Manatt on Medicaid: Pennsylvania Submits Waiver Application for Approval to Implement ACA Medicaid Expansion

Authors: Deborah Bachrach, Partner, Manatt | Patricia Boozang, Managing Director, Manatt Health | Anne O'Hagen Karl, Associate, Healthcare Industry, Manatt

Editor’s note: Projected to cover a record 65 million Americans in 2014--and as many as 1 in 4 by 2020--Medicaid will play a significant role in shaping the strategies and plans of all healthcare stakeholders in the years ahead. Recognizing the importance of a growing and changing Medicaid in shaping the new healthcare environment, the Medicaid team at Manatt will be producing a series of briefs—Manatt on Medicaid—throughout the year. The third edition, summarized below, focuses on Pennsylvania’s waiver application to the Centers for Medicare and Medicaid Services (CMS) requesting approval to move forward with ACA Medicaid Expansion. Click here to read the full brief.

On February 19, 2014, Pennsylvania submitted to CMS an application requesting approval under Section 1115 of the Social Security Act to implement the Affordable Care Act (ACA) Medicaid expansion effective January 1, 2015.

Under the Healthy Pennsylvania Private Coverage Option (Healthy Pennsylvania), individuals in the new adult group, so long as they are not medically frail, would be covered through premium assistance for private insurance—either Qualified Health Plans (QHPs) purchased through the Health Insurance Marketplace (Marketplace) or employer-sponsored coverage. The key features of the Healthy Pennsylvania program include the following:

• Eligibility. All individuals over age 21 in the new adult group, excluding those individuals determined to be medically frail, are eligible for Healthy Pennsylvania.
• Coverage Models. Pennsylvania proposes to purchase coverage for all newly eligible adults through one of two types of premium assistance. Individuals would be required to enroll in a QHP or employer-sponsored coverage (if available).
• Benefits. Under the ACA, covered benefits for newly eligible adults in Medicaid (the Alternative Benefit Plan or ABP) are based on ACA-defined Essential Health Benefits with certain additional requirements, including nonemergency transportation. Pennsylvania has requested a waiver of the requirement that Medicaid separately cover any ABP benefit that is not covered under the QHP or employer-sponsored coverage benefit packages.
• Premiums. Healthy Pennsylvania enrollees with incomes from 100%–133% of the FPL would be required to pay a monthly premium of $25 or $35, depending on the number of adults in their household.
• Cost-Sharing. For year 1 of the demonstration, all Healthy Pennsylvania enrollees would be required to make cost-sharing payments in amounts consistent with federal Medicaid law. In year 2, all Healthy Pennsylvania enrollees would be required to pay $10 in cost-sharing for nonemergency use of the emergency room—more than the $8 currently permitted under federal Medicaid law. Healthy Pennsylvania enrollees with incomes above 100% of the FPL would only be required to pay cost-sharing for nonemergency use of the emergency room, while enrollees with incomes below 100% of the FPL would continue to pay cost-sharing amounts on other services in addition to the cost-sharing for nonemergency use of the emergency room.
• Healthy Behavior Incentives. Healthy Pennsylvania enrollees may have their premium and cost-sharing obligations reduced if they adopt specified healthy behaviors.
• Work Requirements. All new adults who are either unemployed or working fewer than 20 hours per week would be required to complete 12 job-search or job-training activities per month to maintain Medicaid eligibility.
• Retroactive Coverage. Pennsylvania has requested a waiver of the requirement to provide coverage for the three months prior to the date an individual applied for Medicaid coverage. Coverage would become effective on the first day of the individual’s enrollment in a private plan, which could be several weeks after a person is determined eligible.

Similarities and Differences with Iowa and Arkansas

The Healthy Pennsylvania demonstration proposal marks the third expansion waiver (Arkansas and Iowa are the others) to use premium assistance to purchase QHP coverage for individuals in the new adult group. Like Arkansas, Pennsylvania intends to buy QHP coverage for all new adults except those who are medically frail. By contrast, Iowa is using QHP premium assistance only for new adults with incomes above 100% of the FPL.

There are, however, important differences between Pennsylvania’s proposed program and those CMS approved for Iowa and Arkansas. For instance, Pennsylvania’s program:

• Includes premiums that exceed 2% of income for some individuals
• Could deny coverage for failure to pay premiums
• Imposes work requirements as a condition of eligibility
• Seeks to waive federal requirements related to benefits, retroactive coverage and cost sharing

All in all, Pennsylvania requests significantly more waivers of federal requirements (24 in total) as compared to the Arkansas and Iowa waivers. Given the number of waivers Pennsylvania seeks and its request for several waiver authorities CMS has not previously granted, states and other stakeholders will be closely watching Pennsylvania’s expansion demonstration.