By John Reichard, CQ HealthBeat Editor
August 14, 2012 -- State officials will have to plunge deep into the weeds to find the path to create their own insurance exchanges and to expand Medicaid under the health care law. Last week, the two federal health officials best suited to guiding them appeared publicly and answered numerous questions about how to proceed.
Michael Hash, who heads Health and Human Services' exchange effort, provided a new layer of detail about the federal effort to ensure access to the new marketplaces. Cindy Mann, who runs the Medicaid expansion at the Centers for Medicare and Medicaid Services (CMS), outlined factors states should consider in deciding whether and when to expand the health program for the poor.
The officials spoke at the first of four regional meetings this month where state and other officials are invited to ask questions about implementing coverage provisions of the health law (PL 111-148, PL 111-152). The meeting was held at the U.S. Department of Health and Human Services (HHS) headquarters in Washington and was also streamed live on the Web. Meetings were held earlier this month in Chicago and Denver and the final one is scheduled for Wednesday in Atlanta.
The gatherings are being held amid some uncertainty about whether states will be able to fully implement programs to expand coverage under the health law in 2014. If states can't establish their own exchanges, the law provides for the federal government to step in and open the marketplaces. Obama administration officials express confidence that they have the resources to do so, but questions linger about whether that's true if many states leave it to the feds. "They need a lot of cooperation from the states in order to succeed," Joel Ario told Reuters this week. Ario headed the federal exchange effort early in the Obama administration's implementation of the health overhaul.
A number of the questions from the audience expressed uncertainty about the costs of implementing the health law and the stability of the financing it will provide.
HHS Secretary Kathleen Sebelius sought to inspire attendees at last week's event. She said the United States is moving closer to the day when for the first time all Americans will have access to affordable coverage. "But to go the distance we need to work together," she said.
Hash depicted federal efforts relating to exchanges as not seeking to dominate, but to help states in various ways until they are ready to stand on their own.
He said, for example, that the emerging "federal data services hub" that states can access to determine whether exchange customers are eligible for tax credits to buy coverage stands ready to issue those payments directly to insurers so that states don't have to perform that function on their own.
Also, if a state so chooses, it can have the feds run three types of programs under the health law to stabilize premiums in exchanges: reinsurance, risk corridors, and risk adjustment.
The three programs aim to assure insurers they can enter the new and unfamiliar markets that exchanges will create without taking a big financial hit.
Reinsurance protects the insurers against unusually costly cases. Risk corridors involve shifting money to insurers hit with early financial losses in exchanges. Risk adjustment shifts payments from insurers with an unusually large number of good insurance risks to insurers who enroll an unusually large number of people who turn out to be poor risks.
Reinsurance and risk corridors are temporary programs operating only in 2014, 2015, and 2016. Risk adjustment is permanent. CMS will put out for public comment the risk adjustment methodology it plans to use though states can use their own method subject to approval by the federal agency.
Hash noted that even states that decide to operate their own exchanges can have the feds run their risk adjustment program.
On the other hand, if a state decides to let the federal government offer its residents coverage through a federally facilitated exchange, that state can still run its own reinsurance program if it wants. It also can make its own determinations about eligibility for the expanded Medicaid programs states can establish under the health law.
Final application ready
Hash also announced that the CMS Center for Consumer Information and Insurance Oversight (CCIIO) on Tuesday posted the final version of the application states must file by November 16 to run an exchange, called the "blueprint" application. Hash is the interim director of CCIIO.
Hash emphasized that the federally facilitated exchange will try to avoid duplication with state insurance regulations. Before opening a federal exchange in a state, CMS will obtain public comment on what it is planning to do in that state. CMS is enlisting the National Association of Insurance Commissioners (NAIC) in that effort, he said. Getting public input is a "critical part of our plan in standing up a federally facilitated exchange."
Hash said CMS "very shortly" will announce a new round of grants to states to establish exchanges and will soon invite states to apply for more such grants.
Hash said that the "SHOP" exchanges required under the health law for small businesses are a priority for CMS. The agency is "very seriously engaged" in making sure this part of the market operates more effectively, he said. He added that in 2014 and 2015 ,small businesses will be able to get tax credits through SHOP exchanges covering up to 50 percent of their coverage costs.
Mann, who runs the CMS Center for Medicaid and State Operations, noted that states will decide "over the next period of time" whether or not to expand their Medicaid programs under the health law. There's no deadline for deciding, though if they want to expand in 2014 they have to move quickly, she said.
Mann noted that full federal funding for people who for the first time qualify for Medicaid under the expansion is available in 2014, 2015, and 2016. While states can choose to expand Medicaid at some later point, the 100 percent funding is only available in those calendar years. If a state expands its Medicaid program after 2014, that 100 percent funding won't be available for the three years after that. Funding drops to 90 percent in 2019 but remains at that level permanently.
Some states are balking at the added costs of expanding their Medicaid programs. After 2019 they must pick up 10 percent of the costs of the expanded population. Also, efforts to enroll people in the expanded program are expected to lead to greater enrollment of people eligible for the current Medicaid program but not signed up. The federal government will pay a much lower matching rate for those people than for those only eligible under the expansion.
Mann said those added costs should be balanced against the money the expansion saves. That includes lower uncompensated care costs in the state as more residents are covered; savings from other state or locally funded coverage programs that are no longer needed; and savings from state or locally funded direct service programs that may no longer be needed. She said that according to the Urban Institute, these savings from expanding Medicaid under the health law would total between $92 billion and $129 billion in 2014-2015.
States that choose not to expand will still have to streamline their Medicaid enrollment processes under the health law, she noted. Whether or not they expand, they must switch their eligibility systems so that they are based on "modified adjusted gross income," or MAGI, which she said "vastly simplifies" eligibility determinations. Mann also said the population that gains Medicaid coverage under the health law is relatively cheap to cover compared to other Medicaid enrollees. For example, one quarter of the group is in the 19 to 24 age group, she said.
Mann emphasized that her department is working on a streamlined application form for eligibility for coverage in Medicaid and the Children's Health Insurance Program.
She also noted that expanding Medicaid would be a way to bring health care to uninsured veterans. About half of the nation's 1.3 million uninsured vets would qualify for the Medicaid expansion, she said.
Mann said in response to a question that CMS will be "happy" to work with individual states to identify savings they can expect from expanding Medicaid. Asked what prevents lawmakers from lowering the 90 percent federal match rate after 2020, she said Congress has a history of adding to rather than subtracting from the federal match rate. But she added that states have the option of withdrawing from the expansion if they are not happy with its financial terms.
Hash was asked how the federally facilitated exchange would be funded after 2014. It would be "federal funding of some description we have not yet identified," he said. Officials will "explore options" but Hash said he is "fully confident" the federally facilitated exchange will be able to continue to operate.
- Exchange application (pdf)