Manatt on Health Reform: Weekly Highlights

CMS’s risk adjustment program data signals an improving risk pool while the agency announces plans to modify the program; California enrolls 134,000 undocumented immigrant children into Medicaid; and Oregon approves increases to previously-approved rates to maintain insurer participation and plan choice.


CMS Requests Comments on DSH Calculation Clarification

CMS has proposed a new rule that would require calculations of Medicaid disproportionate share hospital (DSH) payments to take into account third party payments made on behalf of Medicaid enrollees, including those from Medicare and private insurers. Specifically, hospitals would have to include the third party payments in their calculations of total cost of care for Medicaid inpatient and outpatient services when establishing their hospital-specific DSH limits, reducing the size of allowable DSH payments at facilities affected by the issue. Comments on the proposed rule are due by September 14.

California: Nearly 134,000 Undocumented Children Now Enrolled in Medi-Cal

An estimated 133,900 undocumented children have enrolled in standard Medi-Cal (the State's Medicaid program) since Governor Jerry Brown (D) allocated State-only funding for the coverage expansion in May. The vast majority—95%—of the new enrollees were previously enrolled in emergency Medi-Cal. State officials expect 185,000 of the 250,000 total eligible undocumented children will enroll this year. California is one of five states plus the District of Columbia where undocumented children are eligible for full service Medicaid.

Colorado: OIG Says State Received $38 Million in CHIP Performance Bonuses in Error

The HHS Office of Inspector General (OIG) identified $38 million in Colorado’s performance bonus payments—out of a total $158 million received between FY 2010 and FY 2013—that it believes should not be allowed. Performance bonus payments were authorized through the CHIP Reauthorization Act (CHIPRA) of 2009 to offset the costs of increased enrollment of children in Medicaid. According to the OIG, the Colorado Department of Health Care Policy and Financing overstated the State's enrollment figures by counting some individuals who did not qualify due to their basis-of-eligibility codes. While OIG recommends that the State repay the $38 million, Colorado disagrees with the report's findings and has stated that its enrollment calculations were consistent with federal requirements.

Hawaii: Revised 1332 Waiver Provides Additional Data to Support Employer Mandate and SHOP Exemptions

Hawaii has submitted a revised 1332 waiver proposal that includes new supporting materials requested by the federal government, including actuarial and economic analyses of the waiver’s impact on coverage and affordability. The waiver still seeks authority to replace the ACA's employer mandate and Small Business Health Options Program (SHOP) Marketplace with the State's longstanding employer-sponsored insurance requirements under the Hawaii Prepaid Health Care Act, which has more stringent standards than the ACA. The Prepaid law requires virtually all employers to provide their employees with coverage roughly equivalent to an ACA gold-level plan.

Pennsylvania: Expedited Medicaid Processing Allows State to Direct $3.5 Million to Substance Use Treatment

The Pennsylvania Department of Human Services expedited Medicaid application processing for offenders transferring from county jail to residential drug and alcohol treatment centers, resulting in $3.5 million in savings that the Department of Drug and Alcohol Programs dedicated to other populations needing substance use treatment in FY 2015-2016. The program, which required the participation of all 47 county-level drug and alcohol administrators, grew out of the Governor's Office of Transformation, Innovation, Management and Efficiency's (GO-TIME) recent efforts to improve cost efficiencies in State agencies. In FY 2015-2016, Pennsylvania agencies saved $156 million, above the $150 million goal Governor Tom Wolf (D) set for the GO-TIME initiative.


Medicaid Expansion Improves Care Continuum for Justice-Involved Populations

Medicaid expansion is the first “widespread opportunity” states have to connect justice-involved adults with the physical and behavioral health services they need, according to a Center for Health Care Strategies paper commissioned by Milbank Memorial Fund’s Reforming States Group. In addition to increasing access to healthcare services, enrolling eligible justice-involved individuals in Medicaid reduces the cost to states—and to counties—of providing those services. For citizens and documented immigrants in jail or prison with little to no income, Medicaid eligibility is “nearly a sure bet” in expansion states. The paper details states’ options for providing Medicaid services to justice-involved individuals using 1115 waivers, health homes, and home- and community-based waivers. It also reviews enrollment strategies and Medicaid services currently being accessed by some justice-involved individuals transitioning back to their communities, such as case management and integrated mental health services.

Indiana: State Requests Continuation of Non-Emergency Transportation Waiver

Indiana has submitted a request to extend the temporary waiver of non-emergency medical transportation (NEMT) in its Medicaid expansion program—“Healthy Indiana Plan (HIP) 2.0”—until the end of the demonstration period on January 31, 2018. The current NEMT waiver was granted with the requirement that the State study and report the waiver’s impact on member access to care prior to requesting an extension. The State’s request cites findings from its 2015 and 2016 evaluations, which indicate that a relatively small number of HIP 2.0 enrollees missed appointments due to transportation issues and that those without NEMT coverage did not experience more transportation issues. The waiver would continue to exclude certain populations, such as pregnant women and the medically frail.


Maine: CO-OP Sues Federal Government for $23 Million in Owed Payments

Maine Community Health Options (MCHO), the largest insurer of individual health plans and the only health insurance CO-OP in the State, filed a lawsuit against the federal government for $23 million in owed risk corridor payments. MCHO, which covers 75,000 Maine residents, posted a net loss of $31 million in 2015 and anticipates up to $43 million in losses this year. In 2014, insurers nationwide claimed $2.9 billion in losses through the risk corridor program, but the federal government only paid $360 million, or 13%, of those claims. Of the 23 ACA health CO-OPs started in 2014, 16 have shut down due to financial losses. MCHO is the latest in a series of CO-OPs filing suits against the federal government over the risk corridor program.

Washington: Exchange Approves Budget With $20 Million Cut

The Washington Health Benefit Exchange’s Board approved a nearly $120 million budget request for 2017-2019, a $20 million reduction from the current two-year budget due mainly to the sunset of $30 million in federal establishment grants. The proposed budget requests no new General Fund dollars and keeps carrier assessment rates stable from 2016 to 2019. It also includes a new cost allocation methodology, a response to the recent State Auditor’s Office report that found that the agreement between the Exchange and Medicaid did not fully account for all operating costs associated with services provided to Medicaid enrollees. Finally, the budget reflects a number of efforts already underway to reduce costs, such as decreases in staff and IT-related expenses. The Exchange will transmit the approved budget request to the Health Care Authority for submission to the Office of Financial Management.


ACA Claims Costs Were Level Between 2014 and 2015, Indicating Improved Risk Pool

Medical costs per enrollee in the ACA individual market were “essentially unchanged” between 2014 and 2015 and actually fell by 0.1% after accounting for data inconsistencies, according to a CMS report. Medical costs per enrollee in the broader health insurance market grew by at least 3% during that same time. CMS attributes the slow cost growth in part to a larger and healthier risk pool. Claims costs in the 10 states with the highest enrollment growth fell by an average of 5%, but increased an average of 2% in the 13 states where enrollment grew less than 50%. The report notes that premium increases between 2014 and 2015 kept pace with the “exceptionally slow growth” in claims costs, but that they were not enough to close the gap between premiums and costs in 2014, when many issuers reportedly underestimated costs due to the difficulty of making predictions in a new market and because they wanted to offer competitive rates. The report concludes that further enrollment growth in 2016 suggests continued risk pool improvements, though America’s Health Insurance Plans CEO Marilyn Tavenner called the report “overly optimistic.”

CMS Exploring Changes to Its Permanent Risk Adjustment Program

CMS is considering modifications to the permanent ACA risk adjustment program to better account for highest-cost enrollees. Specifically, CMS proposed absorbing some of the costs for claims above a to-be-determined threshold (CMS cites $2 million as a possibility). CMS anticipates that this type of modification would help to stabilize Marketplaces by reducing uncertainty for issuers not yet able to predict the nature of very high-cost cases. In announcing the proposed modifications, CMS highlighted Alaska’s effort to protect issuers from high-cost claims through its recent implementation of a State-operated reinsurance program, which media reported caused one issuer to reduce its requested 2017 rate increase from 40% to 10%.

Oregon: State to Ensure Statewide Coverage Options by Allowing Rate Increases

Four insurers in Oregon will either maintain a statewide presence or expand to additional counties in 2017 after the State’s Department of Consumer and Business Services (DCBS) allowed them to raise previously-approved rates. The insurers were expected to reduce the number of Oregon counties that they serve next year, but, as a result of the negotiations, every county will continue to have at least two carriers offering plans both on and off of the Marketplace and at least two insurers will participate exclusively off the Marketplace. The newly approved rates are between 2% and 8% higher than the previously-approved rates. DCBS will post final premium tables for each county within two weeks of this announcement.


New Mexico: Marketplace CEO Resigns, Will Join State’s Largest QHP Carrier

Amy Dowd, CEO of the State-based Marketplace beWellnm, will resign in September to become the associate vice president of Marketplace operations at Molina Healthcare, which covers 40% of New Mexico’s Marketplace enrollees. Dowd and the Marketplace board will develop a transition plan.

Rhode Island: Medicaid Director Leaving for Position at Brown University

Anya Rader Wallack, the Medicaid Director for Rhode Island, is leaving after 10 months in the role to take a position at Brown University’s School of Public Health. Deputy Medicaid directors Deb Florio and Darren McDonald will head the Medicaid program during the search for a new director.



pursuant to New York DR 2-101(f)

© 2023 Manatt, Phelps & Phillips, LLP.

All rights reserved