Governor Asa Hutchinson announced Monday afternoon that he is directing the Arkansas Department of Human Services to pursue a federal waiver that would allow the state to dramatically restrict participation in Arkansas Works, the Medicaid expansion program which now provides health insurance to some 310,000 lower-income Arkansans.

The two largest changes proposed to Arkansas Works (also known as the private option) would involve capping financial eligibility at the federal poverty level, rather than 138 percent of the poverty level, and instituting work requirements for able-bodied adults that would roughly mirror the requirements found in the food stamp (SNAP) program. (More information on the work requirement proposal is at the bottom of this lengthy post.) Hutchinson also proposed two less significant changes: Modifying the employer-sponsored insurance component of Arkansas Works and giving the state more control over the eligibility determination process.


If approved by the federal authorities, the waiver would go into effect January 1, 2018.

Capping the program at 100 percent of the federal poverty line would remove some 60,000 beneficiaries from the Medicaid expansion program. However, those people would then become eligible for federally subsidized insurance on the individual marketplace — coverage which would be equivalent to the plans available under Arkansas Works.


Hutchinson sought to reassure the state today, saying “everybody in Arkansas needs to understand that Arkansas Works will continue to provide health care coverage as designed by law in the legislature. They should not be nervous about it.”

(Some oversimplified background: The Affordable Care Act established two means of covering low-to-middle income people without insurance. It created a marketplace in which people making more than 138 percent of FPL — that’s about $16,000 for a one-person household — can purchase plans from private insurance companies which are federally subsidized for most such individuals on a sliding scale depending on income. For low-income people, the ACA expanded Medicaid — the government-provided insurance program administered and funded jointly by states and Washington — to include those whose incomes are below 138 percent of FPL. States can choose whether to participate in the Medicaid expansion, due to a Supreme Court decision, and Arkansas is one of those that chose to expand. However, in doing so, Arkansas obtained a waiver from the Obama administration allowing it to try a unique model: Medicaid expansion money is used to pay for the full cost of private insurance for those below 138 percent of FPL. This is the private option, now dubbed “Arkansas Works.” So, unlike in other states, Arkansas’s “Medicaid expansion population” and its “marketplace population” are both insured through private plans.)


The news came just hours before Republicans in the U.S. House of Representatives released their much anticipated proposal to repeal and replace the Affordable Care Act, or Obamacare, of which Arkansas Works is a part. Among other things, the federal legislation would begin undoing the Medicaid expansion by freezing enrollment in 2020. It would also profoundly affect the marketplace, by creating a new system of tax credits and removing the ACA’s “individual mandate.” The bill’s chances in Congress are still uncertain, with at least some Republicans likely to oppose it in its current form.

Why would Hutchinson announce major changes to the existing program at a juncture when the ACA itself — including the marketplace and the Medicaid expansion — faces such turmoil? The governor acknowledged today that “we don’t know the timeline of what’s going to happen in Washington” but noted his desire for work requirements and a lower income eligibility cap are nothing new. He pursued a similar waiver with the Obama administration and was rebuffed. “We want these reforms as soon as we can get these reforms,” he declared. The Trump administration has indicated it intends to give states more flexibility implementing Medicaid generally, and Hutchinson said Arkansas could “be a model for other states” regarding in what lies ahead.

One major concern about moving more people onto the marketplace is that it is a particularly vulnerable part of the system created by the ACA. Health care experts worry the marketplace could begin to collapse due in part to the national uncertainty surrounding Obamacare. (Insurers would leave in droves if the subsidies dried up.) When asked about that possibility, Hutchinson acknowledged that the future of the marketplace “does remain to be seen” but seemed to indicate he believed Congress would devise a solution. “Whether it is a tax credit initiative that Congress is considering, or whether it is a marketplace … there is going to be a place for those that are over 100 percent of the federal poverty level to go and get a subsidy from the federal government,” he said. “So this transition that we’re looking at fits in with the direction I see the federal government goes.” Later, he added that he “tried to get an eye on the tea leaves when presenting our plan to them, and all I can say is what I’m presenting is consistent with the direction that I see the replacement for the ACA going.”

This matters in part because Hutchinson knows his way around Washington, having served in the George W. Bush administration and Congress before that. His Department of Human Services director, Cindy Gillespie, is also well acquainted with D.C. It seems unlikely Hutchinson would have rolled out these proposals on the same day as the House’s ACA replacement bill was scheduled to be unveiled unless he was confident it would dovetail with the proposal emerging from Republicans in Congress.


And that leads to the unavoidable question of whether the governor wants to move beneficiaries to the marketplace because he believes it will succeed, thereby providing continuity of coverage to Arkansans, or because he believes it will unravel, thereby shrinking a government program that Republicans have decried since its inception. Hutchinson campaigned against Obamacare in 2014, like every Republican. He also presides over a state that has benefited from it handsomely, and he indicated in his comments today that he wants beneficiaries to keep getting affordable insurance — including those in the 100-138 percent FPL category. “Those above [the poverty level], obviously we want to have that availability of the marketplace, subsidy, we want to be able to have the tax credits in there to assist them. Because it’s still tough, even at that level, when you’re working and trying to buy insurance,” he said.

(We’ve come a long way since talk of “death panels.” But I mean the above question sincerely. What does Asa Hutchinson actually want?)

On the regulatory side of the federal equation, the governor said Health and Human Services Secretary Tom Price indicated to him in a recent phone conversation that the Trump administration would “look favorably” upon Hutchinson’s proposed amendments to Arkansas Works and that they “are consistent with the reform efforts they want to see happen” regarding health care policy. Nonetheless, he qualified, Price “cannot make any definitive judgment until he actually sees the waiver” Arkansas will propose.

Amy Webb, a spokesperson for the Department of Human Services, said after today’s press conference that the state hopes to have a draft of the proposal available to the public by April 15 and to submit the waiver to the Trump administration by June 15. Hutchinson’s plan therefore lacks key details at the moment, but here’s what we know so far:

1) Hutchinson said moving the 100 – 138 percent FPL population to the marketplace will save the state money and impose some cost sharing on beneficiaries

If these beneficiaries are moved to the marketplace, they would begin paying a premium of up to 2 percent of the cost of insurance. DHS Director Gillespie noted today that under the existing Arkansas Works program, those between 100 and 138 percent of FPL are already supposed to pay a $13 monthly cost-sharing fee for their insurance. However, the state has a limited ability to enforce that (effective) premium: It can’t kick people off their insurance for not paying it, although it can take the balance from a person’s state tax refund check, if they have one. If they’re shifted to the marketplace, Gillespie said, “they will have to pay their $13 a month, just like anyone else on health insurance.” Hutchinson said this change “accomplishes a continued incentive and encouragement to move up the economic ladder. It allows us to concentrate our resources on those that are 100 percent of the federal poverty level or below.”

Hutchinson also said the change would save Arkansas money. At the moment, the state pays for a small percentage of Arkansas Works, with the federal government covering the vast majority of the cost. Eventually, the state’s share will rise to 10 percent (the feds will still cover the other 90 percent). If the 100-138 percent population is shifted to the exchange, though, the state will no longer pay any portion of those individuals’ insurance. The governor said this explicitly today: “By us moving over 100 percent onto the marketplace, that means the federal government will be covering all of it, really, and it will save us money in that regard.”

In addition to the federal waiver — which will come as an amendment to Arkansas’ existing 1115 waiver, by which Arkansas Works itself is authorized — lowering the eligibility threshold to 100 percent FPL will require state legislation. Senate President Pro Tem Jonathan Dismang today said that change will most likely be addressed during a special session.

The governor said the switch “should not be a radical change” for beneficiaries, and that they should “smoothly transition into the marketplace.” However, it won’t occur automatically, Gillespie added later. “They will proactively have to go and sign up for a plan,” she said. In late summer, if the waiver is approved by the Trump administration, DHS plans to “send early notification to the beneficiaries that their plans will be ending as of the end of the year, so they have several months heads up. At which point we would work with the insurance carriers and the brokers, and when we hit open enrollment late in the year, they will be able to work with those individuals to help them sign up for a plan on the marketplace — same plan if they choose, different plan if they choose.”

2) Work requirements: Details still to come

The current Arkansas Works program contains a work referral — the Department of Human Services must refer applicants to the state Department of Workforce Services — but not a requirement. “As you know, under President Obama’s administration we were not able to get the work requirement that we wanted,” the governor said. He said that in January, the state referred 37,000 Arkansas Works applicants to DWS. “Less than 2,000 accessed the services at the Department of Workforce Services. Why is that the case? Because it’s not mandatory,” he said.

“The work requirement that we want is that they actually have to show up, they actually have to either be working, in worker training or, as in the SNAP program, participate in 20 hours a month or whatever is established for a volunteer organization in support of a charity activity.” Hutchinson said this “will encourage those that are able-bodied to work … [and] provide the tools they need to move up that economic ladder” in terms of education and training. Later, when asked whether providing additional worker training and education would incur additional cost, he replied “that’s why we have Workforce Services offices in various parts of the state — to be able to provide this training.”

Joan Alker, the executive director of Georgetown University’s Center for Children and Families, said work requirements “are a bad idea because they get this backwards. Encouraging work is great, and we all want people to work, but to be able to work you need to be healthier — not less healthy. So taking away people’s health coverage, in my opinion, makes them less likely to work, not more.”

Major questions about Arkansas’s propsoal remain. What determines “able-bodied” — is it simply anyone who doesn’t qualify for federal SSI disability? (Asked what the phrase meant, the governor said simply, “that means that they’re capable of working.”) Will there be an exemption for those who care for others essentially full time? Hutchinson said there might be one, narrowly tailored. “I think you have to look at moms that are at home with two or three kids and whether they’re suitable to go to work or whether they’re not. … For example, the SNAP program does exempt those who have children at home. [I] certainly want them to have insurance, but as to whether there needs to be worker training … you can work out systems for continuing their training even though they have children at home. That still remains to be seen.”

The governor said the requirements would mirror those found in the state’s SNAP program as much as possible. “It’s a good model to follow, and as close as we can keep it to the SNAP program is good, so it does not confuse the recipients. We would like to not have two different work requirement programs.”

Alker said other states are pursuing their own work requirement waivers, with the assumption that the Trump administration will be on board with such changes. Kentucky had already submitted its own waiver to the Obama administration, which was not acted on when the Trump team took over, “It’s already in the hopper … so we anticipate that Kentucky will be the first state where we will see how this administration will deal with a work requirement.” Arizona is also about to submit a similar waiver request to the feds, Alker said, likely ahead of Arkansas.