Manatt on Medicaid: Pennsylvania Receives Federal Approval to Implement Medicaid Expansion

Authors: Deborah Bachrach, Partner, Manatt, Phelps & Phillips, LLP | Kinda Serafi, Counsel, Manatt, Phelps & Phillips, LLP

On August 28, 2014, the Centers for Medicare and Medicaid Services (CMS) approved Pennsylvania’s application under Section 1115 of the Social Security Act to implement a Medicaid expansion effective January 1, 2015, through a five-year demonstration, “Healthy Pennsylvania.”

While the approved demonstration includes many features articulated in the Commonwealth’s initial waiver application, there are some significant differences. Most notably, the Commonwealth will be enrolling the new adults in Medicaid managed care plans rather than in qualified health plans in the Marketplace as originally proposed. The key features of the Healthy Pennsylvania demonstration include the following:

• Eligibility. All individuals over age 20 with incomes up to 138 percent of the federal poverty level (FPL), excluding those individuals determined to be medically frail, are eligible for Healthy Pennsylvania.
• Coverage Model. Healthy Pennsylvania beneficiaries will enroll in Medicaid managed care plans, which the Commonwealth refers to as Private Care Options (PCOs). Medicaid managed care rules (42 C.F.R. § 438) apply to PCOs, although the waiver permits the Commonwealth to rely on state or federal commercial standards so long as they are as robust as the Medicaid rules. In addition, PCOs must enter into a “Healthy Pennsylvania Private Coverage Organization Agreement,” which was released by the Commonwealth in May 2014. In order for existing Medicaid managed care plans to participate in the Healthy Pennsylvania demonstration initiative, they will be required to enter into and comply with the new PCO Agreement. As noted above, the decision to enroll new adults into Medicaid managed care plans is a departure from Pennsylvania’s original plan to purchase coverage through premium assistance and require beneficiaries to enroll in a qualified health plan.
• Benefits. New adults will receive the Alternative Benefit Plan (ABP) as required by the Affordable Care Act. Pennsylvania will design a second ABP for medically frail adults. The design of these ABPs will be laid out in a forthcoming State Plan Amendment and must comply with federal benefit and coverage rules. CMS provided one waiver with respect to covered services; namely, CMS approved Pennsylvania’s request to waive the requirement that the Commonwealth assure access to nonemergency transportation during the first year of the demonstration. This time-limited waiver will sunset on December 31, 2015, after which the Commonwealth will be required to offer nonemergency transportation to all Medicaid beneficiaries.
• Premiums. Effective January 1, 2016, Healthy Pennsylvania enrollees with incomes between 100 and 138 percent of the FPL who are not medically frail will be required to pay a monthly premium not to exceed 2 percent of their household income. Beneficiaries who fail to pay their monthly premiums for three consecutive months will be dis-enrolled from coverage, but will be allowed to reapply for coverage without a waiting period and without repayment of back premiums. Unpaid premiums will be considered a collectible debt owed to the Commonwealth. The waiver specifies that the Commonwealth may file an amendment to the waiver in order to impose premiums on individuals with incomes below 100 percent of the FPL based on data collected and analyzed with respect to the average amount of co-payments paid each month by these beneficiaries in demonstration year one (2015).
• Co-Payments. All Healthy Pennsylvania enrollees will be required to make cost-sharing payments in amounts consistent with federal Medicaid law. In the second year of the demonstration, individuals with incomes above 100 percent of the FPL who are subject to premiums will not be charged co-payments with the exception of an $8 co-payment for nonemergency use of the emergency room. CMS is requiring a protocol on setting forth the process by which Pennsylvania will track and collect beneficiary co-payments.
• Healthy Behavior Incentives. If Healthy Pennsylvania enrollees with incomes above 100 percent of the FPL adopt specified healthy behaviors during their first year of coverage, they may have their premium obligations reduced in their second year of enrollment. To be eligible for reduced monthly premiums in the second year, beneficiaries must complete an annual wellness exam and make timely co-payments during their first coverage year. In subsequent years, enrollees who continue to meet healthy behaviors will have an ongoing opportunity to reduce their financial obligations. Healthy behavior reductions will be evaluated every six months for potential reduction. The Commonwealth must submit its healthy behavior incentive implementation protocols to CMS for approval by March 31, 2015. The protocol must address, among other things, the criteria for completing a wellness exam, how healthy behaviors will be tracked and monitored, beneficiary notices, the process by which beneficiaries will remit premium payments, and the process by which the Commonwealth will collect past-due premiums.

CMS declined to approve the Commonwealth’s request to waive the requirement that the Commonwealth provide coverage between the eligibility determination and enrollment in a Medicaid managed care plan and the requirement that the Commonwealth provide three months of retroactive coverage from the date of application. However, the waiver authorizes the Commonwealth to submit an amendment in 2016 seeking a waiver of the three-month retroactive coverage requirement; the request must be supported by data demonstrating the Commonwealth’s performance of real-time processing of applications and minimum gaps in coverage.

CMS also denied Pennsylvania’s request to require individuals to complete job-search or job-training activities as a condition of Medicaid eligibility. Outside of the demonstration plan (and not connected to Medicaid coverage), Pennsylvania intends to use state funding to establish incentives for job-training and work-related activities for Healthy Pennsylvania beneficiaries participating in the Encouraging Employment program.

Comparison with Other Expansion-Related Waivers
The Healthy Pennsylvania demonstration is the fourth approved Medicaid expansion waiver following Arkansas, Iowa and Michigan. (Indiana’s waiver is pending.) Healthy Pennsylvania shares several common features with the expansion waivers in Iowa and Michigan. All three states impose premiums up to 2 percent of income on Medicaid enrollees with incomes above 100 percent of the FPL. The penalty for nonpayment of premium differs, however. In Michigan, nonpayment triggers a debt, but not disenrollment. In Pennsylvania, individuals may lose coverage for nonpayment after 90 days but may reapply without a waiting period. And, in Iowa individuals may be dis-enrolled after 90 days for non-payment unless they request a hardship waiver. All three waivers reduce enrollees’ premium obligations if they meet certain healthy behavior standards. Finally, both Pennsylvania and Iowa obtained one-year waivers of NEMT.

In sum, while details differ, the core features of the Pennsylvania waiver are comparable to what CMS has already authorized in Iowa and Michigan; namely, premiums on individuals with incomes above 100 percent of the FPL; a one-year waiver of NEMT; and financial incentives for meeting healthy behavior standards. CMS indicates that it will reconsider Pennsylvania’s request to impose premiums on individuals with incomes below 100 percent of the FPL and to waive the provision of three-month retroactive coverage based on data collected and analyzed during the first year of the demonstration (2015).