A Look at the Private Option in Arkansas

Executive Summary
  1. Arkansas Times, The Arkansas Medicaid mess” (August 2015), available at http://www.arktimes.com/arkansas/the-arkansas-medicaid-mess/Content?oid=4011897.

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Introduction
  1. Both Iowa and New Hampshire obtained waivers that include Marketplace premium assistance as a means of expanding Medicaid, and other states, such as Utah, continue to consider Marketplace premium assistance as they debate whether to cover newly eligible adults. See Kaiser Commission on Medicaid and the Uninsured, Medicaid Expansion in Iowa (Feb. 2015), available at https://www.kff.org/medicaid/fact-sheet/medicaid-expansion-in-iowa/; Kaiser Commission on Medicaid and the Uninsured, Medicaid Expansion in New Hampshire (March 2015), available at https://www.kff.org/medicaid/fact-sheet/medicaid-expansion-in-new-hampshire/; Kaiser Commission on Medicaid and the Uninsured, Proposed Medicaid Expansion in Utah (Jan. 2015), available at https://www.kff.org/medicaid/fact-sheet/proposed-medicaid-expansion-in-utah/.  For additional background on Arkansas, see generally, Kaiser Commission on Medicaid and the Uninsured, Medicaid Expansion in Arkansas (Feb. 2015), available at https://www.kff.org/medicaid/fact-sheet/medicaid-expansion-in-arkansas/; Kaiser Commission on Medicaid and the Uninsured, The ACA and Medicaid Expansion Waivers (Feb. 2015), available at https://www.kff.org/medicaid/issue-brief/the-aca-and-medicaid-expansion-waivers/; Kaiser Commission on Medicaid and the Uninsured, Medicaid Expansion Through Marketplace Premium Assistance (Sept. 2013), available at https://www.kff.org/medicaid/fact-sheet/medicaid-expansion-through-marketplace-premium-assistance/; Kaiser Commission on Medicaid and the Uninsured, Medicaid Expansion Through Premium Assistance:  Key Issues for Beneficiaries in Arkansas’ Section 1115 Demonstration Waiver Proposal (July 2013), available at https://www.kff.org/medicaid/issue-brief/medicaid-expansion-through-premium-assistance-key-issues-for-beneficiaries-in-arkansas-section-1115-demonstration-waiver-proposal/.  The Affordable Care Act requires states to expand Medicaid to adults with income up to 138% FPL effective January 1, 2014.  However, the Supreme Court’s 2012 decision in NFIB v. Sebelius found that this requirement was unconstitutionally coercive of states, and as a result, states effectively have the option to expand Medicaid.  See Kaiser Commission on Medicaid and the Uninsured, A Guide to the Supreme Court’s Decision on the Medicaid Expansion (Aug. 2012), available at https://www.kff.org/health-reform/issue-brief/a-guide-to-the-supreme-courts-decision/; Kaiser Commission on Medicaid and the Uninsured, Implementing the ACA’s Medicaid-Related Health Reform Provisions After the Supreme Court’s Decision (Aug. 2012), available at https://www.kff.org/health-reform/issue-brief/implementing-the-acas-medicaid-related-health-reform/.   States can expand at any time, and if they do expand, they can elect to terminate the expansion at any time.  To date, 31 states (including DC) have implemented the ACA’s Medicaid expansion, most of which have done so through a traditional state plan amendment instead of a waiver.  Kaiser Commission on Medicaid and Uninsured, Status of State Action on the Medicaid Expansion Decision (July 20, 2015), available at https://www.kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/.

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  2. According to Arkansas’s Department of Health and Human Services, there were approximately an additional 15,000 newly-eligible adults who were covered in the state’s fee-for-service system for a brief period pending enrollment into a Marketplace plan on June 30, 2015.  These individuals are not included in the 245,000 figure.

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  3. 42 C.F.R. § 435.1015.

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  4. These conditions included limiting Marketplace premium assistance to individuals whose Medicaid benefit package closely aligns with Marketplace plans and offering beneficiaries a choice of at least two plans. HHS, Medicaid and the Affordable Care Act  Premium Assistance (March 2013), available at http://medicaid.gov/Federal-Policy-Guidance/Downloads/FAQ-03-29-13-Premium-Assistance.pdf.

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  5. Ark. Code § 20-77-2401 et seq., available at http://law.justia.com/codes/arkansas/2014/title-20/subtitle-5/chapter-77/subchapter-24/.

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  6.   Centers for Medicare and Medicaid Services,  Arkansas Health Care Independence Program (Private Option) Special Terms and Conditions (September 27, 2013), available at https://www.medicaid.state.ar.us/Download/general/comment/HCIWProposedAmend.pdf.

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  7. Arkansas has a State Partnership Marketplace, a non-profit public benefit corporation, which is overseen by the Arkansas Health Insurance Marketplace Board. The state retains control of plan management and consumer outreach and education functions while the federal government is responsible for eligibility and enrollment functions.

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  8. The Arkansas legislature also included bans on outreach funding in the budget bill for the Insurance Department and for the Department of Health.

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  9. Ark. Act 257, § § 16, 17 (March 7, 2014), available at http://www.arkleg.state.ar.us/assembly/2013/2014F/Pages/BillInformation.aspx?measureno=SB111.  The legislation specifies that the state insurance department may not apply for or accept funds, including federal funds, for the purpose of advertisement, promotion, or other activities designed to promote or encourage enrollment in the Arkansas Marketplace or the private option.  It also prohibits the state from applying for or accepting any funds for the purpose of funding navigators, guides, certified application counselors and certified licensed producers.

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  10. For a more detailed discussion of the Governor’s speech and the reaction of leading legislators, see Manatt Health, Manatt on Medicaid: Arkansas Update – Private Option To Continue, Additional Medicaid Reforms To Be Explored (January 27, 2015), available at https://www.manatt.com/medicaid-update/Arkansas-Update-Private-Option-To-Continue.aspx#sthash.RPIlJxus.dpuf.

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Issue Brief
  1. As reported by Ark. Dep’t of Human Servs., Div. of Medical Servs. (June 2015) (on file with authors).

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  2. National Center for Health Statistics, National Health Insurance Survey Early Release Program (June 2015), available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/State_estimates_insurance_2013_2014.pdf.

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  3. See, id., (noting significant difference in non-elderly adult uninsured rate from 2013 to 2014 in the following states which have traditional Medicaid expansions: CA (-5.7%), DE (-5.3%), KY (-6.3%), NV (-7.2%), OH (-4.5%), RI (-4.0%), WA (-7.4%), and WV (-14.8%)).

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  4. Modern Healthcare, Arkansas disability claims fall 19 percent after Medicaid expansion (August 2014), available at http://www.modernhealthcare.com/article/20140826/NEWS/308269939.

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  5. ACHI, Facts About Arkansas’s Health Care Independence Program: Private Option and Marketplace Plan Enrollment (April 2015), available at http://www.achi.net/Docs/275/.

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  6. Arkansas had the lowest adult eligibility threshold in the country as of January 2014. See Kaiser Commission on Medicaid and the Uninsured, Medicaid Eligibility for Adults as of January 1, 2014 (October 2013), available at https://www.kff.org/medicaid/fact-sheet/medicaid-eligibility-for-adults-as-of-january-1-2014/.

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  7. See Kaiser Commission on Medicaid and the Uninsured, Fast Track to Coverage:  Facilitating Enrollment of Eligible People into the Medicaid Expansion (Nov. 2013), available at https://www.kff.org/medicaid/issue-brief/fast-track-to-coverage-facilitating-enrollment-of-eligible-people-into-the-medicaid-expansion/.

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  8. See www.insureark.org.  Under the terms and conditions of the waiver, individuals must have a choice of at least two plans.

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  9. See also Kaiser Commission on Medicaid and the Uninsured, How Have State Medicaid Expansion Decisions Affected the Experiences of Low-Income Adults?  Perspectives form Ohio, Arkansas, and Missouri (June 2015), available at https://www.kff.org/medicaid/issue-brief/how-have-state-medicaid-expansion-decisions-affected-the-experiences-of-low-income-adults-perspectives-from-ohio-arkansas-and-missouri/.

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  10. The Stephen Group Status Report #1 to Ark. Health Reform Task Force Appendix at 13 (June 11, 2015), available at http://governor.arkansas.gov/promises/healthcare-taskforce.

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  11. As of June 2015, 22,629 medically frail beneficiaries were receiving the traditional benefit package, and the remaining 3,186 received the same benefit package as private option enrollees but on a FFS basis. Ark. Health Care Reform Task Force, The Stephen Group Update Report #2 Powerpoint Slides at slide 6 (July 15, 2015), available at http://governor.arkansas.gov/promises/healthcare-taskforce.

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  12. Andy Allison, Thomas Seldon, and Joe Thompson, Arkansas Center for Health Improvement, Arkansas Health Care Needs Questionnaire:  Primer on Implementation webinar, (March 19, 2014), available at http://www.achi.net/Pages/OurWork/Project.aspx?ID=58.

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  13. Ibid.

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  14. Ibid.

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  15. As reported by Ark. Dep’t of Human Servs., Div. of Medical Servs. (June 2015) (on file with authors).

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  16. Andy Allison, Thomas Seldon, and Joe Thompson, Arkansas Health Care Needs Questionnaire:  Primer on Implementation webinar, Arkansas Center for Health Improvement (March 19, 2014), available at http://www.achi.net/Pages/OurWork/Project.aspx?ID=58.

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  17. As reported by Ark. Dep’t of Human Servs., Div. of Medical Servs. (June 2015) (on file with authors).

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  18. Ibid.

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  19. Some beneficiaries will be automatically renewed based on electronic data available to the state of Arkansas and so will not receive the renewal notice.  They, however, can still request a medical frailty screening at any time.

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  20. Andy Allison, Thomas Seldon, and Joe Thompson, Arkansas Health Care Needs Questionnaire:  Primer on Implementation webinar, Arkansas Center for Health Improvement (March 19, 2014), available at http://www.achi.net/Pages/OurWork/Project.aspx?ID=58.

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  21. Ibid.

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  22. Ibid.

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  23. Ibid.

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  24. Ibid.

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  25. The Stephen Group Status Report #1 to Ark. Health Reform Task Force Appendix at 13 (June 11, 2015), available at http://governor.arkansas.gov/promises/healthcare-taskforce; see also The Stephen Group Status Report #2 to Ark. Health Reform Task Force at 3, 9-12 (July 15, 2015), available at http://governor.arkansas.gov/promises/healthcare-taskforce (noting that “the highest cost medically frail newly eligible patients fall far below the average cost of highest cost Traditional Medicaid patients”).

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  26. See also Kaiser Commission on Medicaid and the Uninsured, How Have State Medicaid Expansion Decisions Affected the Experiences of Low-Income Adults?  Perspectives form Ohio, Arkansas, and Missouri (June 2015), available at https://www.kff.org/medicaid/issue-brief/how-have-state-medicaid-expansion-decisions-affected-the-experiences-of-low-income-adults-perspectives-from-ohio-arkansas-and-missouri/.

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  27. See, e.g., Benjamin D. Sommers et al., Changes in Self-reported Insurance Coverage, Access to Care, and Health Under the Affordable Care Act, 314 JAMA 366  (July 28, 2015), available at http://jama.jamanetwork.com/article.aspx?articleid=2411283 (finding that lacking a personal physician and limited access to medications both declined significantly more in expansion states than in non-expansion states).

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  28. Arkansas Hospital Association, Survey Reveals Private Option Impact on Hospitals (November 2014), available at http://www.arkhospitals.org/archive/notebookpdf/Notebook_11-03-14.pdf

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  29. Talk Business and Politics, Insurance Execs: Private Option Recipients Use ER Five Times More Often (July 2015), available at http://talkbusiness.net/2015/07/insurance-execs-private-option-recipients-use-er-five-times-more-often/#sthash.vXiSLOlt.dpuf

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  30. Arkansas Hospital Association, APO’s Hospital Impact Strong in 2014 (July 2015), available at http://www.arkhospitals.org/archive/notebookpdf/Notebook_07-27-15.pdf.

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  31. Ibid.

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  32. See, e.g., Deloitte, Commonwealth of Kentucky Medicaid Expansion Report 2014 at 35 (2015), available at http://governor.ky.gov/healthierky/Documents/medicaid/Kentucky_Medicaid_Expansion_One-Year_Study_FINAL.pdf (finding decrease of $1.15 billion in hospital uncompensated care charges from 2013 to 2014).

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  33. Federal law requires the state Medicaid agency to reimburse federally qualified community health centers and related clinics for 100 percent of their costs.  Because this requirement was not waived by the federal government in the special terms and conditions for the private option, the Arkansas Medicaid agency is developing a system for sending payments to these centers to supplement, as needed, the reimbursement rates that they receive from Marketplace plans for private option enrollees.

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  34. Unlike in a Medicaid managed care environment, the cost of an individual’s premium is not set by the Medicaid agency, but rather is set by the commercial carriers competing for business, as regulated by the state insurance department.  For any given individual, the specific premium amount that the Medicaid agency pays is a function of the person’s geographic region; age; and choice of plan. Arkansas has seven different geographic regions for purposes of its insurance market, and carriers can vary their premium bids by region.

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  35. Arkansas enrolls private option beneficiaries into 94 percent actuarial value silver-level Marketplace plans to meet federal Medicaid rules that limit beneficiary copayments to nominal levels and cap total cost-sharing at 5 percent of household income.  With the exception of the plan deductible, these Marketplace plans meet Medicaid cost-sharing standards, charging nominal amounts for individuals above 100 percent FPL and nothing for those below 100 percent FPL. To ease administration of the cost-sharing wrap for Medicaid beneficiaries, Arkansas defined a standard cost-sharing design for its 94 percent actuarial value plans, consisting of a $664 annual deductible and set co-payments or co-insurance for certain services.  Arkansas makes additional cost sharing reduction payments to Marketplace plans to eliminate the deductible for private option enrollees, which otherwise would violate Medicaid cost-sharing protections.  For more details, see Manatt Health, Marketplace Premium Assistance: Creating Alignment Between Medicaid and Qualified Health Plans (April 2015), available at https://www.manatt.com/Marketplace-Premium-Assistance-Creating-Alignment-Between-Medicaid.aspx.

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  36. Arkansas Division of Legislative Audit, Arkansas Dep’t of Human Servs., Medicaid Private Option Program Update, Special Report,  Report Id. SASR50214, at 17, Exhibit XII (December 2014) available at http://www.thearkansasproject.com/wp-content/uploads/2015/01/FINAL-Medicaid-Private-Option-12-12-2014.compressed.pdf.

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  37. The initial cost-sharing reduction payments to carriers are based on projections of the amount required to eliminate deductibles and reduce cost-sharing charges to Medicaid-allowable limits.  These initial up-front payments are subject to reconciliation and will be revised once data on actual costs are available for those beneficiaries who enrolled in the private option.  If the actual cost of buying down deductibles and cost-sharing charges are higher than expected, carriers will receive an additional payment; if costs are lower, they will return some of the cost-sharing reduction payments to the state.

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  38. Arkansas Center for Health Improvement, Private Option and Marketplace Plan Enrollment: Facts About Arkansas’s Health Care Independence Program, April 2015 (April 2015), available at http://www.achi.net/Docs/275/.

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  39. Arkansas secured an amendment to its waiver to establish Health Independence Accounts on December 31, 2014.  The amendment allows Arkansas to waive Medicaid’s comparability requirement to impose cost-sharing charges selectively on those individuals who fail to make the required monthly contribution to a Health Independence Account.  See Centers for Medicare and Medicaid Services, Arkansas Health Care Independence Program (Private Option) Section 1115 Demonstration Amendment Approval (January 2015) available at http://www.medicaid.gov/Medicaid-CHIP-Program-Information/By-Topics/Waivers/1115/downloads/ar/ar-private-option-ca.pdf.

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  40. The state also uses Medicaid funds to make contributions to the accounts, ensuring that they are funded at a level sufficient to cover any copayment and coinsurance obligations that otherwise would be the responsibility of enrollees.  In effect, this allows beneficiaries to substitute a set monthly contribution for cost-sharing charges that rise and fall with their use of services each month. If beneficiaries fail to contribute to their Health Independence Accounts, they are not terminated from coverage, but they must cover their copayments and co-insurance out-of-pocket at the point of service.  To provide an additional financial incentive to participate, individuals above 100 percent of the FPL making at least six monthly contributions can receive credits to offset premiums they face in the future after leaving the private option and enrolling in other coverage.

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  41. The Stephen Group, Status Report #2 to Ark. Health Reform Task Force at 41 (July 15, 2015), available at http://governor.arkansas.gov/promises/healthcare-taskforce.

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  42. Under federal law, newly eligible adults receive a benefit package known as an Alternative Benefit Plan (ABP), a state-designed package that must cover, at a minimum, the 10 essential health benefits (EHBs) required of all Marketplace plans, plus a limited number of additional services and provider types required by Medicaid. Accordingly, with limited exceptions, the ABP aligns with the Marketplace benefit package.  In Arkansas, the ABP includes some benefits not otherwise offered to adults under Arkansas’ state plan benefit package for adults, such as coverage of outpatient diagnostic tests without a dollar limit and substance use disorder services, as a result of the EHB requirements.

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  43. Arkansas Department of Human Services, Division on Medical Services, Health Care Independence 1115 Waiver Application (August 2013), available at http://humanservices.arkansas.gov/dms/Documents/
    Finalpercent201115percent20Waiverpercent20Materialspercent20forpercent20Submission.pdf
    .

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  44. Arkansas Center for Health Improvement, Private Option and Marketplace Plan Enrollment: Facts About Arkansas’s Health Care Independence Program, April 2015 (April 2015), available at http://www.achi.net/Docs/275/

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  45. Arkansas Center for Health Improvement, Private Option and Marketplace Plan Enrollment: Facts About Arkansas’s Health Care Independence Program, April 2015 (April 2015), available at http://www.achi.net/Docs/275/.

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  46. The plans include Arkansas Blue Cross Blue Shield, the national BCBS plan, Qualchoice, and Ambetter.

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  47. D.C. was lower due to significant enrollment among relatively young Capitol Hill staffers. Arkansas Blog, At least four carriers will sell statewide on Arkansas Health Insurance Marketplace in 2015 (plus more data on 2014 Marketplace enrollment) (April 2014), available at http://www.arktimes.com/ArkansasBlog/archives/2014/04/24/at-least-four-carriers-will-sell-statewide-on-arkansas-health-insurance-marketplace-in-2015-plus-more-data-on-2014-marketplace-enrollment

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  48. In practice, states rarely exceed their budget neutrality targets.  If they are at risk of hitting the targets, states typically have a number of options for scaling back their rate of spending or for revisiting their targets with CMS.

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  49. Arkansas Center for Health Improvement, Health Care Independence Program and Budget Neutrality (June 2015), available at http://www.achi.net/Docs/316/.

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  50. Specifically, Arkansas will pay the premiums for any of the following plans: 1) the lowest cost qualifying EHB-only silver-level plan offered in the service area; (2) the next lowest cost qualifying EHB-only silver-level plan offered in the service area that is offered by a different carrier than the lowest cost EHB-only silver-level plan (referenced in item #1 above); and (3) any other carrier’s lowest cost qualifying EHB-only silver-level plan, so long as such plan’s cost falls within 10% of the second-lowest cost qualifying EHB-only silver-level plan available to private option enrollees in the service area.

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  51. Under federal Medicaid law, states can use Medicaid funds to pay private insurance premiums on behalf of beneficiaries only if it is “cost effective” to do so.  The criteria for cost-effectiveness determinations contained in federal Medicaid law include the costs of paying premiums, providing any supplemental Medicaid benefits, paying cost-sharing charges that exceed Medicaid allowable limits, and administrative expenses.   Social Security Act § 1902(a)(4); 42 C.F.R. § 435.1015(a)(4).

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  52. The Stephen Group, Status Report #3 to Ark. Health Reform Task Force at 25 (Aug. 19 and 20, 2015).

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  53. Robert Wood Johnson Foundation, Medicaid Expansion States See Significant Budget Savings and Revenue Gains (March 2015), available at http://statenetwork.org/wp-content/uploads/2015/03/Medicaid-Expansion-States-See-Significant-Budget-Savings-and-Revenue-Gai....pdf.

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  54. Robert Wood Johnson Foundation, Medicaid Expansion States See Significant Budget Savings and Revenue Gains (March 2015), available at http://statenetwork.org/wp-content/uploads/2015/03/Medicaid-Expansion-States-See-Significant-Budget-Savings-and-Revenue-Gai....pdf.

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  55. Federal funding for newly eligible adults is set in the ACA at 100 percent in 2014, 2015, and 2016, and gradually decreases to 90 percent by 2020, where it remains indefinitely.  The share of federal dollars to cover newly eligible adults exceeds the state’s regular Medicaid matching rate, which is 70 percent in FY 2016.  Kaiser Commission on Medicaid and the Uninsured, Federal Medical Assistance Percentage for Medicaid and Multiplier, available at https://www.kff.org/medicaid/state-indicator/federal-matching-rate-and-multiplier/.

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  56. Section 1332 waivers allow states to develop their own initiatives to replace some or all of the Marketplace provisions of the ACA.  States, however, must ensure that the alternative provides as much coverage to as many people without costing the federal government more. While these waivers cannot be used as the basis for an alternative Medicaid expansion such as the private option, they can potentially be combined with Medicaid § 1115 waivers to provide Arkansas with some new options. At the request of a state legislator, the Arkansas Health Insurance Marketplace Board and Legislative Oversight Committee commissioned a report that provides some basic information on the role that Section 1332 waivers might play in shaping the future of Arkansas healthcare reforms.  The task force and the Governor’s advisory committee are reviewing this report, but also more broadly considering a range of options for the future of the state’s Medicaid program.  Public Consulting Group, Section 1332 Waivers and the Future of Arkansas Healthcare Innovation (April 6, 2015) available at http://www.publicconsultinggroup.com/news/post/2015/04/16/1332-Waivers-Will-Allow-State-Specific-Variation-to-Health-Care-Reform-Efforts.aspx

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  57. See, e.g.,  National Center for Health Statistics, National Health Insurance Survey Early Release Program (June 2015), available at http://www.cdc.gov/nchs/data/nhis/earlyrelease/State_estimates_insurance_2013_2014.pdf., (noting significant difference in non-elderly adult uninsured rate from 2013 to 2014 in the following states which have traditional Medicaid expansions:  CA (-5.7%), DE (-5.3%), KY (-6.3%), NV (-7.2%), OH (-4.5%), RI (-4.0%), WA (-7.4%), and WV (-14.8%)); Benjamin D. Sommers et al., Changes in Self-reported Insurance Coverage, Access to Care, and Health Under the Affordable Care Act, 314 JAMA 366  (July 28, 2015), available at http://jama.jamanetwork.com/article.aspx?articleid=2411283 (finding that lacking a personal physician and limited access to medications both declined significantly more in expansion states than in non-expansion states); Deloitte, Commonwealth of Kentucky Medicaid Expansion Report 2014 at 35 (2015), available at http://governor.ky.gov/healthierky/Documents/medicaid/Kentucky_Medicaid_Expansion_One-Year_Study_FINAL.pdf (finding decrease of $1.15 billion in hospital uncompensated care charges from 2013 to 2014).

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