Section 1115 Waivers: The effects of Medicaid expansion under the Affordable Care Act

Section 1115 Waivers: The effects of Medicaid expansion under the Affordable Care Act

To date, 33 states and the District of Columbia have expanded their programs, 8 utilizing a Section 1115 Waiver.  Another 17 are not currently expanding, however, their interest will soon be measured on ballots this Fall.   

Overall, the impacts have been significant; coverage, access to care, and delivery system reform have all seen changes. Medicaid expansion has positively affected utilization of services, the affordability of care, and financial security among the low-income population. According to Kaiser Family Foundation (KFF), Medicaid expansion states have also experienced significant coverage gains and reductions in uninsured rates – among the low-income population broadly and within specific vulnerable populations.  

The state of the states  

Section 1115 Medicaid demonstration waivers provide states an avenue to test new approaches in Medicaid that differ from federal program rules. Waivers can provide states considerable flexibility in how they operate their programs, beyond what is available under current law. Below is our analysis for states with approved requests.  

Approved States

  • Arkansas – Arkansas WORKS, the state’s program, launched in January 2014, but was later amended in December 2016. More recently, on March 5, 2018, Arkansas received approval to add a work requirement to its Medicaid Program. According to FamiliesUSA, the Arkansas WORKS program covers childless adults in the Medicaid expansion population (19-64) who earn less than 138 percent of the federal poverty level, or about $16,000 per year for a single person. Arkansas Works is approved through December 31, 2021.   
  • Arizona – In September 2016, Arizona’s request to modernize its Medicaid Program gained approval. In October 2016, the state added a number of non-traditional elements to their program through an amendment. With CMS’s approval on January 12, 2018, Kentucky became the first state to get work requirements approved in its Medicaid program. Arizona’s waiver is approved through September 2021.   
  • Iowa – Iowa Health and Wellness Plan launched in January 2014. In December 2015, an amendment was granted, permitting significant changes to the waiver. According to FamiliesUSA, the Iowa Health and Wellness Plan covers childless adults in the Medicaid expansion population (19-64) who make less than 138 percent of the federal poverty level, or about $16,000 per year for a single person. Iowa’s waiver is approved through December 31, 2019.    
  • Indiana – Indiana’s Healthy Indiana Program (HIP) 2.0 program launched in February 2015. Covering childless adults in the Medicaid expansion population (19-64) who make less than 138 percent of the federal poverty level, or about $16,000 per year for a single person. The program includes premiums in the form of health savings accounts (HSAs) called “POWER” account contributions. All enrollees have a POWER account and are charged premiums. Those with incomes above 100% of the FPL must make monthly POWER account payments to stay enrolled. However, enrollees who pay premiums are enrolled in a more generous benefit package and do not pay copays. Indiana HIP 2.0 is approved through January 31, 2019.   
  • Kentucky – The state of Kentucky submitted its request for a 1115 Waiver in August 2016. The request was later amended in July 2017. In January 2018, the State of Kentucky received approval to implement and launched Kentucky HEALTH that July. As of January 24, 2018, the state became the first to get work requirements approved for its Medicaid Program. A commentary period is currently opinion and closes August 18.   
  • Montana – The Montana Health and Economic Livelihood Partnership (HELP) Medicaid expansion program launched in January 2016, after receiving approval from CMS. The program covers childless adults in the Medicaid expansion population (19-64) who make less than 138 percent of the federal poverty level, or about $16,000 per year for a single person, according to FamiliesUSA.  It also implements premiums equivalent to 2% of a member’s income for enrollees with incomes from 50% of the FPL. Nonpayment penalties apply to enrollees with incomes above 100% FTL. The program also incorporates cost-sharing and wellness programs to assist with payments and participation in healthy behavior programs.
  • New Hampshire – Approval in 2014, the New Hampshire waiver covers the Medicaid expansion new adult populations, childless adults (19-64) with incomes below 138% of the FPL. The approval, which included a Private Option and Voluntary Work Referral Program, gave enrollees a choice of at least two silver-level marketplace plans. In May 2018, the state was approved an amendment to add a work requirement to its program. All enrollees must participate in 100 hours of “community engagement” activities per month, starting January 1, 2019.  

Combining 1115 & 1332 

Earlier this year, we examined how, per requirements, states that want to make a change that effects both groups – Commercial and Medicaid – will also need to gain approval for a 1332 waiver in addition to a Section 1115 waiver.  

This has come up in a few states, including Idaho. However, to date, no state has been successful in combining them.   

Here’s an example on how it could work: In Idaho, there was an ongoing conversation about people that have too high an income to be on Medicaid, but don’t hit the 100% of FPL threshold to get tax credits. After proposing stopgap measures for years, this year they are trying to tie Medicaid and Commercial changes together. 20K people will get Medicaid eligibility by creating a small eligibility group via 1115 and would have an impact in the commercial market because they would be a part of what is driving up individual market costs. Pulling them out would allow carriers to reduce their premiums. As a result, there is a savings to the feds. These savings would be allocated to apply a state version of tax credits for people that do not qualify for financial assistance.  

Impact to Managed Care Organizations (MCOs) 

The Affordable Care Act (ACA) expanded Medicaid eligibility to 138 percent of the federal poverty level, resulting in more than 14 Million people obtaining coverage under Medicaid Expansion (ME). From 2014 through 2016, the federal government covered 100 percent of the costs for Medicaid expansion. In 2020 and beyond, this percentage will decrease 10%.   

According to Deloitte, in 2016, health plans collectively generated $207 billion in revenue (up from $64 billion in 2010). Medicaid Managed Care gains were $3.0 Billion and $5.8 Billion for MA that year.   

The report also noted that in states that expanded Medicaid eligibility, Medicaid managed care plans had greater margins with the exception of 2016. The report added that “as some states expanded their Medicaid programs in 2014 and 2015, their aggregate underwriting margins were, respectively, 2.6 and 1.4 percentage points higher than margins in non-expansion states. This trend appears to have reversed in 2016.” So, what has attributed to this?

“Following the overall pattern, among Medicaid expansion states, health plans in Michigan, Ohio, and New York had positive margins for at least five of the six years we studied. This seems to indicate some stability in state-level policy for Medicaid pricing. Furthermore, 51% of health plans in these states saw positive underwriting gains for at least four years.” – Sarah Thomas 

One theory is the various rules that govern each state’s Medicaid program. Currently, rules are set by state policymakers, which in turn attributes to some variation.

To learn more, download our infographic on Section 1115 Waivers.   

Sources:  

  1. https://deloitte.wsj.com/cfo/2018/03/27/post-aca-new-state-rules-could-impact-medicaid-managed-care-margins/  
  2. https://www.kff.org/medicaid/issue-brief/section-1115-medicaid-demonstration-waivers-the-current-landscape-of-approved-and-pending-waivers/  

The views and opinions expressed by the authors on this blog website and those providing comments are theirs alone, and do not reflect the opinions of Softheon. Please direct any questions or comments to research@softheon.com

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