $500.08. The target this year is $523.58.

According to Amy Webb, Department of Human Services spokesperson, policymakers from the beginning hoped to attract insurance carriers to the market and then enacted the purchasing guidelines to make the market more competitive.

The private option has been controversial since it was created – barely receiving the three-fourths vote in the Legislature it needed for funding in 2013 and 2014. Supporters point to the program’s role in reducing the number of Arkansas’ uninsured residents. Opponents say it is an unaffordable concession to Obamacare. If the private option continues, Arkansas would begin paying 5% of the costs in 2017, a number scheduled to increase to 10% by 2020. In 2015, legislators agreed to Gov. Asa Hutchinson’s request to fund the program for two years while he works with a legislative task force to consider a next move in the context of overall Medicaid reform.

Hutchinson is scheduled to meet with Department of Health and Human Services Secretary Sylvia Burwell this month to discuss Arkansas’ next waiver. He has sent a letter to her proposing a replacement for the private option, “Arkansas Works,” that would charge premiums for beneficiaries with higher incomes, require those with access to employer plans to obtain coverage that way, and require work referrals for recipients.

A special session will occur later in the year where legislators will consider Arkansas Works and other health care reforms.