Red States Seeking Approval For Alternatives to ACA Expansion

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By Nora Macaluso  

April 21 --A number of Republican-controlled states that have rejected the option of expanding Medicaid under the Affordable Care Act are seeking to use their own state-specific plans for providing coverage to low-income adults to access the federal funds earmarked for state Medicaid expansion.

These states are seeking waivers of ACA requirements for Medicaid expansion, allowing them to include conditions such as copayments, health savings accounts and financial incentives for healthy behaviors. Three of them--Arkansas, Michigan and New Hampshire--were among the top 10 states for new enrollment in Medicaid through February, according to an analysis by Avalere Health, a Washington-based health-care advisory firm.

The trend could herald “an emerging middle way toward reducing the ranks of the uninsured,” according to University of Michigan researchers. “These waivers are important politically,” the researchers wrote in a report published April 7 in the Journal of the American Medical Association. “They have enabled governors to persuade enough conservatives to support a modified Medicaid expansion,” allowing them to “remain critical of the ACA while pursuing Medicaid waivers they view as beneficial for their states,” the report said.

The report, based on 152 interviews with leaders in 25 states, found that only 15 states and the District of Columbia chose to take advantage of both the Medicaid expansion and state-run insurance exchanges. All but two of those states are led by Democratic governors, while all 23 states that chose to opt out of both provisions are headed by Republicans.

Other states--largely those with Republican leaders who have distanced themselves from President Barack Obama and the ACA--have chosen a middle road, either applying to the Centers for Medicare& Medicaid Services for waivers or moving in that direction, the researchers said.

“What's interesting is each state is crafting its own approach,” said John Ayanian, director of the University of Michigan's Institute for Healthcare Policy and Innovation. Arkansas, as the first state to get a waiver to enroll Medicaid beneficiaries in private health plans through an exchange run in partnership with the federal government, paved the way for other states, such as Iowa, which is taking a similar approach, he told Bloomberg BNA April 9.

Echoes of the 1960s

Ayanian likened the trend to the initial adoption of Medicaid in the 1960s. “When Medicaid was originally created, it was a program in partnership between the federal government and state government,” with states choosing whether to participate, he said. While most opted in “within the first year or two,” it took until the early 1980s for the final holdout--Arizona--to join, he said.

Some 5 million people who would qualify for expanded Medicaid coverage live in states that aren't expanding the program, Ayanian said. “Some of the adults with the greatest health needs and the lowest incomes may be left uninsured in those states,” he said. In many of those states, hospital, physician and other health associations are organized in support of expansion, and “I expect they will continue advocating with their governors and legislatures to reconsider the decision not to expand Medicaid,” he said.

Judging from the waiver approvals to date, the federal government will allow states to enroll low-income adults in private insurance plans through partnership exchanges, and to shift some of the costs to enrollees in the form of premiums or copays for those above 100 percent of the federal poverty level, Ayanian said.

Bipartisan Compromises

The trend shows bipartisanship has worked to “make progress in expanding Medicaid for many low-income adults,” Ayanian said. “That's a promising sign compared with the gridlock that we see in Congress.”

“These state approaches and the waivers that are required to expand Medicaid demonstrate that there are opportunities for Republicans and Democrats to work together to meet the needs of some of the lowest-income adults who otherwise would be uninsured,” Ayanian said. “It is also an example of federalism, with state-based approaches being developed in collaboration with the federal government.”

Officials in several states voiced variations on that theme. “This bipartisan plan is a uniquely New Hampshire solution and it exemplifies New Hampshire's tradition of collective problem-solving, demonstrating what is possible when we remain focused on solutions and reach across the aisle to achieve progress for our people,” New Hampshire Gov. Maggie Hassan (D) said in a statement issued after state lawmakers passed a bill expanding Medicaid through a plan that includes the private sector.

Michigan Gov. Rick Snyder (R) called the expansion of the state's Healthy Michigan plan “a state-created effort that reflects Michigan's needs and values.”

Benefits at Threshold Levels

The programs also can help limit “churn,” or disruption resulting from a change in income that puts an individual into or out of eligibility for Medicaid, said Sara Collins, vice president for health-care coverage and access at the Commonwealth Fund, a private foundation dedicated to improving health care. People close to the threshold for coverage--a “not insignificant number”--are at risk of having to change providers, resulting in disruption for them and administrative costs for state and federal governments, she told Bloomberg BNA April 11.

Collins said it's important to watch how the state plans evolve and make sure they are providing coverage that is as protective and affordable as in states that have expanded traditional Medicaid. All the states that have chosen alternative routes--“some more than others”--require some sort of cost sharing, she said.

The Department of Health and Human Services “obviously has standards the states have to meet for waivers, but I think the question is, are people in these states that are expanding somewhat differently spending more as a share of their incomes on premiums or out of pocket,” she said. “Is it having an effect on enrollment in programs and on their access to timely health care? I think those are the critical questions that need to be tracked as these go forward.”

“It's important to know how big of a burden the premiums are for people, and whether or not they're getting the care that they need similar to people in other states that don't face cost sharing,” Collins said.

“I think states are under a lot of pressure to expand, because they're leaving so many people out,” Collins said. “People who are uninsured are still going to need health care, and they're going to be getting health care without any insurance.” As a result, providers in those states “are applying a lot of pressure on the leadership” to expand coverage, she said.

Some States Stand Firm

In some states, opposition to expansion remains strong. Georgia Gov. Nathan Deal (R) has spoken against Medicaid expansion since 2012, while embracing the idea floated by national Republican leaders such as Rep. Paul Ryan (R-Wis.) to block-grant Medicaid funding. The Republican-controlled Legislature recently voted to erect an additional barrier, passing a bill that requires approval of the Legislature before the state can expand Medicaid eligibility requirements.

In other states, however, compromise seems possible. Sen. Bill Nelson (D-Fla.) said April 11 the federal government is willing to consider Florida's plan for a Medicaid alternative that would involve some hospitals contributing a portion of their indigent-care money to help match federal funding. “I believe this leaves the door wide open for Florida to get this done,” Nelson said in a letter to state legislative leaders.

Medicaid expansion is at the root of a budget standoff in Virginia, with Gov. Terry McAuliffe (D) and the leaders of the narrowly Democratic Senate hoping to force the heavily Republican House of Delegates to accept a private-option program, dubbed Marketplace Virginia by the governor. House leaders adamantly reject the idea.

Virginia health insurers support Marketplace Virginia, which would provide health care through seven managed care organizations that provide care under the state's Medicaid program, Laura Lee Viergever, director of policy for the Virginia Association of Health Plans, told Bloomberg BNA April 18.

Marketplace Virginia would provide Medicaid expansion funding allowing lower-income uninsured residents, including single adults, to obtain private health coverage. It would apply to residents who earn too much to qualify for Virginia's Medicaid program but earn up to 138 percent of the federal poverty level.

Michigan's Waiver Plan

Michigan began enrolling beneficiaries in its Healthy Michigan plan April 1, after receiving approval from the CMS to expand benefits under the plan as an alternative to expansion of Medicaid.

In April, Michigan began enrolling people in its alternative plan to ACA Medicaid expansion.  

Healthy Michigan includes the “essential health benefits” mandated by federal and state law but requires copayments from subscribers at the higher end of the income range and puts time limits on coverage. It also provides incentives for those who demonstrate healthy behaviors.

Snyder, the Republican governor, initially wanted to expand Medicaid but failed to win approval from the Republican-led Legislature, which also blocked the governor's plan for a state-run health insurance exchange.

Healthy Michigan is available to Michigan residents earning up to 133 percent of the federal poverty level who otherwise aren't eligible for Medicaid at the time of enrollment. Copayments are required for beneficiaries earning between 100 percent and 133 percent of the federal poverty level, and those people are required to either purchase private insurance or pay increased costs to stay on Medicaid longer than 48 months.

Indiana's Approach

Indiana has applied to the CMS for an expansion of its Healthy Indiana plan, a pilot program for low-income residents, as an alternative to Medicaid expansion. The federal agency in September approved a one-year extension, to Dec. 31, 2014, of the program, which requires enrollees to contribute to health savings accounts.

Gov. Mike Pence (R) has stressed the importance of recipients having “skin in the game,” saying the copayment requirement encourages people to use more preventive care services and make fewer emergency-room visits than traditional Medicaid members, contributing to lower costs over time.

Pence met with Health and Human Services Secretary Kathleen Sebelius in February after the CMS expressed concern about the cost burden. In a statement following the meeting, Pence said he appreciated Sebelius's “willingness to identify areas of common ground that will allow us to use an Indiana solution to meet our shared goal of providing more health-care options to Hoosiers in a fiscally responsible manner.”

Pennsylvania's Private Option

Pennsylvania in February requested federal approval for a plan to use ACA Medicaid expansion funds to cover low-income individuals under private health insurance plans beginning in January 2015.

Under the Healthy Pennsylvania proposal, some 520,000 uninsured Pennsylvania residents ages 21 to 65 with incomes up to 138 percent of the federal poverty level who are currently ineligible for Medicaid would be enrolled in a private insurance plan through the federal marketplace, the commercial market or an employer-sponsored plan, using federal Medicaid funds to subsidize premiums. Adults determined to be medically fragile would be covered under the existing Medicaid program.

The state's Section 1115 waiver application for the Healthy Pennsylvania plan proposes a number of Medicaid program changes that affect current participants as well as the newly eligible. Implementing all of them would require federal regulators to waive 24 Medicaid program requirements.

Gov. Tom Corbett (R) has promoted the Healthy Pennsylvania proposal as a less bureaucratic alternative to expanding the existing state Medicaid program and an approach that protects taxpayers if the federal government fails to fund Medicaid expansion to the extent promised under the ACA.

The state's initial proposal included job training and work search-based requirements, but it was modified in March to make work incentives voluntary, after federal regulators opposed tying Medicaid coverage to employment status.

More than 750 comments were submitted during the public comment period, which ended April 10.

Iowa's Two-Component Approach

Iowa's Medicaid expansion includes two components: the Iowa Health and Wellness Plan (IHWP), for residents earning up to 100 percent of the federal poverty level, and Iowa Marketplace Choice, for those earning between 100 percent and 138 percent of the federal poverty level.

The Iowa Health and Wellness Plan is administered by Medicaid and offers enrollees access to the same providers currently available with Medicaid, according to Amy Lorentzen McCoy, spokeswoman for the Iowa Department of Human Services. Enrollees can, however, choose their own primary care physicians, who coordinate services for each individual.

Under the plan, enrollees aren't required to make any monthly contributions toward the cost of their care in 2014. In 2015, enrollees earning between 50 percent and 100 percent of the federal poverty level will be expected to make contributions of $5 per month, but only if they don't complete wellness activities outlined by the state. For 2014, the activities include completing a health risk assessment and having a physical exam.

The plan requires no copayments for care unless the enrollee uses an emergency room in a nonemergency situation.

With the Iowa Marketplace Choice plan (IMC), members select a commercial health plan available in the state's health insurance marketplace. Medicaid will pay premiums for the plans on behalf of the members.

At present, two plans are available through the marketplace, CoOportunity Health and Coventry Health Care of Iowa. The state's largest insurer, Wellmark Blue Cross and Blue Shield, didn't participate in the 2014 marketplace but has indicated it will participate in 2015.

The commercial plans available use statewide provider networks, allowing members access to primary care physicians, specialists and hospitals. As with IHWP, members make no monthly contributions toward care in 2014 and won't make copayments unless they use emergency rooms for nonemergency situations. Members participating in state wellness plans will have their $10 per month premiums waived.

Also like IHWP, IMC members' health-care costs can't exceed 5 percent of their income.

Iowa's Republican governor sought an alternative to simply expanding the state's Medicaid program because he wanted enrollees to have some investment in their own health care.  


A spokesman for Iowa Gov. Terry Branstad (R) earlier told Bloomberg BNA that the governor sought an alternative to simply expanding the state's Medicaid program because he wanted enrollees to have some investment in their own health care.

New Hampshire's Compromise Plan

New Hampshire Gov. Maggie Hassan (D) signed a Medicaid expansion bill (S.B. 413) March 27 to extend benefits to 50,000 low-income residents. The plan relies heavily on the private sector and is a compromise that was reached after more than a year of failed bills, heated debate and legislative tussling.

The New Hampshire plan is set to begin July 1, when 10,000 low-income employees will be offered subsidies to purchase insurance through the workplace. The 40,000 people without access to employer-sponsored insurance will enroll temporarily in one of the managed care plans currently offered to most Medicaid recipients in the state.

Starting in 2016, Medicaid expansion enrollees will begin purchasing subsidized, private health insurance through the federal health-care exchange, a website where residents can shop for ACA-approved plans. The state will need a waiver from the CMS to allow the state's Medicaid recipients to purchase private health plans on the exchange.

The plan will sunset Dec. 31, 2016, unless the Legislature votes to renew it, and the plan will be repealed if the federal match rate falls below 100 percent before Dec. 31, 2016.

New Hampshire lawmakers liken their plan to those in Arkansas and Iowa, which provide a strong role for the private sector.

Three previous Medicaid expansion bills passed the Democratic-led House but failed or stalled in the Republican-led Senate, due largely to Republican opposition. Senate Republicans, who number 13 while there are 11 Democrats, insisted that new Medicaid recipients not simply be folded into the state's existing Medicaid managed care system. They wanted as many new recipients as possible to receive benefits through the private sector.

The Legislature reached a turning point when, in June 2013, after another failed attempt to pass Medicaid expansion, Senate Republicans led an effort to form a bipartisan commission to study Medicaid expansion. The bill (S.B. 413) that was signed into law was drafted by Senate Republican President Chuck Morse and Senate Democratic Leader Sylvia Larsen and was based on a report of the study commission.

Democrats Push for Expansion in Maine

In Maine, the Democratic-led Legislature is trying to get approval of an expansion of the MaineCare Medicaid program, which relies on managed care as provided through the private sector. The Legislature has approved plans to expand the program to 70,000 low-income Maine residents four times, and three times Gov. Paul LePage (R) has vetoed the legislation. LePage has said he opposes Medicaid expansion due to philosophical and fiscal reasons.

Most recently, two Senate Republicans introduced a bill (L.D. 1487) in an attempt to win enough override votes when LePage delivered his veto, which he did April 9. On April 11, the Senate narrowly failed to win the two-thirds necessary (22-13) to override the veto.

LePage is expected to veto L.D. 1487. The Maine Legislature has completed work for the session, but state lawmakers will come back May 1 to vote on the bills the governor has vetoed.

“I am pleased that the Senate chose fiscal responsibility instead of spending millions of Maine's taxpayer dollars to expand welfare to able-bodied adults who have other options for virtually free health care,” LePage said in an April 11 statement. “I commend the senators who had the courage to stand firm against liberal politicians and do what is right for the hard-working Mainers who would have had to foot the bill for this massive expansion.”

Utah's Alternative

Utah was one of two states that had a health insurance exchange before the enactment of the federal health-care reform law.

When Utah Gov. Gary R. Herbert (R) realized Utah's exchange didn't fit into one of the three options provided to states by the ACA (a state-based, state-federal partnership or federally facilitated exchange), he asked the Department of Health and Human Services to create a fourth option in light of Utah's situation, Steve Gooch, spokesman for the exchange, told Bloomberg BNA April 10.

The HHS accepted Herbert's request, allowing Utah to run its exchange--Avenue H--as the state's small business health options marketplace (SHOP), with the federal government running the individual and family marketplace for private health insurance.

That decision by the HHS effectively opened the fourth option to all other states, Gooch said.

Utah is also seeking an alternative to expanding Medicaid. After lawmakers balked at Herbert's call in January to expand the state-federal program, the governor proposed a three-year pilot plan, the Healthy Utah Plan, for the state using federal money.

Herbert's alternative to Medicaid expansion, rolled out Feb. 27, is designed to help some 110,000 low-income residents secure health care, close a gap in coverage and allow the state to administer its own program, according to the governor's office.

Utah is still discussing with federal officials a proposed plan to use money from block grants.  


The plan would use block-grant funds from the HHS to provide assistance to Utah residents who make under $15,500 a year. The exact amount of assistance will depend on four factors: an individual's ability to work, household income, access to employer or family health insurance and individual health-care needs.

Participants in the program would be responsible to make copayments to help pay for the cost of their care. Parents with children on Medicaid would have the option to put their entire family on private insurance plans.

The governor's office and the Utah Department of Health are in discussions with the HHS about the plan, and no agreement has been reached, Gooch said.

Wisconsin Focuses on Tax Credits

The Wisconsin Office of the Commissioner of Insurance is petitioning the Obama administration for permission to allow state residents to use federal tax credits to purchase insurance products not listed on the federal marketplace.

Insurance Commissioner Theodore Nickel, in a March 26 letter requesting authority to permit the tax credits, said flexibility is needed because of ongoing problems with the federal marketplace, and asserted the request was reasonable in light of other program adjustments and extensions offered by the administration in recent months.

Nickel's comments followed an earlier call from Gov. Scott Walker (R), an outspoken foe of the ACA and a critic of the administration's launch of the federal marketplace, to permit greater enrollment flexibilities with the help of federal tax credits.


With contributions from: Jeff Day in Washington; Chris Marr in Atlanta; Lorraine McCarthy in Philadelphia; Mark Wolski in St. Paul, Minn.; Adrianne Appel in Boston; and Tripp Baltz in Denver.

To contact the reporter on this story: Nora Macaluso in Lansing, Mich., at

To contact the editor responsible for this story: Nancy Simmons at

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