Arkansas' work toward establishing state-based health insurance exchanges will benefit the state no matter how the U.S. Supreme Court rules next month on a challenge to subsidies provided through federal exchanges, the director of a state board told legislators Wednesday.
Speaking to the Arkansas Health Insurance Marketplace Legislative Oversight Committee, marketplace Director Cheryl Smith Gardner added that even if parts of the Patient Protection and Affordable Care Act are changed or overturned, Arkansas would need to continue work on its own health care initiatives.
"You're going to have to come up with something new," Gardner said. "You're going to have to come up with something innovative regardless" of what happens to the Affordable Care Act.
Gardner updated the committee on the Arkansas Health Insurance Marketplace, a nonprofit organization created by the Legislature in 2013, and presented a report on waivers from key provisions of the Affordable Care Act that states will be allowed to obtain starting in 2017.
The marketplace board of directors is using money from a $99.9 million federal grant to establish a state-based exchange for individuals that would replace the one set up for the state by the federal government.
Enrollment in a state-based exchange for small businesses is scheduled to start this fall for coverage taking effect next year.
Consumers are expected to begin signing up in the fall of 2016 for coverage starting in 2017.
Act 398, passed during this year's legislative session, prohibits the board from establishing a state-based exchange until the Supreme Court rules on the subsidies case, King v. Burwell.
If the court sides with the health care law's challengers, Act 398 prohibits the board from establishing the exchange without approval from the Legislature.
An estimated 7.5 million people in 34 states, including about 58,000 in Arkansas, are receiving federal subsidies for coverage purchased on federally run exchanges. The plaintiffs in King v. Burwell say the 2010 health care law does not authorize the subsidies in those states.
Gardner said the health care law is clear that the subsidies are allowed in the 16 states that have established their own exchanges.
The sponsor of Act 398, state Sen. Jim Hendren, R-Sulphur Springs, said he wanted to ensure that the Legislature would have a say in whether the tax-credit subsidies would continue in Arkansas.
He said he doesn't have enough information to know whether the Arkansas-based exchange should go forward.
"It's like trying to call the next football play when you don't know what the rules are yet," Hendren said.
The marketplace oversight committee chairman, Sen. David Sanders, R-Little Rock, also wasn't ready to say what Arkansas' decision on a state-based marketplace should be if the Supreme Court sides with the challengers.
But he said the state will be ready to respond to the court's decision.
"Being in a position to have all options on the table is a very enviable position," Sanders said.
Gardner noted that states with their own exchanges can decide what fees to charge to support the exchange's operations. Federally run exchanges are supported by a 3.5 percent tax on premiums for plans sold on those exchanges.
Gardner noted that Arkansas doesn't control the amount of the fee and that the U.S. Department of Health and Human Services could decide to raise it in the future.
She added that Arkansas would be able to switch back to the federal exchange if that seemed like a better option.
"You reduce your options if you are anything but a state-based marketplace," Gardner said.
Even if the Affordable Care Act is repealed, health care exchanges wouldn't necessarily go away, Gardner said.
The Patient Choice, Affordability, Responsibility and Empowerment Act -- a replacement for the Affordable Care Act proposed by Republican U.S. Sens. Orrin Hatch of Utah and Richard Burr of North Carolina and U.S. Rep. Fred Upton of Michigan -- would likely involve state-based exchanges, Gardner said.
She also referred to another plan proposed by Forbes opinion editor Avik Roy that would require most states to establish exchanges.
In addition to those receiving the tax-credit subsidies, Arkansans receiving coverage through the federally run exchanges include more than 205,000 low-income adults whose premiums are paid with federal Medicaid funds under the so-called private option.
A task force formed by the Arkansas Legislature this year is researching options for replacing the private option after Dec. 31, 2016, when the federal waiver authorizing it expires.
In a report to the committee commissioned by the marketplace, the Boston-based Public Consulting Group outlined two examples of ways Arkansas could use waivers from Affordable Care Act and Medicaid provisions to modify the private option starting in 2017.
Under one scenario, the state would call on insurance companies to develop exchange plans that provide all the benefits required under federal Medicaid rules.
Those plans could serve children who are now covered by traditional Medicaid. The plans also could cover benefits such as nonemergency medical transportation that are required by Medicaid rules but not provided by the plans currently offered on the exchange.
Under the private option, the fee-for-service Medicaid program pays directly for such "wraparound" benefits.
Another alternative is to subsidize the coverage for private-option enrollees with federal tax credits instead of Medicaid funds. That would also eliminate the need for wraparound benefits because the enrollees would no longer be covered under Medicaid.
The tax credits also could be used to pay for coverage for children now covered by Medicaid, according to the report.
Currently, those who qualify for Medicaid are not eligible for tax-credit subsidies.
Section 1332 of the Affordable Care Act allows federal officials to grant waivers from the law's provisions, starting in 2017, if the alternatives proposed by states would not reduce the number of people covered, offer less comprehensive coverage or increase the federal deficit.
Metro on 05/21/2015