4-year savings put at $66M if state cuts Medicaid rolls

A plan to move about 60,000 Arkansans off the state's expanded Medicaid program will save the state at least $66 million over the next four years while increasing premiums in the state's market for individual insurance plans by as much as 1.7 percent, state Department of Human Services officials said Wednesday.

The savings would come from limiting eligibility in the state's Medicaid program to adults with incomes of up to the poverty level, instead of 138 percent of the poverty level.

During a briefing with reporters, Human Services Department Director Cindy Gillespie said the change would be implemented at a rate of about 5,000 enrollees per month over the course of 2018 as the department conducts annual eligibility checks of Medicaid recipients.

Most of those who are moved off Medicaid will be eligible for similar coverage -- and federal subsidies to help pay the premiums -- through the state's health insurance exchange.

The state will work with insurance companies to minimize the number of people who end up becoming uninsured, Gillespie said.

"We don't see ourselves as just saying, 'Good luck,' and dropping people off," Gillespie said. "We see it very much as a handoff."

Gov. Asa Hutchinson plans to seek approval for the change in eligibility for Arkansas Works, as the expanded part of the Medicaid program is known, during a special session of the Legislature next week.

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The legislation would also direct the Human Services Department to impose a work requirement for the remaining Arkansas Works enrollees and to conduct a study along with other agencies on how to help small businesses offer coverage to their employees.

More than 320,000 Arkansans were covered under Arkansas Works as of March 31.

Senate President Pro Tempore Jonathan Dismang said he will be a sponsor of the legislation authorizing the changes. He said he expects the legislation to pass during a three-day special session expected to start Monday.

Changes to the program will also require approval from President Donald Trump's administration.

Under the 2010 Patient Protection and Affordable Care Act, the federal government paid the full cost of coverage through the end of last year for states such as Arkansas that expanded Medicaid.

This year, such states became responsible for 5 percent of the cost. The states' share will rise every year until it reaches a maximum of 10 percent in 2020.

Through insurance exchanges, the health care law offers federal tax-credit subsidies to many people who aren't eligible for Medicaid or other government programs.

Those subsidies are available to people with incomes ranging from the poverty level to 400 percent of the poverty level. The poverty level this year is $12,060 for an individual or $24,600 for a family of four.

The current Arkansas Works income cutoff of 138 percent of the poverty level is $16,643 for an individual or $33,948 for a family of four.

Since Jan. 1, Arkansas Works enrollees with incomes above the poverty level have been required to pay premiums of $13 a month. Those who don't pay the premiums incur a debt to the state but don't lose coverage.

Gillespie said only about 25 percent of those enrollees are current on those premiums. Enrollees who are shifted to non-Medicaid plans on the exchange will risk losing coverage for the rest of the year if they fail to pay their premiums for more than 90 days.

According to one set of projections by the Human Services Department, limiting eligibility to people with incomes of up to the poverty level would reduce Arkansas' spending on Arkansas Works by at least $98.7 million from fiscal 2018, which starts July 1, through fiscal 2021.

But the department also predicted that some people who are moved off Arkansas Works would end up being shifted to the state's traditional Medicaid program, which covers primarily poor people who are elderly or disabled and children in low-income families.

That could happen, for instance, in the case of an Arkansas Works recipient who qualifies for expanded Medicaid now on the basis of his income but also could qualify for traditional Medicaid because of a disability.

Because the state pays about 30 percent of the cost for traditional Medicaid, the shift would reduce the savings to the state by about $16.3 million.

Also reducing the savings, by about $10 million, would be a loss in premium taxes collected by the state if, say, only half of those who lose Arkansas Works coverage sign up for non-Medicaid insurance plans.

The projections also assume about 700 public-school employees now covered by Arkansas Works would sign up for their school districts' plans, which are partially funded by the state. That would increase state costs by $5.6 million.

The net savings of $66.6 million assumes the state's costs for Arkansas Works will increase by 4.7 percent a year. If the Arkansas Works costs are higher, the savings to the state budget from shifting people off the program will be even greater, according to the projections.

Premiums for plans that consumers buy on their own, rather than through their employers, also would be affected. That's because under the so-called private option, most Arkansas Works enrollees are covered by the same type of plans, but with the Medicaid program paying the premium.

Consumers enrolled in both Medicaid and non-Medicaid plans are part of the same risk pool, meaning insurance companies consider all of their costs when setting premiums.

Of the 60,000 Arkansas Works enrollees who lose eligibility for Medicaid, those with expensive medical conditions would be the most likely to enroll in coverage in non-Medicaid plans on the exchange, according to projections by Optumas, an actuarial consulting firm based in Scottsdale, Ariz.

Meanwhile, some healthy people may choose to go without coverage.

Assuming that half of the 60,000 who are dropped from Arkansas Works do not enroll in non-Medicaid plans and that the average medical costs for those who remain insured are 15 percent higher than for those who go without coverage, premiums would increase 1.7 percent, according to the projections.

Marquita Little, health policy director for Arkansas Advocates for Children and Families, said it's likely that a "significant portion" of Arkansas Works enrollees who become ineligible for Medicaid will end up uninsured.

Despite the federal subsidies, the cost of the non-Medicaid plans likely will keep some from signing up, she said. Others may not know they've lost coverage until they go to the doctor.

"The state doesn't have a great track record of getting information to enrollees about changes in their coverage, so I think that's a major concern," Little said.

The legislation that lawmakers will consider next week should include the state's plans for telling Arkansas Works enrollees about the changes and helping those who will be affected find other coverage, Little said.

The state also should detail a plan to evaluate the impact of the changes, she said.

A Section on 04/27/2017

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