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Governor pitches insurance subsidies

Plan for workplaces saves, he says by Andy Davis | September 25, 2015 at 5:29 a.m.

Subsidizing some employer-sponsored insurance with Medicaid funds would affect an estimated 7,700 low-income Arkansans and save the state's Medicaid program $29 million annually, Gov. Asa Hutchinson told an advisory group Thursday.

Hutchinson acknowledged that most of the savings from his proposal would go to the federal government, which in 2017 is expected to pay 95 percent of the cost of coverage for Arkansans who became eligible for Medicaid under the state's expansion of the program.

But he noted that Arkansas' share of the cost will increase, rising until it reaches 10 percent in 2020.

The $29 million is "real money that's on the table that could not only accomplish a value objective but a real savings as well," he told the 40-member Governor's Advisory Council on Medicaid Reform. The council is made up of health care industry and advisory groups.

Hutchinson spoke to the council to provide additional information, answer questions and gather feedback on the seven-point proposal he presented in August for replacing the private option.

The private option covers more than 200,000 low-income Arkansans.

According to the state Department of Human Services, Hutchinson's proposal also would save an estimated $14 million by eliminating nonemergency transportation for privat-option enrollees and generate $9 million by requiring certain enrollees to pay 2 percent of their income as a monthly premium.

Hutchinson said he had heard little support for another point of his proposal: covering the poorest Arkansans through traditional Medicaid while limiting private-option coverage to those earning above a certain income level.

"If you really like that, you'd better raise your voice because there are not very many voices in support of that that are being articulated at the present time," he said.

Under the private option, the state buys insurance on the federally operated health insurance exchange.

Arkansans became eligible for Medicaid under the program's expansion authorized under the 2010 Patient Protection and Affordable Care Act and approved by the Legislature in 2013.

The expansion extended coverage to Arkansans with incomes of up to 138 percent of the federal poverty level: $16,105 for an individual, for instance, or $32,913 for a family of four.

Otherwise eligible adults who are considered to have exceptional health needs -- about 10 percent of the total -- are covered under the traditional fee-for-service Medicaid program.

The federal government is paying the full cost of covering the newly eligible adults -- more than $1 billion annually -- through 2016.

Citing the eventual cost to the state and opposition to the private option by some legislators and others, Hutchinson called on the Legislature to create a task force to recommend a program that will replace the private option starting in 2017.

He appointed the advisory council to help the task force gather information and make recommendations.

Under the proposal he presented to the council and task force last month, Arkansans who are offered employer-sponsored coverage would be required to enroll in it to receive a Medicaid subsidy.

The Medicaid program would provide subsidies to reduce the workers' premiums and out-of-pocket spending for medical care. Employers would also pick up part of the premiums, as they do for other workers.

Although employers would be paying to cover additional employees, Hutchinson said he didn't think the businesses would object.

In some cases, he said, enrolling the additional employees could help the business meet minimum enrollment thresholds set by insurance companies and reduce worker premiums.

"I fully think the employers will embrace this," he said, adding that the idea "came at the suggestion of some employers that raised this issue to begin with."

The $29 million in savings does not account for workers now covered by employer-sponsored insurance who would apply for the subsidy, Human Services Department Director John Selig said in an email.

"There's no reason to expect that a significant number of employees who could have moved to [Medicaid-funded coverage] already (at no cost) would suddenly do so under this approach," Selig wrote. "However, if they did, the savings could be smaller."

Randy Zook, president of the Arkansas State Chamber of Commerce, said after the meeting that he would need to see details of the proposal before commenting.

Advisory panel member Sylvester Smith, state director of the National Federation of Independent Businesses, said he supports subsidizing employer-sponsored coverage, but would oppose making that the only option for the workers to receive subsidized coverage.

"Individuals need to be able to make whatever insurance decision is best for them and their families," he said.

Hutchinson said the savings estimate was generated by the Los Angeles-based Manatt, Phelps and Phillips law and consulting firm.

The firm advised "being careful about the complexity" of subsidizing the employer-sponsored insurance "and making sure that it's manageable from an administrative standpoint," the governor said.

Of the seven points, Hutchinson said he received the most feedback about eliminating nonemergency medical transportation for private-option enrollees.

Medicaid currently pays for that benefit directly for private-option enrollees, who are limited to eight trips per year.

Private insurance plans don't typically provide the benefit, he said, but he acknowledged some enrollees might need it.

"I recognize that we're a unique state. We're a rural state. We have those that have exceptional needs, and we need to provide some hardship exemptions or other exemptions" if the benefit is eliminated, he said.

The other elements of Hutchinson's proposal are strengthening procedures for verifying recipients' eligibility for benefits, requiring referrals to job training programs for unemployed or "underemployed" enrollees and finding ways to reduce the state's Medicaid expenses by at least $50 million per year.

On Thursday, Hutchinson added that he also wants to support initiatives to encourage healthy behavior.

Most of the changes proposed by Hutchinson would require waivers of federal Medicaid rules.

Hutchinson said that he spoke with U.S. Health and Human Services Secretary Sylvia Mathews Burwell on the phone about his proposal.

She was "cautious" but "indicated she is happy to work with us on each of these," he said.

She is "anxious to get more details" on the proposals, he added.

When he told Burwell that the state's plan would depend on the task force's recommendations, which are expected by the end of the year, he said that she responded, "OK, but the sooner, the better."

A Section on 09/25/2015

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