State-based marketplace (SBM) leaders convened in Washington, DC last week to share experiences and ideas and meet with key Congressional staff in advance of this year’s open enrollment period.
SBMs, which exercise total control over their health insurance marketplaces in contrast to states that use the federal marketplace, are making considerable progress in reaching and serving the uninsured. However, confusion fostered by unclear federal policies — such as the recent public charge rule and the looming decision in Texas v Azar that could strike down the Affordable Care Act – has created a cloud of uncertainty that challenges all states.
Today, 13 states operate SBMs, including Nevada that transitioned to this model for the 2020 open enrollment season. Additionally, four states (ME, NJ, NM, and PA) have announced plans to transition to the SBM model, three of which are currently operating as hybrid SBM models that use the federal platform (SBM-FPs) during this enrollment season.
Officials from the newly transitioning states – New Jersey and Pennsylvania – were welcomed at the meetings. They explained that a desire for stable insurance markets, state sovereignty over their marketplaces, and the potential for financial savings drove enactment of their new laws to transition to the SBM model.
Pennsylvania Democrat Gov. Tom Wolf’s proposal to establish an SBM and a reinsurance program received unanimous support from the state’s Republican-controlled legislature. In New Jersey, the decision to launch an SBM came on the heels of earlier efforts to restore the individual mandate requiring coverage and a successful federal waiver application to begin a reinsurance program.
By “owning” their marketplaces through the SBM model, state officials indicated they believe they will more efficiently and effectively serve their constituencies through implementation of state-focused policies and tailored outreach that were not possible when they used the federally facilitated marketplace (FFM).
Data shared at the meetings underscored the greater success that SBM states have had in serving their populations. (View a slideshow about SBM advantages here.) Unlike states that use the FFM, SBM states have the flexibility to address the health insurance needs of local populations and, as a result, have:
- Maintained steady enrollment steady;
- Been more successful in lowering their states’ uninsured rates; and
- Helped more unsubsidized consumers find coverage.
While SBM states have held down premium cost growth better than FFM states, SBM leaders expressed urgency to do more to make coverage affordable, especially for middle-income consumers. This slide highlights a number of strategies SBM states are pursuing.
Five states are operating reinsurance programs – that subsidize coverage of high-cost enrollees – in partnership with the federal government and five more states will join their ranks in the 2020 plan year. The results officials presented made clear that reinsurance programs do lead to significant premium reductions and provides a tangible initiative for state insurance departments to hold insurers accountable through quantifiable premium reductions. But, state officials were quick to point out, state-run reinsurance programs are time-limited or are simply unaffordable for many states. The need to restore and make permanent a federally funded reinsurance program remains a priority even as states pursue other strategies to address affordability.
The message from SBM leaders who attended the Washington, DC meeting was clear – SBMs are succeeding, sustainable, and growing in number because they are on the ground, fine-tuning their operations, and growing their capacity to address local needs.
California Gov. Gavin Newsom’s new budget has infused significant funds to make health care coverage sold through its health insurance marketplace (Covered California) more affordable and has made new subsidies available to middle-income individuals earning between 400 to 600 percent of the federal poverty level (FPL).
The budget allots $429 million in 2020 to provide new subsidies and builds on current federal premium subsidies that help fund individuals earning 100 to 400 percent of FPL.
To learn more about California’s new initiative, NASHP spoke with Covered California Executive Director Peter Lee and Director of Policy Katie Ravel. They also discussed their implementation plans for the 2020 coverage year.
What prompted development of this coverage initiative?
PL: Many people have been left out of accessing coverage — especially the middle class and those who are undocumented — and our governor and legislature wanted to take concrete steps to get the state toward universal coverage. On Governor Newsom’s first day in office, he laid out his agenda, calling for the federal government to reinstate the individual mandate and expand subsidies available through the marketplaces. Meanwhile, our legislature has also been committed to building on what the Affordable Care Act (ACA) did to expand coverage.
KR: Last year, the legislature required Covered California to develop options to improve coverage affordability for low- and middle-income consumers in the state.
What was California’s approach in developing this initiative?
PL: We had four goals driving our work; decrease the number of uninsured; address affordability concerns of those who are insured; make sure what we did would be affordable for the state; and deliver options that could be implemented in the short term.
KR: To start, we wanted to build on the main levers of the ACA and ultimately move the needle on coverage and cost. We formed a workgroup inclusive of consumer advocates, insurers, providers, and legislative staff members. We provided them with education about the basics of how our programs currently work and how Covered California is structured in addition to reviewing data about current affordability challenges. We worked with economists Wesley Yin from the University of California at Los Angeles and Nicholas Tilipman from the University of Illinois at Chicago to model the impacts on coverage and cost of various affordability policies including enhanced premium and cost-sharing subsidies, reinsurance, and reinstatement of a coverage mandate.
PL: We were able to prepare a good product that laid out the options and informed legislators and advocates about the pros and cons of each. From this work, they could clearly understand what an investment of additional funds would get you in terms of increased coverage and affordability. The information we gathered helped steer us away from other options like reinsurance or reducing cost sharing for marketplace plans.
KR: When it was clear that the intention was to launch a program in 2020, the most turnkey option was to increase subsidies. Ultimately, the best way to drive enrollment is to make premiums more affordable.
Why is it important to include a coverage mandate?
PL: Policymakers almost universally recognize the sensibility of the individual mandate. There is empirical evidence that a mandate has an impact on driving people to get insured. Massachusetts is one example, they have a long-standing state mandate and was the only state to see an increase in new enrollment after the federal mandate went away.
Once legislators were able to come together and recognize that lack of a mandate [and associated drops in enrollment and increases in premiums] was most hurting the middle class who do not qualify for federal subsidies, it made sense to marry those policies together; reinstitution of a mandate, with penalty funds supporting those who were at the “subsidy cliff” [400 percent of FPL, the point at which individuals no longer qualify for federal subsidies]. Sixty percent of the new enrollment we project due to these policies in 2020 will actually be motivated by the penalty. Approximately 80 percent of overall funding allotted for subsidies will go to those [earning] between 400 to 600 percent of FPL.
What other work was required to bring policymakers on board with this subsidy plan?
KR: What was most important was that we were able to produce concrete estimates of how each policy choice would impact enrollment and affordability. Data made the choices real. Legislators understood the impact they could have if these initiatives were passed. We spent a lot of time diving into the data to better understand the health care costs for Californians whose incomes are over 400 percent of FPL. It was eye opening! Some, especially those nearing Medicare eligibility, would have to pay nearly 35 percent of their premium to purchase a benchmark health insurance plan.
PL: That people have to pay tens of thousands of dollars a year in health plan premiums is unfair. People are really hurt by the federal subsidy cliff. However, for this to work, we were talking about a lot of money, and had lot of politics to get through. These policies are complicated, and it took years of Covered California becoming a trusted part of health policy discussions to get here. It was important for us to bring awareness about what was actually doable, especially in quick-turnaround. There is no way we would be implementing as soon as 2020 if it were not for the workgroup.
Through our reports and data, we told the story of the local impact of these policies. In our workgroup report, we provided examples of hypothetical families, but presented them in a way that most policymakers could relate to — policymakers had heard from “people like them” in their communities for whom our insurance system was not working. Having that data to make things local is an important role for the state-based exchanges.
Plan year 2020 is quickly approaching. How will Covered California be able to implement this law so quickly?
PL: A critical part of our planning was early engagement with our carriers. We engaged them to work through importation questions like: Could our systems even work with theirs to add a state subsidy? What were their deadlines to price products anticipating changes might come as soon as plan year 2020? The plans have confidence we will aggressively market these changes, and anticipate this will lead to lower rates for plan year 2020.
Also helpful is that we modeled everything off what already existed under the ACA and leveraging as many existing processes as we can. We are using the same rules for the mandate as exist under federal law and subsidies will be distributed using the same mechanics in place for advanced premium tax credits.
KR: On the technical side, there are three main buckets we’re focused on for implementation: we’ll have to make changes to our eligibility rules engine, then figure out the money flow for the subsidies, then how to reconcile the subsidies at the end of the year based on income changes. We have been coordinating regularly with our design team and carriers to develop and test new systems and processes. We’re also working closely with our state tax agency on the subsidy reconciliation piece.
PL: The partnership with the tax agency is new for us. We recognize that it is part of our collective job as agencies of the state to make sure that people are insured, so we are working hard on how we inform consumers that they have better options than to pay the penalty. Our intent is not to penalize individuals, but rather to make sure that people are insured.
How will Covered California raise awareness about these changes?
PL: We are currently doing market research on what messages will resonate best with consumers. We recognize that passage of a mandate does not necessarily mean consumers will automatically be aware of and comply with the law, so we are planning a marketing strategy to increase awareness. Rather than focus on the penalty, our ads will focus on the fact that the mandate is now the law in California and that we are making coverage even more affordable. We want to drive people to come in and shop for coverage.
What else should we know about California’s new initiative?
PL: Importantly, these proposals are just stopgaps for what California believes should be federal responsibilities [e.g., to enforce a mandate and to provide subsidies that make coverage more affordable for all]. The penalty is written so that it is in effect until the federal one is reinstated. As for the subsidies, the program is only set to run for three years. We believe this will greatly benefit Californians in the short-term, but don’t want it to be the long-term solution. In the absence of leadership from the federal government, states can step up, but ultimately the federal government needs to step in.
More details about California’s new subsidy program are available at Covered California’s board meeting presentation available here.
States that control their own insurance marketplaces – called state-based marketplaces (SBMs) – are leaders in providing affordability and choice, outperforming the federal marketplace on notable markers including higher enrollment, lower premium rate hikes, more participating issuers, and successfully attracting a young consumer base. These accomplishments are especially notable given recent federal policy actions that have unsettled insurance markets and a national rise in uninsured rates.
The success of SBMs results from years of hard work spent cultivating their markets while building operational and technical systems tailored to serve their states’ consumers. Thanks to the work of these SBMs and the evolution of new technology, it is now easier (and cheaper) for states currently using the federal platform to switch and adopt the SBM model.
As new states express interest in the SBM model, they can learn much from the leaders who have pioneered implementation of this model.
Earlier this month, the National Academy for State Health Policy (NASHP) hosted a webinar with SBM leaders from Idaho, Nevada, Massachusetts, and Washington, DC to showcase some of their lessons. Highlights are featured below, and a recording and slides from the webinar are available here.
Focus on the Basics (and Avoid Scope Creep)
SBMs provide more than “shop-and-compare” websites for consumers shopping for health insurance — SBMs are dynamic business enterprises. While their main objective is to make sure that individuals have “easy access to health coverage,” SBMs must also:
- Perform a series of complicated eligibility and enrollment functions easily;
- Work with the systems of partner organizations, including carriers, Medicaid, and outreach partners; and
- Be financially sustainable.
Rather than get carried away by bells, whistles, and complex policy aspirations, SBM leaders advise that future SBMs must first focus on building a functional, sustainable system. Once a working SBM is established with a long-term financing strategy, it can always grow and evolve to perform new functions.
Prioritize the Consumer Experience
Much of an SBM’s success depends on its ability to attract and retain consumers. Over the years, SBMs have worked diligently to improve the experience of its consumers. As Massachusetts Health Connector Chief of Policy and Strategy Audrey Gasteier explained, “Marketplaces require a lot of activity on the part of a consumer,” and it is important that consumers feel empowered. Outreach is a major component of this work — from providing educational materials to in-person assistance provided by brokers, Navigators, and certified application counselors. Earned press coverage and social media are also effective tools for SBMs to quickly spread the word about their products and policy changes at low cost. Speakers also noted the importance of call centers and recommended that states equip their centers with self-service capabilities so that consumers can easily resolve common issues over the phone.
Set Clear Expectations and Timelines
Heather Korbulic, executive director of Nevada’s SBM, presented an 18-month timeline for implementation of an SBM — from passage of enabling legislation to the marketplace’s first open enrollment period. While “out-of-the box” technology and adaptable systems make it easier than ever to for a state to build an SBM leaders cautioned states not to be too aggressive in their planning and timetables. As with any large-scale project, states should anticipate delays and challenges. For example, from the start states need to work closely with federal officials from the Center Consumer Information and Insurance Oversight (CCIIO) to establish their marketplace “blueprint.” While CCIIO experts serve as an important resource for states — providing years of technical and policy expertise to help guide states — implementation of an SBM requires strict federal oversight and approvals that may cause delays that are outside of the control of a state.
Throughout the SBM implementation process, leaders emphasized the importance of maintaining transparency so that stakeholders are not deterred by unexpected delays or issues. By keeping stakeholders informed of progress and expectations, an SBM will cultivate trust and maintain relationships critical to the marketplace’s long-term success.
Relationships Are the Foundation of an SBM
Any marketplace cannot function without engagement across a mix of stakeholders, which include:
- State policymakers who will establish the marketplace;
- Federal officials who will oversee and approve its implementation;
- Insurance carriers who will sell products through the marketplace; and
- Consumers whom the marketplace will serve.
Stakeholders will have different — and sometimes conflicting — interests and it is the job of the marketplace to balance those interests in pursuit of mutual goals. Leaders underscored the importance of insurer engagement, recognizing the central role of health plans in the success of the marketplace. Establishment of an SBM will require insurers in the state to establish new business practices. A state should not underestimate the uniqueness of how each carrier operates and the time it may take for each to adapt to the new SBM system.
Establish Clear Leadership that Can Take Quick Action
A state has the flexibility to choose how to establish its SBM — either as a state agency, a non-profit, or a quasi-public-private entity. Because an SBM must be responsive to changing consumer and insurer markets and be able to readily contract with vendors to develop needed services, it is best that an SBM assume a governance structure that can enable it to act quickly. Moreover, leaders directors noted the importance of leadership to any marketplace. While operation of an SBM takes a team, it is important to have one person who is clearly designated to establish priorities, take accountability, and make decisions to get the SBM “across the finish line.”
SBMs Serve as a “Hub” for Health Reform across State Agencies.
Regardless of the specific model chosen, SBMs must be able to work across existing state agencies including Medicaid, insurance departments, and other health policy agencies. SBMs are uniquely positioned to serve consumers who range from those on the cusp of Medicaid eligibility to those accustomed to various types of commercial market coverage. To ensure smooth processes for consumers, SBMs must be able to navigate between agencies to ensure that its policies and operations are consistent with what is being promulgated by its sister agencies.
For instance, SBMs are required to generate many different types of notices to consumers, such as information related to a consumer’s eligibility for coverage programs. SBMs coordinate closely with their Medicaid agencies on the language and process for sending these notices to help reduce confusion for consumers who might otherwise receive duplicative or misaligned information from both agencies. Additionally, because SBMs serve consumers who are eligible for federal tax credits, they serve an important role in informing state and federal policymakers about how policy changes may directly impact their consumers. To serve this role, it is important that SBMs have sufficient analytic capacity to process data on their consumers and advise on the implications of changing federal and state policies.
Let SBMs Adapt Over Time
Insurance markets and marketplace consumers are not static, and SBMs must be able to adjust to changing needs and consumers. They must constantly work to engage new consumers who may be coming in and out of other coverage programs (e.g., leaving parental coverage, employer-sponsored insurance, or Medicaid), while also adapting to evolving expectations as consumers interact more and more with e-commerce and advanced technology. Through consumer surveys and testing, SBMs are constantly learning and adapting their services. One benefit of their flexible structure is that SBMs are also becoming more sophisticated and efficient in navigating this process. Some have even been able to cut operational expenses and lower the assessments they charge to carriers who sell on their exchanges, which, in turn, results in lower consumer premiums. For example, Mila Kofman, executive director of DC Health Link, estimates her SBM was able to save approximately $2 million annually by moving its data servers to a cloud-based system in 2016.
Most notably, leaders point out that each SBM has taken a unique approach in how it has operationalized its marketplace. In the process, each has learned lessons from their SBM peers — from simply sharing effective marketing strategies to full partnerships, like Massachusetts’ adoption of Washington, DC’s technology for its small business marketplace. In this spirit, speakers advised states to learn from their peers as they work through their own challenges on the road to implementing SBMs.
NASHP and the SBMs are ready and eager to help support states as they contemplate establishing their own SBMs. For additional resources about SBM models and implementation, explore NASHP’s State Exchange Resource Hub.
In an April 29, 2019 letter to the secretaries of the departments of Treasury, Labor, and Health and Human Services, 12 state-based marketplace leaders expressed serious concerns about delays in proposed federal rules that would significantly change states’ insurance markets and marketplaces in 2020.
The proposed rules would impact health reimbursement arrangements (HRAs) — allowing employers to deposit pre-tax funds into accounts for employees to use to purchase insurance coverage. Previously, HRAs could only be tapped to purchase certain medical services and equipment. The government originally proposed the rule changes last October, but it has not released a final version of these rules yet, despite the fact the proposed changes are proposed to go into effect in 2020.
As proposed, implementation of the rule would require marketplaces to make significant policy and operational changes. With 2020 rate-filing deadlines starting next month and open enrollment beginning in six months, there is little time for marketplaces to implement changes.
In their letter, marketplace leaders emphasize that last-minute changes imposed by the final rule will lead to significant costs and a hasty implementation that would “detract from attention and service to marketplace enrollees and locally determined priorities for marketplace functionality.” They also point out that little time remains to adjust insurance product offerings to account for the hundreds of thousands of individuals expected to switch from the group health market into individual market coverage.
- View the letter marketplace leaders sent to the secretaries of the departments of Treasury, Labor, and Health and Human Services here.
- For a full summary of changes proposed under the rule read: New Federal Health Reimbursement Proposal Adds New Variables to State Health Insurance Markets
State-based health insurance marketplaces (SBMs) have emerged as successful models in delivering health insurance to consumers. They consistently outperform other states that use the federal platform in areas of enrollment, affordability, and increased plan offerings and competition. Their flexible structure allows SBMs to focus marketing and outreach efforts and promote policies that generate more health coverage choices at lower costs. The resources below explore the SBM model and how recent state and federal actions are impacting state insurance markets.
State-Based Health Insurance Marketplace Performance, June 30, 2020. This slideshow details data about current state-based marketplace models, enrollment trends, premium growth, and impacts of reinsurance.
State-based Marketplace Leaders Share their Success and Growth with Federal Leaders September 23, 2019 SBM executives came to Washington DC to share how they are succeeding, sustainable, and growing in number.
Slideshow: State Marketplaces Outperform the Federal Marketplace, April 1, 2019. This slideshows examines how state-based marketplaces outperform the federal marketplace model based on enrollment, affordability, and plan competition.
Chart: Individual Enrollment in Federal and State Health Insurance Marketplaces 2018-2019, April 1, 2019. This chart illustrates how the three marketplace models performed in every state between 2018 and 2019.
Blog: Is New Jersey’s Conversion to a State-based Insurance Exchange a Harbinger?, April 1, 2019. This blog explores why states like New Jersey are considering converting to a state-based marketplace model.
Blog: State-based Exchange Directors Share their Marketplace Success with Congress, March 11, 2019. This blog explores topics shared by marketplace executives with Congressional leaders during a series of meetings in Washington, DC.
State-based Marketplace Resource List, March 6, 2019. State-based marketplace (SBM) resources highlight strategies to support market stability and affordability, the 2019 enrollment period, and how state flexibility enables their success.
Blog: State-based Marketplaces Open for Business, Dec. 19, 2018. This blog describes how SBMs are still at work, even in light of a federal district court ruling striking down aspects of the Affordable Care Act. Includes information on enrollment deadlines for each state.
Blog: How Massachusetts SHOP-ed for a New Small Group Marketplace, May 1, 2017. This blog describes how Massachusetts leveraged Washington, DC’s marketplace technology to create a joint platform for its Small business Health Options Program (SHOP).
Transitioning to an SBM
New Jersey and Pennsylvania Approve Legislation to Launch State-Based Insurance Marketplaces July 9, 2019 This blog recaps recently enacted legislation in New Jersey and Pennsylvania to transition the states to the SBM model.
Blog: So You Want to Build a State-based Marketplace? Here’s How! — Advice from Marketplace Leaders, May 21, 2019. This blog highlights advice from state-based marketplace (SBM) leaders about how to transition to the SBM model.
Webinar: So You Want to Build a State-based Marketplace? Here’s How! May 10, 2019. During this webinar, state-based marketplace (SBM) leaders from Idaho, Massachusetts, Nevada, and Washington, DC discuss what states should know if they’re considering transition to the SBM model.
Blog: Is New Jersey’s Conversion to a State-based Insurance Exchange a Harbinger?, April 1, 2019. This blog explores why states like New Jersey are considering converting to a state-based marketplace model.
Q&A Nevada’s Insurance Director Talks about Transitioning to a State-based Marketplace and Saving Millions, April 24, 2018. Q & A with Heather Korbulic, Executive Director of Nevada’s Marketplace, about the decisions driving Nevada’s conversion to the SBM model.
Blog: How Massachusetts SHOP-ed for a New Small Group Marketplace, May 1, 2017. This blog describes how Massachusetts leveraged Washington, DC’s marketplace technology to create a joint platform for its Small business Health Options Program (SHOP).
Issue Brief: Building a More Efficient Marketplace: Lessons from DC Health Link’s Experience with Open Source Code, March 21, 2016. Issue brief detailing the savings and efficiencies generated from Washington DC’s conversion to an open source system for its marketplace.
Federal Impact on Markets
State Officials Fear Final Public Charge Rule Could Deter Health Coverage Enrollment September 10, 2019 This blog reviews the Administration’s recently enacted “public charge” rule and how the rule may impact enrollment in coverage programs including Medicaid, CHIP and health insurance marketplaces.
Changes to Poverty Measure Could Disqualify Thousands from State and Federal Programs June 17, 2019 This blog examines a proposal issued by the Office of Management and Budget that could impact the annual poverty measure used to assess eligibility for several state and federal programs.
Blog: Annual Federal Insurance Rule Includes Proposals to Address Prescription Drug Cost, Feb. 11, 2019. This blog details the ways the 2020 Notice of Benefit and Payment Parameters proposes to address prescription drug costs through changes in benefit requirements and limits on coupons for prescription drugs.
Chart: Deadline Looms for State Comments on Fed’s Latest Insurance Rules, Jan. 29, 2019. This chart contains details of all the federal changes to insurance market regulations proposed under the 2020 Notice of Benefit and Payment Parameters.
Blog: New Federal Health Reimbursement Proposal Adds New Variables to State Health Insurance Markets, November 6, 2018. This blog describes how proposed regulations grant additional flexibility over the administration of Health Reimbursement Accounts (HRAs).
Blog: Administration Proposes Significant Policy Changes for State Insurance Markets through New 1332 Waiver Guidance, Oct. 23, 2018. This blog explains how new federal guidance changes the requirements for states under section 1332 State Relief and Empowerment Waivers.
Blog: Lower Cost, Short-Term Insurance Plans Approved, but at What Cost to State Markets and Consumers, Aug. 7, 2018. This blog summarizes changes to federal regulations governing short-term limited duration insurance plans, state actions to regulate these plans, and what implications these changes may have for states’ markets.
Blog: The New Association Health Plan Rule: What Are the Issues and Options for States, June 26, 2018. This blog details all the changes made under a new federal rule regulating association health plans (AHPs)
Blog: New Insurance Rules Allow States to Revise Marketplace Coverage as Rate-Filing Deadlines Near, April 17, 2018. This blog provides a detailed summary of changes made by the 2019 Notice of Benefit and Payment Parameters, the federal rule governing health insurance in 2019.
Blog: How Elimination of Cost-Sharing Reduction Payments Changed Consumer Enrollment in State-based Marketplaces, March 20, 2018. This blog provides an update on how state regulators adjusted their insurance markets in response to the federal decision to eliminate funding for the cost-sharing reduction program. An accompanying chart documents resulting shifts in enrollment by metal level in state-based marketplace states.
SBM Responses to Federal Actions
Blog: State-based Exchange Directors Share their Marketplace Success with Congress, March 11, 2019. This blog explores topics shared by SBM executives with Congressional leaders during a series of meetings in Washington, DC.
Letter: State Exchange Leaders Express Concern about Potential Rule Changes, February 19, 2019. Letter from 13 SBM executives to the U.S. Department of Health and Human Services regarding changes proposed under the 2020 Notice of Benefit and Payment Parameters.
Letter: Twelve State-based Exchanges Outline Strategies to Stabilize Individual Market, August 29, 2018. Letter from 12 SBM executives to the Senate Health, Education, Labor and Pensions Committee detailing consensus strategies to bring stability to the individual insurance market.
Letter: State-based Marketplace Directors Ask Senate Leaders to Support a Reinsurance Program, February 6, 2018. Letter from 10 SBM executives to the Senate Health, Education, Labor and Pensions Committee to support Congressional efforts to stabilize insurance markets.
How States Stabilize Markets
Q&A: How Maryland Uses Multiple Policy Levers to Improve Health Coverage, Affordability, and Access October 14, 2019. Maryland’s Health Insurance Marketplace Executive Director discusses how reinsurance and a new easy enrollment program will help spread affordable coverage in the state.
How Washington State Is Reducing Costs and Improving Coverage Value – A Q&A with its Health Benefit Exchange CEO August 5, 2019 In this interview, Washington’s marketplace CEO discusses plans for implementation of Washington’s public option and standard benefit design.
How California Is Moving the Needle on Coverage and Costs: An Interview with Covered California Leaders July 29, 2019. In this interview, officials from Covered California talk about the implementation of California’s new law to expand health insurance subsidies and reinstate the individual mandate.
Webinar and Blog: State Reinsurance Programs Lower Premiums and Stabilize Markets — Oregon and Maryland Show How, Dec. 11, 2018. This blog describes early results from Maryland and Oregon’s implementation of a reinsurance program for their individual insurance market. Additional details are shared in a webinar linked in this blog.
Blog: Health Coverage and Human Service Program Eligibility: Considerations for States Weighing Systems Integration, Oct. 2, 2018. This blog describes various policy considerations for states that are interested in implementing more integrated eligibility systems for their health and human services programs.
Blog: How State Policymakers Spent Their Summer: Stabilizing Their Insurance Markets, Sept. 11, 2018. This blog provides a round-up of new state legislation passed to implement an individual mandate and to regulate short-term insurance and association health plans.
Blog: #NASHPCONF18: Policymakers Share Their Approaches to Stabilize State Individual Insurance Markets, Aug. 28, 2018. This blog recaps a NASHP conference panel with state officials highlighting strategies used to stabilize markets and identify lingering challenges to insurance markets’ affordability and choice.
Blog: #NASHPCONF18: State Policymakers Share Views on Evolving Individual Insurance Markets, Aug. 21, 2018. During NASHP’s 31st Annual State Health Policy Conference, experts and state officials assessed the dramatic sea changes that recent federal action has imposed on their individual health insurance markets, what they are doing to stabilize them, and what the future holds.
Webinar and Blog: Ministry, Association, and Short-Term Health Insurance Plans – What’s a State to Do? May 29, 2018. During this webinar, experts reviewed major trends expected for insurance markets, and state actions and tools to encourage stability and consumer protections in the midst of these changes.
Blog: States Face Short Deadlines to Address the Risks of Short-term Insurance Plans, May 1, 2018. This blog reviews options for state regulation of short-term insurance plans in light of proposed federal rules to expand their availability.
Q&A with Pennsylvania’s Insurance Chief: Jessica Altman Explores the Evolving Role of Insurance Coverage, April 10, 2018. Altman speaks with NASHP about the evolving role of health insurance coverage in state and national politics.
Webinar: How Would a State Individual Insurance Mandate Work? Feb. 7, 2018. This webinar dives deep into Massachusetts’ individual mandate and a new proposal in Maryland to create an auto-enrollment process for individuals through its insurance marketplaces.
Webinar: Prohibiting Discrimination under the Affordable Care Act—State and Federal Roles and Responsibilities, April 18, 2016. This webinar examines the state role in prohibiting discrimination in health insurance coverage per requirements issued under the Affordable Care Act including the impacts of nondiscrimination requirements on insurance markets.
States with state-based insurance marketplaces (SBMs) have consistently outperformed states that use the federal platform in enrollment, affordability, and increased plan offerings and competition, prompting states to consider launching their own marketplaces and Congress to propose new funding to support states that want to transition.
New Jersey may become the next state to convert to an SBM, following Gov. Phil Murphy’s announcement of a plan to move off the FFM and create an SBM, which exercises greater control over marketing, enrollment, and plan recruitment efforts than FFMs. New Jersey’s transition follows Nevada, which will become an SBM later this year, and Idaho, which transitioned from an FFM in 2014.
New Jersey’s plan to become an SBM follows other actions taken to stabilize its insurance market, including enactment of an individual mandate and a reinsurance program. These two policies alone reduced premiums by 9.3 percent this year. Transitioning to an SBM will give New Jersey even greater control over its markets, including the flexibility to fully access marketplace data and to implement policies tailored toward state-specific needs and populations.
New Jersey’s SBM would be housed in its Department of Banking and Insurance and begin offering coverage for plan year 2021. The state will finance its transition through a 0.5 percent assessment on marketplace premiums, an amount diverted from FFM user fees, which are expected to drop from 3.5 to 3 percent next year. Once operational, New Jersey’s SBM will use the 3.5 percent fee (generating an estimated $50 million per year) to finance operations and consumer assistance and outreach. Legislation is pending to implement this change.
Fueled by growing evidence of SBM success, other states may follow New Jersey’s lead. NASHP is closely monitoring action in the Congress where funds to support states that convert to an SBM are included in the Protecting Pre-Existing Conditions and Making Health Care More Affordable Act of 2019.
View a chart with every state’s marketplace model and enrollment changes between 2018 and 2019 here and view a slideshow highlighting how SBMs have outperformed state marketplaces that use the federal platform here.
** The District of Columbia reports that 1,352 lives transitioned from their individual health insurance marketplace to their Small business Health Options Program (SHOP) from 2018 to 2019, a major factor contributing to its individual market loss in 2019.
*** 2019 is the first year that Vermont enacted a policy to permit the sale of individual market plans sold outside its marketplace. This enabled the sale of “mirror” plans that are insulated from premium increases attributed to “silver-loading,” a practice of premium modifications made to account for the loss of federal cost-sharing reduction funding.
View 2017-2018 state-based marketplace enrollment here.
The President’s 2020 budget request proposes a 12 percent reduction in the US Department of Health and Human Services (HHS) budget, compared to 2019 federal fiscal year (FFY) funding levels. The following highlights some of the key components of the President’s proposed $87.1 billion HHS budget proposal that could impact state health programs.
Affordable Care Act (ACA) and Insurance Markets
The proposed budget recommends the following changes to the ACA and insurance markets:
- Converts Medicaid and private market subsidies into state block grants: The changes are modeled after a 2017 bill originally proposed by Sens. Lindsay Graham (R-SC), Bill Cassidy (R-LA), Dean Heller (R-NV), and Ron Johnson (R-WI), which would convert Medicaid as well as private market subsidies (e.g., advance premium tax credits and cost-sharing reductions) into block grants for states. The program would require that states dedicate 10 percent of their grants toward funding that protects high-cost individuals, including those with pre-existing condition. The change is estimated to result in $777 billion in cuts to these programs over a 10-year period.
- Establishes a minimum contribution standard for health insurance premiums. Amends premium tax credit calculations to require that individuals contribute a minimum percentage of their income toward insurance premiums. Currently, there is no such requirement, enabling some consumers to pay as little as zero for insurance once tax credits are calculated.
- Funds the cost-sharing reduction (CSR) program: Proposed appropriation for CSR payments through calendar year 2020, with a request that CSR funding remain in place as long as the CSR requirement remains in place for health insurers. However, the budget only allocates $479 million in funding for calendar year 2020, which falls significantly short of the Congressional Budget Office’s CSR cost estimate of $10 billion in FFY 2020. The President’s proposed FFY 2019 budget included a similar proposal that was not funded.
- Reduces the grace period for payment of health insurance marketplace premiums: This suggests that the 90-day grace period consumers are given to enact marketplace coverage be reduced to 30 days.
- Expands availability of health savings accounts (HSAs): Allows HSAs to be combined with any plans that are below a certain value threshold based on their benefits and cost-sharing structure (actuarial value of up to 70 percent). Current law only allows for use of HSAs with high-deductible health plans.
The President’s FFY 2020 budget contains some significant changes to Medicaid financing that were in the FFY 2019 budget, as well as other proposals impacting its policies and program operations:
- Cuts overall program funding: Proposes to cut $777 billion over 10 years from Medicaid and marketplace subsidies.
- Repeals ACA’s Medicaid expansion and targets Medicaid funding: Advocates repealing the ACA’s Medicaid expansion and supports a refocusing of Medicaid on individuals the program was “originally intended to serve.”
- Requires work and community engagement initiatives: Notes that work and community engagement demonstrations for able-bodied adults enrolled in Medicaid have been approved in eight states. Proposes that all able-bodied, working-age individuals meet work requirements to receive Medicaid benefits (and other federally funded public assistance programs), predicting this will save $130.4 billion over 10 years.
- Gives states the ability to change certain program elements and eligibility determination processes: Proposes to give states additional flexibility over Medicaid benefits and cost sharing, including making non-emergency medical transportation optional and allowing states to use state plan authority to increase copayments for nonemergency use of emergency departments rather than requiring a waiver to do so. Proposes to allow states to apply asset tests for individuals who are financially eligible for the program through the Modified Adjusted Gross Income (MAGI) standard. States would also be permitted to conduct eligibility redeterminations for MAGI-eligible individuals more frequently.
- Reduces the federal match rate for Medicaid eligibility staff: Reduces the federal match rate for Medicaid-eligibile workers from 75 percent to 50 percent by FFY 2024, predicting this will save $7.4 billion over 10 years.
- Prohibits Medicaid payments to public providers in excess of costs: Proposes to limit Medicaid reimbursement for health care providers operated by a unit of government to no more than the cost of providing services to Medicaid beneficiaries.
- Allocates resources for program integrity and data collection: Includes measures designed to address waste, fraud, and abuse, as well as forthcoming guidance from the Centers for Medicare & Medicaid Services (CMS) about improving data collection of Medicaid supplemental payments.
- Continues Medicaid Disproportionate Share Hospital (DSH) reductions: Current law reduces Medicaid DSH allotments between FFY 2020 and FFY 2025. This budget proposes to continue DSH allotment reductions from FFY 2026 through FFY2029 and estimates this will save $25.9 billion over 10 years.
- Allows states to provide postpartum coverage for pregnant women with substance use disorders (SUDs): Proposes to make it easier for states to offer pregnant women diagnosed with SUD full Medicaid benefits for one year postpartum, which would cost $245 million over 10 years.
- Improves maternal mortality and morbidity interventions: Through the Center for Medicare and Medicaid Innovation, it proposes to explore a potential service delivery model to test ways to address maternal mortality and morbidity rates.
- Extends postpartum Medicaid coverage: Proposes making it easier for states to extend full Medicaid coverage for up to one year after birth for postpartum women with SUD. Currently, postpartum Medicaid coverage ends 60 days after birth, which can be a barrier to SUD treatment for postpartum women.
- Expands flexibility for enrolling out-of-state providers in Medicaid: Currently, when Medicaid beneficiaries receive care outside of their home state, their provider must enroll in the beneficiary’s home state Medicaid program to receive payment. To reduce paperwork and promote access to specialized out-of-state care, the budget proposes allowing out-of-state providers to be paid as long as they are enrolled in Medicare or any state Medicaid program. This proposal would cost $9 million over 10 years.
- Extends Medicaid managed care waivers: Currently, to implement mandatory, risk based Medicaid managed care, states must request waivers from HHS every two to five years. This budget proposes permitting the HHS secretary to approve waivers for longer time periods, and even make the state’s managed care authority permanent if a waiver has been renewed once before.
Proposals Affecting Individuals Dually Eligible for Medicare and Medicaid
- Coordinates review of Dual Eligible Special Needs Plans marketing materials: Allows for joint state and CMS review of marketing materials for Dual Eligible Special Needs Plans.
- Revisits Part D special enrollment period for dually eligible individuals: Clarifies the special enrollment period (SEP) for Medicare Part D to allow CMS to apply the same annual election process for all eligible individuals, but maintains the ability for dually eligible beneficiaries to use an SEP to opt into integrated care programs or to change plans following auto-assignment.
- Expands Medicaid drug coverage demonstration: Would allow up to five state Medicaid programs to test a closed formulary under which they negotiate prices directly with drug manufacturers. However, states in this demonstration cannot participate in best-price reporting or the Medicaid Drug Rebate Program. Closed formularies would permit states to pursue a selective and more cost-effective specialty pharmacy network, but leaving the rebate program is a risk states need to weigh. Predicted savings is $410 million over 10 years.
- Eliminates the Medicaid rebate cap: There is currently a statutory cap on manufacturer drug rebates at 100 percent of a drug’s average manufacturer price. Once the cap is reached, manufacturers can increase a drug’s price without increasing associated Medicaid rebate. Lifting the cap will ensure manufacturers pay rebates covering all prices of a drug. It will also protect state Medicaid programs from the cost of excessive price spikes and incentivize lower list prices.
- Authorizes the Health Resources and Services Administration (HRSA) to collect a user fee from participating 340B hospitals. Covered entities would pay 0.1 percent of total 340B drug purchases to create a sustainable source of funding to manage the 340B Drug Pricing Program.
- Requires 340B transparency. All 340B-covered entities would need to report savings achieved from the 340B program and their uses to HRSA.
- Improves integrity of rebate program: Enables HHS to impose fines on manufacturers when they misclassify drugs for Medicaid drug rebate purposes. Predicted savings are $347 million over 10 years.
Children’s Health Insurance Program (CHIP)
The President’s proposed budget only includes one suggested policy change that does not offer much detail.
- Eliminates an existing fund and establishes a new one to provide states with additional federal CHIP funds in case of a shortfall. The proposed budget eliminates the Child Enrollment Contingency Fund, which provides additional funding to states that anticipate a shortfall of federal funds due to higher-than-expected CHIP enrollment. However, it also creates the Shortfall Fund and tasks CMS to transfer unused annual appropriations to this fund for states that need additional federal CHIP dollars.
Prevention and Public Health
The HHS budget request prioritizes public health through its investments in the opioid crisis and by targeting funds to support the launch of an initiative designed to end HIV/AIDS across the country. The high-level budget breakdown:
- Continues support to prevent, treat, and support recovery from opioids, including:
- $1.5 billion for State Opioid Response grants in support of all states and territories;
- $221 million to expand the behavioral health workforce, including an additional $4 million for a new effort authorized in the SUPPORT for Patients and Communities Act to increase the number of providers that are able to prescribe medication-assisted treatment;
- $120 million to support SUD treatment and prevention, including opioid abuse, in rural communities at the highest risk;
- $476 million for the US Centers for Disease Control and Prevention to continue current activities in support of all 50 states and territories, as well as local jurisdictions, to track and prevent overdose deaths;
- Align SUD treatment privacy protections with other confidentiality protections;
- Prevent abusive prescribing by establishing HHS reciprocity with the Drug Enforcement Administration (DEA) to terminate provider prescribing authority;
- $330 million in Department of Justice funding for opioid-related state and local assistance, including: $145 million for the Comprehensive Opioid Abuse Program to support, treatment and recovery, diversion, and alternatives to incarceration programs; $125 million for drug courts, mental health courts, and veterans treatment courts; $30 million for residential substance abuse treatment; and $30 million for prescription drug monitoring programs, as well as funding for the DEA to combat illicit drug use and trafficking; and
- Funding for US Department of Agrilculture: $44 million in distance learning and telemedicine grants, of which $20 million would be dedicated to projects that combat the opioid crisis. In addition, the budget proposes $60 million in community facilities grants, which can be used to support treatment centers and other community needs.
- Aims to end the HIV epidemic: The HHS budget invests $291 million in FFY 2020 for the first phase of the administration’s proposed initiative, which will target areas with the highest infection rates with the goal of reducing new diagnoses by 75 percent in five years and 90 percent in ten years. The initiative includes:
- $140 million investment in CDC to test and diagnose new cases, link newly infected individuals to treatment, connect at-risk individuals to pre-exposure prophylaxis (PrEP), expand HIV surveillance, and directly support states and localities;
- $70 million in new funds for the Ryan White HIV/AIDS Program within HRSA to increase direct health care and support services, in an effort to increase viral suppression among patients in targeted, high-incidence areas. Also includes $50 million to HRSA for expanded PrEP services, outreach, and care coordination in community health centers;
- Prioritizes the reauthorization of the Ryan White program; and
- $25 million in new funds for the Indian Health Service to screen for HIV and prevent and treat hepatitis C in those living with HIV/AIDS.
- Expands activities to address HIV/AIDS: Allocates $54 million for the Minority AIDS Initiative within the Office of the Secretary and $116 million for the Minority AIDS program in the Substance Abuse and Mental Health Services Administration in an effort to increase services to disproportionately affected communities of color.
- Prioritizes funding for programs that address the needs of older Americans, many of whom require some level of assistance to continue living independently within their communities. This funding provides critical help and support to seniors, providing direct services such as respite care, transportation assistance, and personal care services. These services also include $907 million for senior nutrition programs. This funding is estimated to provide 221 million meals to more than 2.3 million older Americans nationwide.
- Cuts CDC’s total discretionary budget authority by $1.276 billion, compared to 2019 funding levels. Program-level cuts would be $153 million. Other changes include:
- A cut of $237 million for chronic disease prevention and health;
- The creation of the America’s Health Block Grant as a means of reforming state-based chronic disease programs; and
- An increase of $10 million for influenza monitoring and prevention.
Health and Housing Issues and Other Programs Addressing Social Determinants of Health
Some components of the HHS budget, and several aspects of the US Department of Housing and Urban Development (HUD) budget, could affect states’ abilities to address health through housing and other social determinants of health. The proposed budget cuts HUD funding by $8.7 billion — a 16.4 percent decrease from 2019 estimate.
- Proposes changes to federal investment in rental assistance. The budget request would increase rental assistance to $37.9 billion, which would maintain services for all currently enrolled HUD-assisted households. However, “work-able” residents would be required to pay a greater share of their rent.
- Adds funds to the Rental Assistance Demonstration (RAD) program, which supports transitioning public housing to housing voucher and project-based rental assistance units. RAD would prioritize the redevelopment of public housing units in designated Opportunity Zones.
- Increases funding for lead-safe healthy homes by $60 million to $290 million.
- Supports changes to existing programs:
- Cuts $45 million from Housing Opportunities for People with AIDS, and
- Eliminates the Community Development Block Grant (CDBG), “recognizing that state and local governments are better equipped to address local community and economic development needs.”
- Proposes policy and financial changes for safety net programs. The budget cuts $17.4 billion from the Supplemental Nutrition Assistance Program and cuts approximately $1.1 billion from the Temporary Assistance for Needy Families (TANF) block grant. Adds additional work requirements in federally funded public assistance programs, including Medicaid and TANF.
- Eliminates several programs serving children and youth with special health care needs (CYSHCN): Proposes eliminating several programs funded by HRSA that help states better serve CYSHCN. These include initiatives to improve systems of care for those with autism and other developmental disorders, pediatric mental health conditions, genetic disorders, and sickle cell disease.
- Ends programs promoting screenings for infants and mothers: The budget proposes ending an initiative that supports universal newborn hearing screening and a program that promotes screening and treatment for maternal depression.
- Promotes innovations to address maternal mortality: The budget proposes that the Centers for Medicare and Medicaid Innovation (CMMI) create a service delivery model for states to test interventions to improve maternal morbidity and mortality. This proposal would not require Congressional approval, and is in addition to CMMI’s recently released Maternal Opioid Misuse and Integrated Care for Kids models.
- Funds Family-to-Family (F2F) Information Centers: Funds F2F Health Information Centers at their current level through 2021.
- Maintains Maternal, Infant, and Early Childhood Home Visiting (MIECHV) program: Maintains MIECHV program at current levels.
- Promotes foster care: To promote family-based foster care for children with significant disabilities, proposes spending of $357 million over 10 years on salaries for foster parents. The recent Family First Preventive Services Act (FFPSA) placed restrictions on funding for congregate care placements (such as group homes), so this proposal would support states in developing alternatives to congregate care. Additionally, the FFPSA allows states to provide preventive services, such as mental health or substance abuse services, to keep children with their families. The budget proposes creating a flexible funding option that would further broaden eligibility for preventive services and increase the types of services that states can provide.
- Caps benefits for families with more than one child enrolled in the Supplemental Security Income (SSI) Disability Program: Creates a cap on the total SSI benefits that families with more than one child receiving SSI disability payments can receive.
- Increases Individuals with Disabilities Education Act (IDEA) funds: Proposes a slightly increased level of funding ($13.2 billion) for IDEA formula grants to states to support special education and early intervention services.
- Maintains funding for Women, Infants, and Children (WIC): Proposes maintaining current level of funding ($5.8 billion) for the Special Supplemental Nutrition Program for WIC.
Today, 13 state-based marketplace directors submitted a joint letter to the US Department of Health and Human Services responding to its request for comment on possible changes to state insurance rules that could eliminate automatic re-enrollment and change cost-sharing reduction policies by 2021. The directors expressed concern that potential changes curtailing those policies would, “create market instability, harm consumers, and intrude on states’ rights to manage their insurance markets.” Read their letter.