Exchange fees seen as lode for Medicaid

LITTLE ROCK — More dollars generated by fees levied on a huge new pool of customers on the state’s health-insurance exchange could help pay for Arkansas’ share of Medicaid expansion, say some Republicans, but state health-policy officials said Tuesday that they hadn’t signed off on such a plan.

The state’s exchange, an online marketplace for the uninsured and small businesses to buy health coverage beginning in January, was already expected to attract about 211,000 customers.

Now that the federal government has agreed to let Arkansas funnel its Medicaid-expansion population onto the exchange, that client pool might well double, said Insurance Commissioner Jay Bradford.

The state already levies a 2.5 percent premium fee on insurance plans, which would also apply to policies covering the expansion population, Bradford said.

Exchange planners estimate that those fees could deliver about $50 million a year in revenue from all policies in the exchange in 2015. If the Legislature fails to approve Medicaid expansion, the fees would bring in about $25 mil-lion.

The potential fee revenue has attracted lawmakers’ interest.

“It is a source of revenue that would not have existed otherwise. I think it’s smart to factor this into discussions on how to make [Medicaid expansion] revenue neutral,” said Rep. John Burris, a Harrison Republican.

Burris has been deeply involved in talks with lawmakers and policymakers about the new deal between Arkansas and the federal government to provide private insurance through the exchange to up to 250,000 people earning up to 138 percent of the federal poverty level of $15,415 for individuals, the group previously under discussion to be included in an expansion of the existing Medicaid program.

Under the agreement with the federal government, the premiums of the expansion group would be paid with Medicaid dollars. Copays and other cost-sharing measures might also be included.

Soon after Gov. Mike Beebe announced the unprecedented deal last week after meeting with U.S. Secretary of Health and Human Services Kathleen Sebelius, lawmakers and policymakers began to hash out the details of how to pay for the state’s share of covering up to 250,000 people when the federal government stops paying the full tab for expansion in 2017.

Burris, Sen. Jonathan Dismang and other Republicans have asked Beebe administration officials to run the numbers to see if the premium fees can finance the expansion.

The state Department of Human Services, which has been the lead agency on expansion, isn’t planning to do so for now, said John Selig, the agency’s director.

“It’s not something we have proposed,” Selig said.

A study by a consulting firm is looking at the issue and may have some answers within a few weeks, said Cynthia Crone, the exchange’s planning director.

Before the new deal was announced, the Department of Human Services had estimated that the state’s share of Medicaid expansion would be $133 million by 2020.

But the department said that expense would be offset by $180 million in savings from spending less money on the uninsured, higher tax receipts from economic activity spurred by an influx of billions of federal dollars and other savings.

The department has promised to revise its estimates, but it has not released updated figures.

GOP interest in premium fees as a way to finance expansion was first reported by the Arkansas Times, citing an anonymous legislator.

Crone said it’s still unclear how much money from premium fees would be available to pay the state’s share of covering the expansion population.

“I would be very hesitant to say,” Crone said.

Before the new deal wasannounced, exchange planners estimated that it would cost $13.3 million to operate a partnership exchange, easily accomplished from the projected fee revenue.

Administrative costs should go up somewhat if 200,000 or so newly eligible people enter the market, she said, but those estimates haven’t been completed.

Both Medicaid expansion and the insurance exchange were created by the Patient Protection and Affordable Care Act, championed by President Barack Obama.

After the U.S. Supreme Court ruled last year that states have the option to decide whether to expand their Medicaid programs, legislatures have wrestled with the choice of whether to enlarge their Medicaid rolls and how to structure their exchanges.

Republicans have been leery of the cost. Many remain opposed, citing fears of encroaching government.

Democrats are heavily in favor of extending coverage to some of the state’s poorest residents.

Any form of Medicaid expansion, including offering private coverage through the exchange, would require a supermajority of 75 votes in the House and 27 votes in the Senate, a tough task in a Legislature where the GOP controls both chambers.

Any decision on how to use any excess premium fees - revenue above the cost of running the exchange - would be up to lawmakers, but those discussions can come later, Bradford said.

“We’re going to have some time to come to the proper decision on that issue,” Bradford said. “It’s a little bit too early to predict the outcome of that right now.”

Burris echoed those sentiments, saying lawmakers’ focus should remain on Medicaid expansion through the exchange.

“I don’t want that discussion to muddy up what we’re doing right now.”

Still unanswered is how many premium-fee dollars would be available if Arkansas decides to switch back to a state-run exchange, an increasingly popular option among Republicans, who killed that path in 2011. Beebe has long supported the staterun model.

Operating a state-run exchange would cost more than the current plan to partner with the federal government - about $19 million a year without the expansion population, according to exchange planners.

But the risk of possible clashing goals - more local control of the exchange likely means less money to pay for Medicaid expansion - doesn’t concern Burris. He said he wants to keep separate what type of exchange the state settles from the expansion debate.

“That’s definitely a discussion when it’s time to cross that bridge. It’s not part of the discussion now,” he said.