Marketplace Premium Assistance: Creating Alignment Between Medicaid and Qualified Health Plans

Authors: Deborah Bachrach, Partner | Jocelyn Guyer, Director | Elizabeth Osius, Manager

Arkansas broke new ground with its Marketplace Premium Assistance Medicaid expansion (widely referred to as the “Private Option”) last year, spurring additional states to consider the model. Under Marketplace Premium Assistance, states use Medicaid dollars to purchase qualified health plans (QHPs) offered on a Marketplace for Medicaid to enrollees, permitting an alternative to traditional Medicaid and enhancing continuity of care by enabling individuals and families to keep the same coverage as their income changes. To date, CMS has approved applications from three states—Arkansas, Iowa and New Hampshire—to cover some or all of their newly eligible adults under this model, and a number of other states, such as Utah, have expressed interest.

When Arkansas first began considering Marketplace Premium Assistance, the idea generated significant controversy. A major concern was that Medicaid beneficiaries would fare poorly in Marketplace plans offering fewer benefits, costing more, and lacking important Medicaid protections. However, states have discovered a surprising level of convergence in the benefits offered by Medicaid and Marketplace plans and have been able to align Medicaid and QHP products while ensuring Medicaid protections.

Benefit Design

The majority of Medicaid expansion adults must receive the Alternative Benefit Plan (ABP), a package of benefits designed by the state that must cover, at a minimum, the 10 essential health benefits (EHBs) required in all QHP products, plus a limited number of additional services and provider types. While QHP coverage initially was assumed to offer fewer benefits than Medicaid coverage, states are not finding this to be the case. The requirement to offer 10 EHBs has resulted in ABP and QHP benefit packages that are relatively robust and that are naturally closely aligned. More notable, in fact, is that the Medicaid benefit package for new adults often includes some important benefits missing from the “traditional” Medicaid package (i.e., the package available to parents and other adults who qualify for Medicaid under pre-ACA rules). As a result, some states have elected to enhance their traditional Medicaid package—such as by adding substance-use benefits or additional rehabilitation services—in order to create alignment between what is offered through the ABP, QHPs and traditional Medicaid.

On the other hand, there are some Medicaid services not included in QHPs. The benefit gaps—benefits Medicaid is required to cover that QHPs do not—include non-emergency medical transportation (NEMT) and Early and Periodic Screening, Diagnostic, and Treatment (EPSDT), which generally ensures children (including 19- and 20-year-old Medicaid expansion adults) receive all medically necessary screenings and treatments. To date, all three approved states have elected to provide any benefit required by Medicaid but not covered in a QHP through a Medicaid fee-for-service (FFS) wrap. Iowa was permitted not to provide NEMT for the first 18 months of the program, with extension contingent on evaluating the impact on access to care. In place of an FFS wrap, a state theoretically also might consider requiring QHP carriers to cover certain Medicaid services as a condition of certification; however, states must cover the cost of any state-mandated benefits outside of the EHB package, making it highly unlikely that a state would pursue this path.

Additionally, neither the ABP nor the QHP covers long-term care services in most states. Under federal law, medically frail Medicaid expansion adults who require long-term care services have the option to elect traditional Medicaid in order to access these services.

Network Design

When Medicaid purchases a QHP product on the Marketplace, in essence it purchases the QHP’s network of providers. Each QHP’s network is required to meet adequacy standards for certification, as reviewed and approved either by the state’s insurance department or the federally-facilitated Marketplace. Generally, states secure a waiver to require that Premium Assistance enrollees use the QHP’s network of providers—thereby enhancing alignment between the Medicaid and QHP products. The state must additionally ensure adequate access to federally qualified health centers and any family planning provider that participates in the state Medicaid program as required by Medicaid law.

Cost-Sharing Design

States implementing a Premium Assistance program must ensure compliance with Medicaid cost-sharing rules, which apply limits to cost-sharing charges and cap total cost-sharing expenditures at 5% of household income. Most QHPs have deductibles and/or co-payments above Medicaid-permissible levels, but states nevertheless have found practical strategies for ensuring that Medicaid enrollees do not incur these costs when enrolled in QHPs. To limit cost-sharing exposure at the point of service, Arkansas, Iowa and New Hampshire elected to enroll their Marketplace premium assistance enrollees subject to cost-sharing in 94% actuarial value (AV) high-value silver plans.¹ These high-value plans have more limited cost-sharing than other QHPs, dramatically reducing the extent to which a state must step in to pay cost-sharing charges on behalf of Medicaid premium assistance enrollees.²  

To ease administration of the cost-sharing wrap for Medicaid beneficiaries, Arkansas and New Hampshire also defined a standard cost-sharing design for their 94% AV plans, consisting of a specific deductible and set of co-payments or co-insurances for certain services. Notably, with the exception of the deductible, states have found that it is possible to design a 94% AV plan consistent with Medicaid cost-sharing limitations. And states then require carriers to use that cost-sharing design for any QHP in which a Premium Assistance enrollee might enroll. By creating a standard design that is consistent with Medicaid cost-sharing requirements except for the deductible, the state can pay the “excess” deductible in order to fully protect beneficiaries from excess cost-sharing. As illustrated by the standard high-value designs used in Arkansas and New Hampshire, the states can fully protect Medicaid enrollees against excess cost-sharing by paying the $225 and $325 deductibles, respectively.

Deductible and Out-of-Pocket Maximums in “Standardized” QHPs Used for Premium Assistance Enrollees with Income >100% FPL

* Paid by the state

Co-payments & Coinsurance in “Standardized” QHPs Used for Premium Assistance Enrollees with Income >100% FPL, Compliant with Medicaid Limits

States implementing Marketplace Premium Assistance do so for a number of reasons. One reason is that it can promote more continuous care for individuals and families whose income fluctuations cause them to move between Medicaid and Marketplace coverage. Continuity of coverage leads to continuity of care, which is linked to better health outcomes. Additionally, Marketplace Premium Assistance can benefit the Marketplace, by increasing enrollment and thereby stabilizing the risk pool. A large and stable risk pool attracts more carriers to participate, and increased competition helps drive down premiums. Finally, for some policymakers, an additional benefit is the use of private Marketplace plans in lieu of direct coverage in Medicaid.

To expand coverage to and improve the health of their residents, the three states that have implemented Marketplace Premium Assistance to date leveraged the natural convergence between the two products. They also took additional steps to ensure that their QHP products were strategically aligned with Medicaid to enhance continuity of coverage and care, such as through use of standardized cost-sharing designs.

_________________________

_{¹“Actuarial value” describes how much of the average cost of services is covered by the insurance plans. All silver plans are designed to cover approximately 70% of the average cost of services. However, insurance carriers offering Marketplace plans must develop cost-sharing variations on the silver plans. A “94% actuarial value” plan for a Marketplace Premium Assistance program has approximately 70% of costs covered by the carrier, 24%-25% of costs covered by the state, and 5%-6% of costs covered by the enrollee.}

_{²In Arkansas and New Hampshire, the new adults subject to cost-sharing have income above 100% FPL. Other new adults below 100% FPL have no cost-sharing obligations and so are enrolled in 100% AV plans.}