Manatt on Health Reform: Weekly Highlights - February 2016

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Virginia submits a $1 billion DSRIP application; Michigan's Governor will request authority to extend Medicaid coverage to Flint residents aged 21 and under; and Hawaii reinstates small business tax credits in its updated 1332 waiver proposal.

STATE MEDICAID EXPANSION & REFORM NEWS:

State Medicaid Agencies Continue to Improve Eligibility and Enrollment Processes

The Kaiser Family Foundation's 14th annual 50-state survey on Medicaid and CHIP eligibility and enrollment finds that states continued to improve and streamline their Medicaid enrollment and renewal processes in 2015, noting that all but one state now accept applications online and all but two accept telephonic applications. The report also finds that 34 states' eligibility systems can process automated Medicaid renewals, and 47 states are now up-to-date with renewing enrollees. A number of states made enrolling easier for children and pregnant women by, for example, eliminating waiting periods and expanding CHIP to state employees' dependents. Thirty-seven states reported the capacity to make Medicaid eligibility determinations for low-income children, pregnant women, and non-disabled adults within 24 hours; of the 27 states tracking the percentage of applicants that can be processed in this timeframe, 11 reported a rate of 50% or more. The report also notes that coordination between state Medicaid agencies and the Marketplaces remains a challenge, despite improvement in 2015.

Alaska: Reports Highlight Benefits of Medicaid Expansion and Propose Medicaid Reforms

A report commissioned by the State Legislature analyzing Medicaid expansion dismissed many of the concerns raised by State lawmakers who oppose Alaska's expansion, established by Governor Bill Walker (I) via executive order. The authors find that expansion would lead to a net gain of $170 million annually for the State. The report also notes that expansion would not trigger a significant increase in non-expansion Medicaid enrollment (the so-called woodwork effect) and that such increases are more directly related to ACA implementation than Medicaid expansion. Oral arguments in the Legislature's lawsuit against the Governor's action begin this week. A separate report commissioned by the State Department of Health and Social Services (DHSS) made recommendations for Medicaid reform including: moving towards a payment model that rewards outcomes and efficiency; paying providers a per-patient care coordination fee; linking providers to each other and to a prescription drug database; and establishing accountable care organizations. Governor Walker's administration incorporated the DHHS report's recommendations into a revised Medicaid reform bill, which will be reviewed by a recently established Medicaid reform Senate subcommittee.

Kansas: Twin Medicaid Expansion Bills Introduced, Futures Remain Unclear

Legislators in the House Federal and State Affairs Committee and its Senate counterpart have introduced identical bills for a Medicaid expansion plan, "Bridge to a Healthy Kansas," crafted by the Kansas Hospital Association (KHA) and modeled after Indiana's expansion program. The plan would extend coverage to approximately 150,000 Kansas residents through KanCare, the State's Medicaid managed care program, and require enrollees above the federal poverty level to make monthly contributions up to 2% of income towards a personal healthcare account. Enrollees would lose coverage if they failed to pay. All non-disabled unemployed adults or those working less than 20 hours per week would be referred to State workforce training and job search resources. While the Legislature and Governor Sam Brownback (R) have historically opposed expansion, the Governor reportedly indicated a willingness to consider a Medicaid expansion program if it met certain requirements, including budget neutrality.

Michigan: Governor Seeks Medicaid Eligibility for Flint Residents up to Age 21

Governor Rick Snyder (R) will seek federal approval to extend Medicaid coverage to Flint, Michigan residents up to age 21, regardless of income or enrollment status in other insurance programs, amid the unfolding water crisis there. The Governor is also calling for increased community-based resources, including physical and behavioral health treatment, long-term healthcare services typically needed by children exposed to lead, and federal Medicaid match for lead abatement actions in impacted areas. State officials have indicated that the cost of the proposals are unknown, and details have not been released regarding the impact on long-term Medicaid eligibility.

Virginia: State Submits $1 Billion Medicaid DSRIP Waiver

The Department of Medical Assistance Services submitted an 1115 Medicaid waiver application to CMS requesting authority to implement a Delivery System Reform Incentive Payment (DSRIP) program and Medicaid Managed Long-Term Services and Supports (MLTSS) for dual eligible enrollees. The $1 billion DSRIP initiative would establish networks of "high performing providers," known as "Virginia Integration Partners" (VIPs), that would share and integrate patient care, data, processes, and communication. VIPs would also partner with managed care organizations to coordinate care and transition to new payment models for high-cost Medicaid enrollees. In demonstration year three, additional providers, known as "Affiliate Providers," would transition to alternative payment models for individuals not receiving care through a VIP. The MLTSS initiative would expand an existing care coordination demonstration for high-risk dual eligibles statewide.

FEDERAL & STATE MARKETPLACE UPDATES:

HealthCare.gov Ends 2016 Open Enrollment as Some States Extend to Accommodate High Demand

For most of the country, open enrollment for 2016 Marketplace coverage ended on January 31; however at least three states—California, D.C. and Maryland—extended their deadlines, citing inclement weather and last-minute demand. At 11:00 pm on January 31, 80,000 individuals were shopping for coverage on HealthCare.gov, according to a blog post on Health Affairs, which also notes that nearly half of HealthCare.gov visitors were using phones and tablets during the last three days of open enrollment. As of January 29, 11.6 million people had signed up for or had been automatically renewed for 2016 Marketplace coverage.

CMS Provides CO-OPs With Additional Flexibility to Improve Sustainability

CMS released an FAQ clarifying that CO-OPs may sell health insurance policies other than Marketplace qualified health plans (QHPs), including large group policies, Medicaid managed care products, Medicare Advantage products, and ancillary products (such as dental and vision coverage), provided that at least two-thirds of policies issued by a CO-OP are QHPs. The FAQ also confirms that CO-OPs are not obligated to make payments on their federal loans called "surplus notes" if those payments would lead to financial distress or default, and that beneficiary claims should be paid before federal loans. Further, CO-OPs with a risk-based capital below 500% will be subject to CMS review and potentially a Corrective Action Plan, but will not automatically default on their loan agreement. CMS also stated its intent to explore changes to the requirements for serving on a CO-OP board, which could allow CO-OPs to attract new sources of financing.

Average Marketplace Premiums Increase by 6% in 2016, Report Finds

Marketplace premiums increased an average of 6% nationwide in 2016, compared to no increase in 2015, a new study by The Commonwealth Fund finds. Rate changes varied dramatically across states, with Tennessee's average premiums increasing 37%, while Florida's and Texas's average premiums decreased by 1% and 8%, respectively. Rates increased more slowly in higher-cost urban areas than in suburban and rural areas, which the report notes may reflect a higher level of insurer competition in urban areas. The authors also note that most Marketplace enrollees qualify for premium subsidies—83% in 2016—which largely protects them from the observed premium increases. The number of participating carriers declined slightly in 2016: 6% in urban areas, 7% in suburban areas, and 3% in rural areas.

Alaska and Oregon: Moda Health to Exit Individual Marketplaces

Insurer Moda Health announced it will withdraw from the individual Marketplaces in Alaska and Oregon after regulators in both states issued orders prohibiting the insurer from issuing new policies or renewing current policies. Regulators did not offer details on when current Moda policyholders will be required to transition to other carriers. Moda's departure from Alaska's individual Marketplace leaves Premera Blue Cross Blue Shield of Alaska as the only insurer that continues to issue new policies. Alaska's Division of Insurance Director Lori Wing-Heier said the State is working to bring additional insurers to the Marketplace. Oregon's individual Marketplace will have nine remaining carriers after the departure of Moda, which is the third largest insurer in the State.

MORE HEALTH REFORM ACTIVITY:

Hawaii: 1332 Waiver Proposal Updated to Comply With Federal Guidance, Maintains Small Business Tax Credits

The State Health Care Innovation Waiver Task Force revised its draft 1332 waiver proposal, which would now retain small business tax credits for eligible employers rather than request the federal government pay the $46 million value of the tax credits directly to the State to support the small business community, as proposed in the previous draft. The waiver still seeks authority to replace the ACA's employer mandate and Small Business Health Options Program (SHOP) Marketplace with the State's longstanding employer-sponsored insurance requirements under the Hawaii Prepaid Health Care Act, which has more stringent standards than the ACA. The updates to the proposal are in response to federal guidance published in December 2015 that requires states' 1332 waivers to offer comparable coverage, affordability, and comprehensiveness, and to maintain budget neutrality. The State Legislature must approve the 1332 authorizing language prior to submitting the waiver application to HHS for approval.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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