Iowa: "Private Option" Medicaid expansion Bad News/Good News...
2019 OPEN ENROLLMENT ENDS (most states)
Time: D H M S
Over at Forbes, virulently anti-ACA critics Josh Archambault and Jonathan Ingram have written a detailed analysis of What Went Wrong with Iowa's implementation of the Affordable Care Act's Medicaid expansion provision. While their tone is understandably hostile, from what I know of the situation, it seems to check out for the most part (granted, the only part of this piece I knew much about until now was the CoOportunity failure portion of it).
First, it's important to understand that Arkansas is not the only state which has been using a "private option" solution for their ACA Medicaid expansion program; Iowa opted for this as well. For some reason, Arkansas is the only state ever mentioned when this comes up, probably because they were the first ones to do so, I believe:
Iowa’s expansion was loosely modeled afterArkansas’ Obamacare expansion. Under Iowa’s “Marketplace Choice” waiver, able-bodied adults above the poverty line would receive Medicaid benefits through Obamacare exchange plans.
The program has seen double-digit premium hikes, one carrier becoming insolvent, both carriers eventually leaving the program, skyrocketing enrollment, cost overruns, and changes that make Medicaid enrollees less accountable. With that unfolding, it’s no wonder state officials announced in July 2015 that they were closing the Medicaid expansion waiver.
The first part of the article focuses on the meltdown of CoOportunity Health, one of the 23 "Consumer Oriented & Operated Plan" organizations seeded with ACA-provided funding. I agree wholeheartedly that the story of CoOportunity is an ugly one:
In 2014, CoOportunity Health experienced significant financial problems, recording a net operating loss of $163 million. The insurer blamedthe expansion program as a primary culprit leading to its financial tailspin.
...But the insurer’s financial condition continued to deteriorate and it announced in October 2014 that it was dropping out of the Medicaid expansion program altogether. In December 2014, the insurer’s financial condition was so perilous that the state was forced to step in and take over the carrier. By February 2015, CoOportunity was insolvent.
(As an aside, I'll even go one step further: Remember when President Obama and the HHS Dept. suddenly announced the "transitional" or "grandmothered" plan policy in early November 2013? This was in response to the "If You Like Your Plan You Can Keep It" brouhaha/backlash to several million people's pre-ACA policies being scheduled for cancellation as of 12/31/13.
In response, President Obama decided to allow state insurance commissioners to decide whether or not to allow insurance companies to keep offering their non-ACA-compatible policies for up to 1 year (this was later quietly extended further, up to 3 years). About 1/3 of the states said "no", but most states--including Iowa--did indeed allow for this extension of either 1, 2 or all 3 years. Most of those enrolled in these "transitional" policies have since gradually moved to other, compliant coverage anyway at this point, and the rest will be moved off of them one way or another by next year.
While I understand the rationale for this extension--the idea was to avoid "ripping the band-aid off all at once", so to speak--it also caused a serious actuarial problem for some insurance companies. Remember, this change of policy was announced after the open enrollment period had already started. That means that the insurance companies--including CoOportunity Health--were already locked into their premium rates for at least one full year.
CoOportunity probably went into the 2014 open enrollment season thinking that several hundred thousand lower-risk, less-expensive-to-treat patients would be kicked off of their existing, non-compliant policies at larger competitors, thus giving them the opportunity (pun intended) to try and snap up this market.
Instead, due to the "transitional policy" extension, very few of that market was freed up after all...leaving CoOportunity (and other new players) holding the bag, as their new enrollees tended to be sicker/more expensive to treat on average than they had expected.
The following year, they were able to reprice their premium rates accordingly...but it was too late by then; they were cash poor, having burned through all of their funds trying to cover the new batch of pricey enrollees.
NOTE: I don't know for certain that this is what happened, but it sure as hell couldn't have helped.)
This left just one other insurance carrier handling Iowa's Private-Policy-via-Medicaid-Funding enrollees, Coventry. While Coventry isn't going out of business, they've decided to cut their losses and aren't going to take on enrollees in Iowa's "Private Option" plan any further.
One of the tenets of Iowa's "alternative" Medicaid expansion program, like that in many other mostly/entirely GOP-controlled states, is to try and add a "skin in the game" or "personal responsibility" clause, by requiring enrollees to pay premiums or other fees which traditional Medicaid enrollees don't have to, along with other assorted requirements. Ironically (and sadly/amusingly), this seems to have backfired in Iowa:
Although traditional Medicaid allows cost-sharing charges of up to $812 per year for single adults in the expansion, Iowa was limited to charging just $120 per year in premiums. (The state can also charge up to $8 for unnecessary emergency room use.) This swap had the net effect of actuallyreducing personal accountability in the Medicaid expansion program.
...Enrollees can avoid premium payments altogether by engaging in certain “healthy behaviors.” They can also forgo paying premiums if they qualify for one of several exemptions or by filing a form self-attesting that they are facing a financial hardship.
Anyone who doesn’t meet those exemptions, self-attest to a hardship, or engage in approved healthy behaviors receives a lengthy waiting period before the state can disenroll them. Even if the state manages to remove enrollees for refusing to pay premiums, they can immediately return to the program with no consequences. Rather than creating more personal responsibility, the program has managed to make Medicaid enrollees even less accountable.
OK, so this is all pretty depressing, right?
Well, here's the punchline. It sounds pretty alarming at first...
After 18 months, Iowa is now calling it quits on its original Obamacare expansion model.
Oh, crap...is Iowa going to become the first state to get rid of ACA Medicaid expansion, reversing the progress made of getting states like Indiana, Pennsylvania and Alaska to start the expansion program??
But wait a minute...
State officials have already moved new applicants and former CoOportunity Health enrollees into the traditional Medicaid program. Now they are preparing to close the Marketplace Choice waiver altogether and transition the remaining enrollees into Medicaid managed care. The Governor is wisely following the lead of other successful Medicaid reforms by moving toward a new managed care program called “IA Health Link.”
Yes, that's right: It turns out that Iowa is killing off their "waiver/alternative" version of Medicaid expansion and replacing it with...the original expansion program called for by the ACA in the first place!
The wording in the article isn't 100% clear about this, so I contacted one of the authors, who confirmed it:
@charles_gaba They started transition when one carrier dropped out. But yes: no more QHPs; moving to Medicaid managed care organizations.
— Jonathan Ingram (@ingramlaw) September 21, 2015
The authors, of course, conclude by arguing that Iowa should indeed kill Medicaid expansion altogether, but to me, this is actually good news: Just like Pennsylvania, which scrapped their own messy "alternative" Medicaid expansion program (hastily/sloppily set up by their then-GOP Gov. Tom Corbett late last year) in favor of "normal" Medicaid expansion this year (under the newly-elected Democratic Governor Tom Wolf this year), Iowa is simply doing what the ACA envisioned in the first place: Bumping up the eligibility threshold for Medicaid to 138% of the federal poverty line, period.
Oh, by the way: Pennsylvania is now expected to save $626 million by doing so, for whatever that's worth.