Lawmakers today got the first glimpse at details of the changes coming to the private option in 2015, including the creation of “Health Independence Accounts” and cost-sharing for beneficiaries below the poverty line. Many of these developments — popular among Republican backers of the private option who believe the changes will push the Medicaid program in a more conservative direction — were anticipated in the original legislation but were given teeth via amendments in this year’s fiscal session, which mandated their implementation in order for the private option to continue. In testimony before the Arkansas Health Insurance Marketplace Legislative Oversight Committee, Surgeon General Joe Thompson and Interim Medicaid Director Dawn Zekis gave the broad outlines of the amendments that they will submit for federal approval later this year. 

Most of the attention today was focused on the Health Independence Accounts, a version of Health Savings Accounts, though the HIAs would operate a bit differently than HSAs. The core idea is that beneficiaries will be asked to contribute a small monthly amount to their HIA — if beneficiaries are current with their contributions, the HIA will then cover any cost-sharing, and beneficiaries can potentially accrue money in the account that they could use to help them pay health insurance costs in the future if they transition out of the private option, either to employer-sponsored coverage or to a private plan they purchase if their income rises above the eligibility line for the private option. 


So how would the HIAs and cost-sharing in the private option work? It depends on beneficiaries’ income. Details after the jump:

The private option, remember, uses Medicaid funds to purchase private health insurance plans for low-income Arkansans — people who make less than 138 percent of the federal poverty level (that’s about $16,000 for an individual or $33,000 for a family of four). No private option beneficiary pays a premium or a deductible but some have small co-pays. Currently, there is no cost-sharing for beneficiaries who make less than 100 percent of FPL, while those between 100-138 do have co-pays, limited by Medicaid rules to a maximum of 5 percent of their family income. The change coming in 2015 will extend cost-sharing to beneficiaries all the way down to 50 percent of FPL (again, limited to a maximum of 5 percent of their family income). People who make less than 50 percent of FPL will continue to have no cost-sharing (and will not participate in the HIAs).  


The HIA program will be mandatory for all beneficiaries who make between 50-138 percent of FPL. They will receive an HIA card which will cover cost sharing as long as they’re current with their monthly contribution. The biggest difference is that people in the 100-138 group can be refused service if they fail to contribute to their HIA card and they are unable to make their co-payment, while people in the 50-100 group can be billed, but not refused service. Here’s how HIAs would work for the two groups: 

People who make between 50-99 FPL: 
* Contribute $5 per month to their account. 


* As long as the beneficiary has paid that month, all cost-sharing is fully covered.

* If the beneficiary has not paid that month, the individual will be billed for any co-payments by a third-party administrator that contracts with the state. Crucially, the private option will pay the provider the relevant cost-sharing amount either way. The provider is not trying to collect the cost-sharing debt from the beneficiary; rather, the beneficiary incurs the debt to the state, with the third-party administrator in charge of collection. 


* If the beneficiary doesn’t pay the bill for cost-sharing, any previously accrued balance will be used to pay. Otherwise, the beneficiary will simply owe money to the state. It will be up to the legislature to determine the extent to which the third-party administrator actually attempts to collect.   

* For each month that a beneficiary makes the $5 contribution, they will accrue $15 in rollover funds, paid for by the private option (fully federally funded next year, with the state eventually kicking in 10 percent by 2020). These rollover funds (only available if a beneficiary contributes at least 6 months, and capped at $200) can be used to pay for the costs of health insurance in the future if a beneficiary transitions off of the private option. 


People who make between 100-138 FPL:

* Contribute $10-25 per month to their account, depending on income on a sliding scale.  


* As long as the beneficiary has paid that month, all cost-sharing is fully covered.

* If the beneficiary has not paid that month, the individual will be billed for cost-sharing by the provider. The provider can choose to refuse service if the beneficiary is unable to pay (note: while the HIA card is a different wrinkle, this basic dynamic is already true for the 100-138 group this year — if they are unable to pay co-pays, providers can refuse service). 

* Rollover funds: work the same as 50-99 group described above. 

Got all that? It’s pretty confusing! The goal here is help educate beneficiaries about the way that health insurance works (they’ll be given periodic statements, for example, showing their balance and explaining how their contributions and use of coverage impact their cost-sharing) and make them behave more like consumers, incentivizing them toward proper utilization of health coverage. In practice, I’m a little worried that beneficiaries are just going to be, well, confused. Particularly since the legislature has consistently tried to quash any efforts at outreach for the private option or the Health Insurance Marketplace. On that front, Thompson drew a distinction between outreach to enroll new beneficiaries and outreach to help current enrollees. “We have clear legislative direction not to solicit enrollment in the private option,” he said. “We’re clearly going to have to educate and support those who are enrolled in the private option. Once they’re enrolled it is our obligation to help them be successful in the program.”


The biggest open question is just how aggressive the state would be in trying to collect debts from the 50-99 group. Thompson said that the administration viewed the purpose as more educational than punitive. Of course, one possibility is that simply getting a bill — even if collection is not aggressive — will help to motivate behavior. 

Is this a good deal for beneficiaries? For the people in the 100-138 group, it could be: their contribution will be less than the maximum allowable cost-sharing, so if they use the health care system a fair amount, the HIA system can end up saving them money as long as they’re making their contributions. For the 50-99 group, who had no cost-sharing in 2014, this will simply represent an additional cost, albeit a small one. For this group, again, much will depend on how aggressive debt collection turns out to be. Both groups will get the potential bonus of $200 in (government-funded) rollover funds, but that will only be useful for people who transition off the private option. 

Some other points to keep in mind:

1) Unlike an HSA, it’s not like beneficiaries are saving up a large amount of money in case they get a large medical expense, or to cover a large deductible. As long as the beneficiary is current with the monthly payment, all co-pays are covered.

2) Meanwhile, the rollover funds they’re accruing — up to $200 — are based on making their monthly contributions, not on their utilization of health care.

3) Missing a month’s contribution in the past will not incur a debt or any sort of penalty going forward— if the beneficiary hasn’t paid the contribution for a given month, their co-pays are not covered; but if they pay their contribution in the future, they would then have co-pays covered for that month that they paid.

4) State officials said that in the future, the Independence Accounts could be used to establish incentives for healthy behavior or proper utilization of the health care system. But the proposal for 2015 really has to do with incentives encouraging folks to make their monthly contributions rather than anything about utilization.

5) Backers of the HIA like Sen. David Sanders argue that this will encourage personal responsibility. There are benefits and protections only available if you make your payment. You don’t know for sure whether you’ll need them, but if you make your payments, the coverage will be there if you do.  In that way, the idea it to mimic private health insurance. 

There are some costs here. The private option will be on the hook for up to $200 for each beneficiary that actually makes contributions for six months (hard to know how many will). There will also be costs involved in administering and managing the HIAs, which will be done by contracting with a third-party administrator. Officials did not speculate on what that budget would be; they hope to select the contractor after a competitive procurement process by later this summer.

The hope of Sanders and other Republican backers of the HIA is that in the long run, a more consumer-oriented system centered around the HIAs will reduce utilization costs, not to mention helping to educate beneficiaries about how to use health insurance — making them more active consumers of insurance instead of passive recipients of an entitlement. Maybe so! As with all things private option, the state is using a demonstration waiver — which means conducting an experiment. At first glance, though, the general outlines of this program would seem to risk adding layers of bureaucracy, confusion, and possibly costs just to give a more conservative imprimatur to the private option.

p.s. See below for the co-pays for private option beneficiaries for 2015. Again, remember that co-pays like this were already in place for the 100-138 group; next year, they’ll apply to the 50-99 group too. All of this will be fully covered if beneficiaries make their HIA contributions. If they don’t, they’ll be on the hook, up to a maximum of $604 per person or 5 percent of family income, whichever is less (wonky side note: this year, in practice the max is typically the flat per-person amount; if that’s higher than 5 percent of family income, beneficiaries have to inform DHS in order to get the lower out-of-pocket maximum…one question is whether that will change next year for people below the poverty line, for whom 5 percent of family income would typically be lower than $604 per person. )