Manatt on Health Reform: Weekly Highlights

In quick succession, governors in Alaska and Utah announce Medicaid expansions this week; Iowa is transitioning its expansion away from the Marketplace to Medicaid managed care, for now; and, HHS extends its exception to Medicaid cost allocation rules for human services programs.


Alaska: Governor Intends to Expand Medicaid by Executive Action

Governor Bill Walker’s (I) announcement of his plans to expand Medicaid in Alaska, effective September 1, without the Legislature’s approval came after the Legislature rejected expansion twice this summer. Under Alaska State law, the Governor can accept federal funds unilaterally when the Legislature is not in session but must submit a formal notice to the Legislative Budget and Audit Committee. Governor Walker submitted his notice on July 16 and the Committee has 45 days to approve, recommend against, or take no action on the request. Alaska's Department of Health and Social Services estimates that an additional 42,000 Alaskans will be eligible for Medicaid under the expansion, and that the State will save more than $6 million in its first year.

Iowa: State to Stop Enrolling Medicaid Expansion Adults through the Marketplace

Iowa will no longer enroll Medicaid expansion adults with incomes above 100% of the federal poverty level in qualified health plans (QHPs) on the federal Marketplace starting in 2016, according to a waiver amendment draft released for public comment. As part of a larger transition to managed care, in 2016 these individuals will be enrolled in Medicaid managed care plans. Iowa’s Marketplace program became voluntary when CoOportunity Health, one of two insurers offering QHPs at the time, withdrew from the Marketplace in December 2014. The waiver also states that the other Marketplace insurer, Coventry Health Care of Iowa, will not accept additional expansion adults and will not continue to offer coverage to existing expansion enrollees after the State completes its transition to Medicaid managed care. Iowa will consider reinstating the Marketplace program if additional insurers offer coverage on the Marketplace in the future.

Maine: Medicaid Family Planning Eligibility Expansion in Veto Limbo

The future of legislation (LD 319) that expands Medicaid reproductive health benefits to individuals up to 209% of the federal poverty level in Maine is in question despite assertions by the legislature and the State Attorney General that the bill became law on July 12 because the Governor neither signed nor vetoed within 10 days of passage. Governor Paul LePage (R), however, considers his veto on July 16 to be valid and is seeking a State Supreme Court ruling on the fate of the bill and 64 others. Should the bill survive the challenge, the State Department of Health and Human Services will be required to submit a state plan amendment expanding eligibility to an estimated 12,900 individuals, effective October 1.

Utah: Leaders Announce Framework for Medicaid Expansion

In a surprising turnaround, Governor Gary Herbert (R) and Republican legislative leaders announced their consensus on a "conceptual framework" for Medicaid expansion in Utah just days after House Majority Leader Jim Dunnigan stated that the working group would delay an expansion plan decision until January 2016. Details have yet to be released, but the State will reportedly generate funding from hospitals, physicians, and pharmaceutical companies—potentially through a new tax. A full draft of the plan is anticipated in the coming weeks, as is a special legislative session for its consideration. The plan must still overcome historic opposition to pass the full legislature and would require approval from CMS.


HHS Extends Medicaid Cost Allocation Exception for Human Services Programs

The Department of Health and Human Services, in conjunction with the Department of Agriculture, released new guidance extending an exception to the Office of Management and Budget’s (OMB) cost allocation requirements that was set to expire December 31, 2015. The exception, which the new guidance extends through the end of 2018, permits states to depart from the normal cost allocation rules when they are building functionality in Medicaid, CHIP and state-based Marketplace Eligibility and Enrollment (E&E) systems that allows those systems to also determine eligibility for state-administered human services programs (such as TANF, Child Support or SNAP). Costs relating to services needed by the health programs would be allocated among those programs and not to the human services programs, even if benefiting them, while services or increases in capacities that are not required by the health programs would be allocated to the non-health programs pursuant to regular OMB cost allocation principles. The letter notes that this extension, along with CMS' previously proposed permanent extension of enhanced funding for the Medicaid component of E&E systems, enables states to build more efficient E&E systems that are integrated among multiple programs. CMS encourages states to use the extended timeline under the exception to pursue additional system integration.

CMS Expands Scope of Companies Exempt From Contraceptive Mandate

CMS published final regulations on the Affordable Care Act preventive services requirement, broadly defining which for-profit companies may elect not to include contraceptive coverage in their group health plans on the basis of religious beliefs. The regulation stems from the Hobby Lobby Supreme Court case ruling that "closely held" for-profit companies are entitled to accommodation from the contraceptive mandate. CMS’s final regulations define a closely held company as one that is for-profit, not publicly traded, and has the majority of its shares held by five or fewer individuals. Health insurance issuers and third party administrators are still required to provide contraceptive services to these companies’ group health plan enrollees, but may not charge the employer or enrollee for the service.


CMS Report Shows Higher than Anticipated Costs for Newly Medicaid Eligible Population

According to a new report from the CMS Office of the Actuary, per-enrollee Medicaid costs for newly eligible adults were $5,517 in 2014, 19% higher than for other Medicaid adults. CMS had originally anticipated the costs for newly eligible adults to be 1% lower than for other Medicaid adults. The report postulates that most states that expanded Medicaid did so under managed care programs, and average capitation rates for newly eligible adults were greater than the projected average costs. Many states adjusted the capitation rates to reflect a higher level of acuity and a higher utilization of services due to pent-up demand. Of the total $457 billion increase associated with newly eligible adults between 2014 and 2023, the Federal government is projected to pay $426 billion, or 93%.

Government Accountability Office Finds HealthCare.Gov Renewed Fictitious Enrollees

According to a report released this week by the Government Accountability Office (GAO), HealthCare.Gov renewed coverage for 11 of 12 fictitious applicants who initially applied online or by telephone and were enrolled in 2014 coverage as part of a GAO audit of enrollment controls. In 2014, the 6 applicants who began applying online failed to clear a required identity-checking step, but 5 of the 6 were able to enroll by calling the Marketplace. After enrolling, these individuals were required to submit documentation and all 11 maintained coverage after fictitious or no documentation was submitted. The 11 applicants paid premiums throughout 2014 totaling approximately $12,000 and their health insurers received approximately $30,000 annually in advanced premium tax credits. After the enrollees’ coverage was automatically renewed for 2015, 6 applicants were terminated early in the coverage year due to their failure to submit documentation associated with a new application, though the GAO had not filed any new applications. Coverage was reinstated in 5 of 6 cases after the GAO contacted the Marketplace.

Federal Judge Says Tribe is Large Employer; Bills Introduced to Exempt Tribes from ACA Employer Mandate

The Affordable Care Act’s large employer mandate, which requires employers—including tribal government employers—with at least 50 full-time employees to provide health insurance, is under scrutiny in the Courts and U.S. Congress. According to the Wyoming Public Media Statewide Network, a U.S. District Court Judge ruled that, under the ACA, the Northern Arapaho tribe in Wyoming qualifies as a large employer and therefore must provide insurance, rejecting the tribe’s argument that the federal government is obligated by treaty to pay for tribal healthcare. Concurrently, Senator Steve Daines (R-MT) and Congresswoman Kristi Noem (R-SD) introduced S. 1771 and H.R. 3080, which now reside in the Senate Finance and House Ways and Means Committees, respectively, to exempt tribes and tribal entities from the ACA’s large employer mandate.



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