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States Confront Current and Future Insurance Coverage Challenges as Pandemic Persists

State Medicaid, children’s health insurance programs (CHIP) and health insurance marketplaces strive to prepare for an expected increase in the demand for their services as they navigate a world roiled by COVID-19, an economic downturn and ensuing budget crises, and unpredictable federal relief efforts.

Officials are trying to gauge the effects on individuals’ access to affordable health coverage as federal stimulus assistance, like the additional unemployment benefit, winds down. Adding to the uncertainty is how long the federal government will continue the public health emergency declaration, which allows states to employ many coverage flexibilities, particularly in Medicaid, to maintain individual coverage. Though they do not know when the public health emergency may end, state officials are already trying to prepare for it.

Background

Currently, there are two federal national emergency orders in place. On Jan. 31, 2020, US Department of Health and Human Services (HHS) Secretary Alex Azar declared a public health emergency and on March 13, 2020, President Trump signed an order proclaiming the COVID-19 pandemic a national emergency. The two declarations triggered a series of actions, including empowering HHS to temporarily waive or modify requirements for Medicaid, CHIP, and the Health Insurance Portability and Accountability Act (HIPAA). Together, these emergency authorities allow states to leverage Medicaid and CHIP Disaster Relief state plan amendments to make changes to help consumers access and maintain coverage, including using Medicaid’s presumptive eligibility to expedite enrollment and waive premium and copayment requirements for Medicaid and CHIP, critical for those with reduced incomes due to the pandemic.

#NASHPCONF20 Examines Medicaid and Marketplace Coverage  Register today.

The Role of Marketplaces in Re-Envisioning Commercial Health Insurance Post COVID-19
1:10-2:10 p.m. (ET) Tuesday, Aug. 18, 2020

Medicaid in an Era of Policy Unpredictability and Enrollment Shifts
2:30-3:30 p.m. (ET) Wednesday, Aug. 19, 2020

Additionally, there have been federal aid laws passed with provisions to further protect individuals’ coverage. For example, the Families First Coronavirus Relief Act (enacted March 18, 2020) provides an additional 6.2 percent in federal matching funds (FMAP) to state Medicaid programs that meet the law’s maintenance of effort criteria, which includes not disenrolling anyone retroactive to March 18, 2020 through the public health emergency.

Due to the freeze on Medicaid disenrollments, state officials tell the National Academy for State Health Policy (NASHP) that their programs are serving more individuals than this time last year. However, even with enrollment simplifications, many states report they have not had big increases in Medicaid or CHIP enrollees. There are exceptions, Washington State officials report significant increases in Medicaid enrollment since March. Kentucky has also experienced steady new Medicaid enrollment, with state officials reporting “hundreds of thousands” of newly enrolled individuals. But many more state Medicaid and CHIP programs have been trying to prepare for an increased enrollment that has not yet materialized. States have faced the challenge of requesting that state funds be made available before they are needed during a state budget crisis in order to meet the anticipated demand.

The delay in Medicaid enrollment has surprised many state officials and national stakeholders. There continues to be massive job losses that threaten the availability of employer-sponsored insurance (ESI) – the source of health insurance for the majority of Americans. Without regular income, many may be unable to afford coverage on their own. However, some of these employees may qualify for coverage under the Consolidated Omnibus Budget Reconciliation Act (COBRA), which allows former employees to purchase coverage under the health plan offered by their former employers for up to 36 months. Federal law requires that COBRA must be offered by business with 20 or more employees. Most states require smaller employers to also offer continuation coverage, including COBRA-like policies, in Arizona, Maryland, Massachusetts, Minnesota, New York, Rhode Island, South Dakota, Tennessee, Texas, and Vermont.

What Happens when COBRA Ends?

Recent Department of Labor guidance extends the period during which employees may elect COBRA (normally limited to 60 days after they receive their notice of COBRA eligibility), giving individuals up to 60 days after the end of the current national emergency to elect COBRA coverage. The guidance also allows for deferral of COBRA premium payments during the national emergency – however individuals are required to pay back deferred premiums once the emergency ends. These delays in coverage election and payment periods offer consumers greater flexibility in choosing COBRA coverage, but may also strain employer resources and disrupt employer markets as employers grapple with other challenges brought on by the pandemic.

It is also unclear if COBRA would be affordable for most eligible employees. While some employers may offer to pay all or some of a former employee’s COBRA expenses, in most cases employees are required to bear the full brunt of the cost of these plans. With average premiums costs exceeding $500 per month, this may be an untenable expense for newly unemployed individuals. However, federal aid laws and emergency declarations extended support for maintaining commercial – including employer-sponsored insurance – as well. For example, many of the commercial insurance requirements put in place (e.g., extension of grace periods) by state agencies are also tied to the declared national emergency and are set to sunset within a given period (usually 30 days) after the emergency ends.

As a result, officials suspect that some individuals and families are still enrolled in their commercial health insurance plans, benefiting from protections like the premium grace period, that allows them to sustain coverage even if they cannot pay. This is a temporary solution and unfortunately, many may find themselves seeking alternative health coverage options when the period of protection ends. Under the Affordable Care Act, individuals and families who may not be eligible for Medicaid, may successfully find coverage through the health insurance marketplaces.

Will Marketplaces Become the Safety Net?

State-based marketplaces (SBMs) have also been changing enrollment policies, preparing for and experiencing new enrollment. For example, many SBMs created new special enrollment periods (SEPs) to ensure that uninsured individuals who did not enroll during the traditional annual open enrollment period have access to advanced premium tax credits (APTC) – if eligible – and enroll in a marketplace plan. Some SBM officials have reported substantial enrollment hikes – from thousands to hundreds of thousands of new enrollees – which highlights the important role marketplaces are playing as millions of individuals and families experience job losses and income fluctuations. This coverage is filling the gap between employer-sponsored and Medicaid coverage.

One reason individuals and families could be maintaining their employer-sponsored coverage through COBRA or qualifying for APTC, rather than seeking Medicaid coverage, is the “bonus” unemployment income made available under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). The additional $600 per week in unemployment payments must be treated differently when determining eligibility for Medicaid versus APTCs, which presented a significant challenge for eligibility systems. However, that bonus income is only available through July 31, 2020, at which point individuals may not be able to afford COBRA and may seek marketplace coverage, some already enrolled in a QHP may become eligible for an increased APTC, and others may be eligible for Medicaid depending their circumstances.

  • Another new federal aid program, the Paycheck Protection Program (PPP), established to provide loans to small businesses that can be used to pay for payroll costs, including health benefits of workers, may be helping to keep individuals on their ESI as well. Businesses that receive these loans are eligible for loan forgiveness if they meet certain requirements including:
  • Retention of the same number of full-time equivalent (FTE) employees that they had prior to onset of the pandemic (if FTEs were reduced prior to receipt of the loan they must be rehired during the loan period to meet this requirement);
  • That 60 percent of PPP funds are used to cover payroll expenses. PPP loans can be used to cover either an 8- or 24-week period extending no later than Dec. 31, 2020.

However, a recent estimate released by the Congressional Budget Office projected that it may take nearly a decade for the US economy to recover from the economic fallout of this pandemic. These PPP requirements are only short-term fixes and without sustained support or success in curbing new COVID-19 cases, these businesses may not be able to sustain their employees’ ESI for long. The end result may again be more individuals and families seeking publicly subsidized coverage.

An Uncertain Future

As states try to anticipate the needs of their residents, there is much that cannot be predicted about individuals’ and families’ finances given the employment fluctuations, which in turn impact their access to affordable coverage options. Today, all focus is on whether the HHS Secretary will extend the public health emergency declaration beyond July 25, 2020 when it is currently scheduled to expire. Administration officials have indicated support for extending the declaration and state leaders have expressed why an extension is needed.

Even if the public health emergency is extended, there are mounting questions about whether or how states should relax any changes put in place under the emergency period. State officials also question the federal government’s expectation that state systems rapidly revert back to prior policies. While these measures were always intended to be temporary, when these policies are terminated at the end of the national emergency, thousands could face more restrictive coverage and higher cost-sharing policies at a time of economic uncertainty brought about by the pandemic.

The Centers for Medicare & Medicaid Services has provided states with some information about how to retain some of the Medicaid and CHIP flexibilities, but additional guidance is needed to assist states, particularly related to eligibility determinations. For example, when the requirement to freeze Medicaid disenrollments ends, states will need to begin conducting eligibility redeterminations again. States are estimating thousands of individuals currently enrolled in Medicaid could lose their coverage. This would be potentially problematic for:

  • Consumers who could lose coverage;
  • Providers whose patients could not pay for care; and
  • States whose increasingly limited resources resulting from furloughs and layoffs due to the budget crisis would generate serious administrative burdens.

Many questions remain about how to best handle consumers who may be at risk of losing coverage once the public health emergency ends.

As COVID-19 cases continue to rise in the United States, now more than ever it is important for individuals to have a secure source of health care coverage. States are working diligently to get people the access to health coverage and resources needed in immediate response to the pandemic. However, states are also looking ahead, and bracing for the future when federal programs and deadlines end, yet residents’ need for insurance coverage persists.

NASHP will continue to track states’ efforts as they continue to modify their coverage programs in response to the ongoing pandemic.

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