Comparison of Consumer Protections in Three Health Insurance Markets: Medicare Advantage, Qualified Health Plans and Medicaid Managed Care Organizations
Appendix A: Background on Medicare Advantage, Marketplace Qualified Health Plans and Medicaid Managed Care Organizations
Medicare Advantage (MA)
Medicare currently covers over 50 million individuals, almost a third of whom are enrolled in Medicare Advantage plans. The Medicare Advantage (MA) program, also known as Medicare Part C, is a voluntary coverage option available to Medicare beneficiaries as an alternative to the traditional fee-for-service Medicare program.1 Medicare Advantage coverage is offered through private insurance companies in the form of health plans, such HMOs and PPOs. An individual must affirmatively choose to enroll in a Medicare Advantage plan, and once enrolled they generally receive all their Medicare services through the plan. If a person chooses to dis-enroll from a Medicare Advantage plan, or is involuntarily dis-enrolled, they are by default enrolled into traditional Medicare coverage.
Medicare Advantage benefits, cost-sharing and other consumer protections are grounded in the federal rules governing traditional Medicare. Medicare Advantage plans must provide enrollees with coverage of all services that are covered by Medicare Parts A and B except hospice, (and, if applicable, the Part D prescription drug benefit). Medicare Advantage plans can, and are often required to, provide benefits in addition to those covered by traditional Medicare, such as vision and dental services or reduced cost-sharing. The scope of benefits covered by Medicare Advantage generally has the same limitations as traditional Medicare (e.g., number of days covered in a skilled nursing facility); however, plans have leeway to loosen such restrictions. Medicare Advantage plans can also charge varying cost-sharing amounts, including deductibles and co-pays and, unlike traditional Medicare, provide caps on beneficiary out-of-pocket expenses. Cost-sharing in Medicare Advantage is limited by actuarial equivalency rules; in others words, in general, Medicare Advantage enrollees will not pay significantly more out-of-pocket than they would under traditional Medicare.
Medicare Advantage plans are regulated by the federal Centers for Medicare and Medicaid Services (CMS), which also administers other parts of the Medicare program. States are largely preempted from regulating Medicare Advantage plans. The Medicare Advantage program, and its predecessor Medicare+Choice, has had decades of experience operating within the Medicare program. Similarly, CMS has an established track-record of regulatory oversight of Medicare Advantage plans which continues to evolve in response to changes in the market and plan behavior.
Marketplace Qualified Health Plans (QHPs)
In an effort to expand access to health insurance coverage, the Affordable Care Act (ACA) created exchanges, or Marketplaces, through which individuals can shop for insurance coverage effective January 2014.2 States have the option to build and administer a fully state-based Marketplace, enter into a state-federal partnership Marketplace, or default to a federally-facilitated Marketplace (FFM) administered solely by the federal government. This brief focuses on rules governing the federally facilitated Marketplace. As of January 2015, 11.4 million people had enrolled in private insurance through the Marketplaces.3
Health insurance plans must be certified as Qualified Health Plans (QHPs) by a Marketplace before they may be sold to consumers. To be certified, QHPs must cover certain essential health benefits (EHB), follow established limits on cost-sharing (like deductibles, copayments, and out-of-pocket maximum amounts), and meet other requirements. QHPs are divided into 4 different categories based on actuarial value: Bronze, Silver, Gold, and Platinum, all of which must cover essential health benefits (EHBs).
Oversight of QHPs is shared by the federal and state governments. States perform primary enforcement of federally mandated insurance market reforms that govern QHPs. If a state cannot or will not perform such functions, however, CMS may step in. Currently, oversight and enforcement capacity at the federal level is limited – both for group health plans (DOL and Internal Revenue Service (IRS); HHS for public employer plans) – and for QHPs in federally operated Marketplaces. Note that most private coverage continues to be provided outside the Marketplace, through employer-sponsored group health plans, which are subject to federal regulation and for which most state regulation is preempted by ERISA.
Medicaid Managed Care Organizations (MCOs)
As the nation’s primary public health insurance program for people with low incomes, as of January 2015 Medicaid covers over 68 million Americans over the course of a calendar year. It is a major source of coverage for people with low incomes and people with disabilities. Medicaid is jointly financed by the federal government and the states and administered by the states with federal oversight.4 Federal law requires states participating in Medicaid to cover certain mandatory benefits, and states can choose to cover additional optional benefits.5
Before passage of the ACA, federal Medicaid matching funds were available only for specified categories of people with low-incomes: children, pregnant women, parents, people with disabilities, and seniors.6 States that choose to participate in the Medicaid program must cover people in these groups with income up to federal minimum thresholds, and states have the option to expand coverage to individuals at higher incomes.
The ACA expanded Medicaid to nearly all adults under age 65 with income at or below 138 percent FPL or $16,242 per year (2015) for a single person, with no asset test, effective January 1, 2014.7 However, the 2012 Supreme Court ruling in NFIB v. Sebelius effectively made implementation of the Medicaid expansion a state choice.8 To date, 29 states, including DC, have implemented the ACA’s Medicaid expansion.9
States can choose to provide Medicaid benefits through managed care, including managed FFS models, such as primary care case management, and private capitated managed care organizations (MCOs) that contract with the state on a risk basis to deliver Medicaid services. This brief focuses on consumer protections specific to enrollees in Medicaid MCOs. States have the option to make Medicaid managed care enrollment voluntary or mandatory for beneficiaries. However, states are required to seek CMS approval to require managed care enrollment for children with special needs, beneficiaries dually eligible for Medicare and Medicaid, and certain Native Americans. As of July 2014, 39 states including DC had comprehensive risk-based contracts with Medicaid MCOs.10 Among these states, 16 reported that over 75 percent of their Medicaid beneficiaries were enrolled in MCOs, and 34 states indicated that they made specific policy changes to increase their number of MCO enrollees, such as expanding voluntary or mandatory enrollment to additional coverage groups, in FY 2014 or planned to do so in FY 2015.11 Over half of Medicaid beneficiaries nationally – mostly, children and parents – are enrolled in comprehensive MCOs; this share is growing as states expand managed care to include higher-need Medicaid populations, such as people with disabilities12 and dual eligible beneficiaries, as well as newly eligible Medicaid expansion adults.
Appendix B: Low-Income Assistance and the Medicare “Cliff”
There are substantial differences in income and asset thresholds at which low-income assistance is available to Medicare beneficiaries and those seeking QHP coverage in the Marketplaces. For Medicare beneficiaries, including Medicare Advantage enrollees, assistance with Part A and B deductibles, coinsurance and copayments is available only to individuals with incomes up to 100 percent of the Federal Poverty Level (FPL) ($11,770 in 2015) and who meet certain asset tests. Assistance with paying the Part B premium is available to individuals with incomes up to 135 percent of FPL ($15,889 in 2015), with limited assets, and Part D premium and cost-sharing assistance is available, on a sliding scale, for individuals up to 150 percent of FPL ($17,655 in 2015) and limited assets. Assistance with Medicare Advantage premiums is limited to individuals dually eligible for Medicare and Medicaid, and only at state discretion.13
By contrast, in Marketplaces, people with incomes between 100 percent and 400 percent FPL who have no other offer of affordable minimum essential coverage, including Medicaid, can access tax credits to defray premium costs for QHPs; there is no asset test for Marketplace tax credits. Additionally, cost-sharing subsidies are available for individuals between 100 percent and 250 percent of FPL. However, for individuals over 200 percent FPL these subsides lower the out-of-pocket cap on expenses (from $6,600 to $5,200 in 2014) but typically make only modest adjustments to other cost-sharing features, such as annual deductibles. The Affordable Care Act made Medicaid available to more people. Now, in states that implement the Medicaid expansion, individuals with incomes up to 138 percent FPL may qualify. There is no asset test under the new financial methodology that applies to the newly eligible population as well as to other poverty-related coverage groups. Medicaid provides comprehensive coverage with very low out-of-pocket costs.
Individuals who attain Medicare eligibility are no longer eligible for Marketplace subsidies, and they may see their eligibility for Medicaid change. Individuals transitioning to Medicare from Medicaid, and to a lesser extent those under 200 percent FPL enrolled in a QHP with subsides may encounter what is referred to as the Medicare “cliff” – meaning that depending upon their income and resources, they may see their out-of-pocket costs increase when they become eligible for Medicare because of more stringent eligibility requirements for cost-sharing assistance imposed by Medicare low-income programs and Medicaid. For example, Medicaid for seniors (over 65) has a federal income eligibility limit of 100 percent FPL and imposes an asset test in most states (unless states cover seniors at higher incomes or without regard to assets through a waiver). Likewise, Medicare has more stringent eligibility requirements for cost-sharing assistance.14