Medical homes are critical components of comprehensive care systems for children and youth with special health needs (CYSHCN). They can reduce costs and improve outcomes and care experiences for CYSHCN and their families. This new report, State Strategies to Advance Medical Homes for Children and Youth with Special Health Care Needs, examines effective strategies used by 16 states to advance a medical home model of care for CYSHCN and their families, as part of the Maternal and Child Health Bureau, Health Resources and Services Administration’s State Implementation Grants to Enhance Systems of Services for CYSHCN through Systems Integration. Read the report.
If you’re working to control the cost of prescription drugs, you need to know the lingo used by the pharmaceutical industry. Below is a glossary of terms commonly used by players in the drug research, regulation, manufacturing, distribution, and purchasing worlds.
Drug Product Terms
Brand product: Branded products are not generic drugs or products. A brand can be an innovator (first-in-class) or not. It is protected by a patent or has an expired patent. It is licensed under a New Drug Application by the US Food and Drug Administration (FDA).
Generic drug: Competitors to a branded product that has an expired patent. Generics are considered identical to the brand product. Licensed under an Abbreviated New Drug Application by the FDA.
Biologic: A therapeutic drug or a vaccine, made from living organisms — human, animal, yeast, or microorganisms — licensed under a Biologic License Application by the FDA.
Biosimilar: Competitors to the first-in-class biologic product that has an expired patent. These drugs are not currently considered to be identical to the original product (because of the nature of manufacturing with live products), but are considered to be therapeutic alternatives.
Retail drugs: Any kind of drug typically available at a pharmacy counter. Usually billed on a pharmacy claim.
Physician-administered drugs: Any kind of drug that cannot typically be self-administered. Usually billed on an office visit claim.
Specialty drug: A drug that is costly, requires special supply chain features (such as freezing or cold storage), typically indicated for a small group of patients, and where the patients may need special case management services. This is the broadest definition. There is no single agreed-upon definition, so sometimes specialty drug will only mean high-cost. For instance, specialty drugs in the Medicare Part D program are only defined by cost – currently $670/month (2018) – and indexed annually.
Innovator drug: The drug from which generics or biosimilars are made – the first product of its type.
Multisource drugs: Any and all the generic drugs (included the innovator) which are competing against each other.
Small molecule products: These are capsules, tablets, powders, ointments, sprays – that are generally self-administered and available at retail pharmacies with no live ingredients.
Large molecule products: These are known as ‘biologics’ – and contain live active ingredients. They are infused or injected and are not typically self-administered.
Pipeline drugs: Drugs (small or large molecule) under development by a manufacturer.
In-line or post-market drugs: Products that are licensed and in the market.
Distribution System Terms
Wholesaler: In a simple distribution system, the wholesaler is the first purchaser of a drug product – direct from the manufacturer. Wholesalers buy very large quantities and then resell either direct to provider-purchasers (like a large health system, pharmacy or pharmacy chain), or resell to smaller, regional distributors for regional or local distribution to retail pharmacies and hospitals.
Specialty pharmacy: These organizations may or may not take ownership of the drug product. Their clients are drug manufacturers that want or need limited distribution of specialty drugs. Specialty drugs are typically (but not always) high cost, require special shipping and storage (freezing or cold storage), are indicated for relatively small patient populations treated by physician specialists. Manufacturers have been accused of using specialty pharmacies to limit access to a drug by potential generic or biosimilar competitors (limited distribution can make it difficult to obtain a drug sample if the entity is not a treating provider on a list approved by the manufacturer). Specialty pharmacy can deliver ‘just in time’ products by working with treating providers to supply the appropriate drug in time for a patient visit at the location where the drug will be used.
Administrative Organizations in the Supply and Payment Chain Terms
Health plan: Health insurance coverage provided by an individual or group that provides or pays the cost of medical care. Health plans can be provided by public (Medicaid) or private (an employer) entities.
Payers: The entity responsible for processing insurance claims. It can handle eligibility, enrollment, and premium payment oversight.
Pharmacy benefit manager (PBM): PBM clients are health plans. PBMs handle some or all of the pharmacy benefit for health plans (formulary design, cost sharing and tiers, pharmacist networks and contracts, price concession negotiation with manufacturers). PBMs may own mail order pharmacies and/or specialty pharmacies. Unless the PBM owns a pharmacy, it is not part of the drug distribution/supply chain.
Group purchasing organization (GPO): These entities represent groups of drug purchasers, such as hospitals and health systems. A GPO negotiates on behalf of its clients for either up-front, on-invoice discounts or back-end rebates. Importantly, GPOs do not take ownership of a drug; they are not part of the supply chain. GPOs essentially negotiate a purchase-order from which members of the buying group can purchase in whatever quantities needed. Wholesalers supplying to GPO members typically provide the drug at the discounted price on the invoice and then are compensated by the manufacturer after the fact. GPOs may provide additional client administrative services as well.
Pharmacy services administration organization (PSAO): Similar to a GPO, but it serves independent pharmacies. In addition to price negotiation with PBMs, PSAOs offer a variety of administrative services to pharmacies. PSAOs are often owned by wholesalers or PBMs.
Wholesale acquisition cost (WAC): The price the wholesaler pays the manufacturer. Generally considered the ‘list’ price. This price is under the control of a manufacturer.
Average wholesale price (AWP): The price at which a wholesaler sells product to others in the supply chain (hospitals or pharmacies for example). AWP is independent of whatever price concession deals a manufacturer might make with hospitals or other purchasers. AWP is generally estimated by companies that provide “pricing files” to insurers or PBMs so they can know how much to reimburse pharmacies, hospitals, clinics, etc. for dispensed drugs. AWP of the pricing files is thought to be higher than what dispensers actually pay. Therefore, many payers reimburse pharmacies something like AWP-17 percent or lower – reflecting what they believe to be the cost that needs to be reimbursed.
Actual acquisition cost (AAC): Increasingly health plans and other large payers are trying to ascertain what pharmacies and other dispensers actually paid to get the drug in stock. Payers want to reduce the extent to which dispensers profit on the drug price and move profit or revenue to the professional fees associated with the dispensing of the drug.
Types of Manufacturer Price Concessions
Rebates: These are provided by manufacturers and are typically based on the ability of a payer to move market share for the manufacturer’s product. Rebates are confidential. Rebates are billed periodically by the insurer or PBM based on drug utilization subject to the rebate. Rebates allow the manufacturer to retain a high list price (which can be important to the manufacturer so any US price that might wind up in the reference pricing system of another country is high).
On-invoice discounts: Whatever price concession agreement a manufacturer has with a purchaser, the discount is on the invoice (rather than a post-sale rebate).
Coupons: These are given to consumers for use at the point of service (the pharmacy counter). Coupons mitigate the impact of insurance coverage cost sharing for a manufacturer’s product. A coupon might cover the full deductible cost, copays or coinsurance. Pharmacies redeem the coupons with the manufacturer or its coupon administration vendor. There are different views about coupons. They provide patient out of pocket cost relief for drugs where insurance benefits require significant cost sharing on high cost drugs. They also can undermine insurer efforts to control utilization (and costs) by encouraging a patient to move to less costly generics or alternative branded treatments. Coupons are not permitted in Medicaid or Medicare because of the effect on program costs. They are restricted in the commercial markets of California and Massachusetts.
Medicaid Rebate Terms
Average manufacturer price (AMP): This is a Medicaid term and does not have any meaning or use outside the Medicaid program at this time. It is calculated by the manufacturer and provided to CMS, which uses it to let state Medicaid programs know the unit rebate amount for billing manufacturers. It is the average of manufacturer prices to the wholesale and retail class of trade (does not include sales from wholesalers to retailers but only the prices in any direct agreement between manufacturer and a retail seller). The Medicaid rebate is 23.1% of the AMP. AMP is confidential and not publicly available.
Best price (BP): Is a Medicaid term and does not have any meaning or use outside the Medicaid program at this time. It this best price the manufacturer offers to any purchaser in the U.S.; this could be a clinic, a hospital, a health plan, a PBM, and so on. Generally speaking, if the BP is greater than 23.1% of the AMP, all state programs will get the BP rebate. BP is confidential and not publicly available.
Provider Drug Reimbursement Payment Limit Methods
Average sales price (ASP): This is a Medicare Part B reimbursement term used to pay for Medicare Part B drugs (which are typically physician-administered drugs). This is the weighted average manufacturer price for a product in the market. This applies to multi source drugs and patented products. Medicare reimburses physicians ASP+ 6 percent for Part B drugs.
Maximum allowable cost (MAC) and federal upper limits (FUL): Briefly, these payment limit methods apply only to multisource drugs (including the off-patent brand). The approach appears to be used by almost all payers. MAC/FUL is the average price of all the multisource drugs in a group. The frequency the MAC/FUL is recalculated is at the discretion of the payer. The multi-source drugs to which a MAC is applied is also at the discretion of the payer.
Actual acquisition cost (AAC): Discussed elsewhere, payers increasingly are moving to an AAC model, which is calculated using provider cost survey data.
Some percentage of average wholesale price (AWP): Payers assume that a published AWP is higher than what a pharmacy or provider actually pays for a drug, so payers reimburse pharmacies and other providers some percentage less than AWP, for instance AWP – 17 percent.
Reference price: This is generally not used in the US at this time for drugs. A reference price limits the amount the insurer will pay for one product to the price of a similar product in the market. There are a number of ways to structure reference pricing, an example would be to tie the amount an insurer will pay (to a doctor or pharmacy for instance) to the lowest price of any drug in the therapeutic class, or limit the insurer payment to the average price of drugs in a class. If the consumer choses a product that exceeds the reference price, the consumer pays — to the provider or pharmacy– the difference between what the insurer will reimburse the pharmacy and the pharmacy’s costs/charge of the more expensive drug.
Dispensing fee/Professional fee: There are two parts to pharmacy payment: ingredient cost and dispensing fee. The ingredient cost is where payers apply MAC, AWP, AAC etc. The dispensing fee remunerates for the professional services of the pharmacist. Dispensing fees have trended upward in recent years as payers try to move from pharmacy profits on the ingredient cost to profits on the dispensing fee and as pharmacists have taken on a greater role in case management type services for some health plans.
(Last updated June 2018)
The US Centers for Disease Control and Prevention estimates that children in 4 million households are exposed to high levels of lead. Elevated blood lead levels increase risk for damage to the brain and nervous system, slowed growth and development, and learning, behavior, hearing, and speech problems, along with long-term financial financial and health implications.
In 2018, NASHP scanned state health care policies in all 50 states and Washington, DC that promoted lead screening and treatment for children and pregnant women. The review, which included metrics, incentives, provider guidelines, CHIP abatement coverage, and reporting requirements, has been summarized in a new 50-State Scan of State Health Care Delivery Policies Promoting Lead Screening and Treatment.
NASHP, in partnership with the Association of Maternal and Child Health Programs (AMCHP), developed this resource as part of the Health Resources and Services Administration’s Maternal and Child Environmental Health (MCEH) Collaborative Improvement and Innovation Network (CoIIN).
This project is supported by the Health Resources and Services Administration (HRSA) of the US Department of Health and Human Services (HHS) under grant number UJ9MC31105 – Maternal and Child Environmental Health Collaborative Improvement and Innovation Network (CoIIN) for $849.999. This information or content and conclusions are those of the author and should not be construed as the official position or policy of, nor should any endorsements be inferred by HRSA, HHS or the US government.
Greg Moody, director of Ohio’s Office of Health Transformation, has quietly spearheaded one of the most effective redesigns of a state health care payment system in the country, generating cost savings and improving public health by showing providers how the cost and quality of their care compares with their peers.
This value-based cost-savings and quality improvement approach, embraced by Ohio’s employers, insurers, and Medicaid managed care plans, pays for health care value instead of volume by analyzing two factors — how much it costs a provider:
- To provide high-quality comprehensive primary care, and
- To treat an “episode of care,” such as treating an acute asthma episode.
Providers are given a report card that assesses their charges, quality of care, and patient outcomes. If they deliver value-based care, they are financially rewarded with a $4 per patient per month bonus. If their care is over-priced and poor quality, compared to their peers, they get bad reviews and no rewards.
This value-based payment approach with its financial inducements has reduced acute asthma treatment costs by 21 percent and acute COPD treatment costs by 18 percent in 1 million Medicaid enrollees over a two-year period. Not only are the state’s Medicaid and employer plans saving money, patients are healthier because doctors are doing more to keep them well, which benefits overall population health.
“We can spend time fighting about health care coverage, like the federal government has for the last few years, or we can address the underlying health care costs,” observed Moody, a member of the National Academy for State Health Policy’s executive committee. “Today, I think it’s up to states to experiment and explore how to create sustainable health care costs.”
How Ohio Launched Value-Based Payment Reform
Ohio, which has been conducting its health care payment delivery reform experiment for eight years, is finding success with a value-based approach that replaces a pay-per-visit system with one that promotes comprehensive primary care and rewards providers who deliver efficient episodes of care. The state focused on improving care coordination, integrating physical and behavioral health, rebuilding behavioral health system capacity, strengthening home- and community-based services, improving community services for the disabled, and modernizing its Medicaid administration.
To date, a handful of states have taken small steps to develop a value-based payment system, but early results have not yielded dramatic, financial successes and many state policy makers are still casting about for a system that quickly delivers cost savings and quality care. According to Moody, Ohio found it and has spent more years implementing and refining it than any other states.
Moody, who worked for then-Congressman John R. Kasich researching Medicaid funding while staffing the US House Budget Committee, was appointed by newly-elected Governor Kasich to Ohio’s new Office of Health Transformation in 2011.
“Governor Kasich did something I never saw anyone do and it is key to how we got it done,” he explained. “About 18 months before he became governor, he assembled a health care team and told us, ‘I’m not running for governor unless we have ideas to propose.’ Now normally, you start recruiting and developing policy proposals after you get elected, but on his third day in office in January 2011, we had already done our homework and released our strategic plan. Now, eight years later, we are using the same plan.”
Ohio modernized its Medicaid system by creating a stand-alone Medicaid department with a new claims payment system and it provided an online eligibility tool to residents who no longer had to travel to county offices to apply. It also consolidated mental health and addiction services as the state’s opioid epidemic exploded and expanded Medicaid.
State leaders also began engaging partners, including provider groups, health plans, and Medicaid managed care organizations, to identify public health priorities that their payment reforms – in this case applying the episodes-of-care payment system – could support. “The starting point,” Moody explains, “is to be clear about our population health priorities – or in payment terms, define what we want to buy.’”
Ohio decided it wanted to prioritize improvements in three main health care areas:
- Mental health and addiction, addressing depression, suicide, drug dependency, and drug overdoses;
- Three chronic diseases: heart disease, diabetes, and asthma; and
- Maternal and infant health.
Shaping Physician Reimbursements to Improve Population Health
Next, Moody’s office asked high-performing primary care practices what they did to keep patients well. “The problem is none of these activities [recommended by doctors] are properly reimbursed under fee-for-service – for example, holding time for same-day appointments, providing 24/7 access to care, risk stratification of patients, and scheduling based on risk.” Moody knew that a new value-based care system had to reward providers who delivered those successful — though uncompensated — services.
To achieve these goals, Ohio created a Comprehensive Primary Care Model that enrolled 161 primary care practices to serve 1 million patients. Ohio collected and evaluated 1,800 performance reports that included patient cost and care quality measures. It also provided $3 million in “enhanced payments” to providers who delivered value-based care. To qualify for the $4 PMPM bonus, providers had to keep patients well by meeting the new quality requirements, including the same-day appointments, team-based care, patient outcomes, and reduced hospitalizations and emergency department use.
In December 2014, Ohio won a federal State Innovation Model test grant to implement an episode-based payment model statewide. The timing of the grant was perfect, Moody noted. It allowed Ohio to expand the state’s limited data analytic capacity, and create new insights about how best to improve health outcomes while holding down the total cost of care. Ohio could now pull in all insurance claims related to certain episodes of care for its value-based analysis.
For example, to assess a joint replacement episode of care cost, Ohio combined the total cost of the surgeon, implanted device, hospitalization, medication, and rehabilitation, and used the data to compare providers’ cost-effectiveness across the state. “We then take back money from the rates of the high-cost providers (in red) and share savings with the high-value providers (in green),” Moody explained.
To qualify for bonuses, providers had to meet both cost and quality targets. “This creates a powerful incentive for the principal accountable provider to pay attention to the total cost of the episode,” Moody explained, “[which is] very different from fee-for-service, which pays the surgeon the same regardless of other costs.”
In January, 2018, Ohio started paying the 161 practices that participated in Ohio’s comprehensive primary care pilot program $4 PMPM for meeting the basic efficiency and quality targets. “In addition, practices that meet quality targets while holding down the total costs of care compared to peers and based on self-improvement earn a significant annual performance bonus,” Moody explained.
Similar initiatives in other states are starting to yield substantial savings and care improvements. Minnesota achieved cost savings and an 89 percent improvement in quality measures and one regional initiative in northeast Pennsylvania achieved an 83 percent improvement in quality measures.
With this performance data, primary care providers are able to make value-based recommendations when referring patients to specialists, and insurance plans can also promote providers who receive high value-based rankings to their members.
Using Episodes of Care Costs to Tackle the Opioid Epidemic
By breaking down costs within each episode of care, Ohio has also been able to address another population health-related problem – opioid over-prescribing – by analyzing claims information to see which providers over-prescribe. The analysis, for example, revealed a provider who prescribed opioid painkillers 100 percent of the time for ankle sprains — meanwhile the state average hovered below 18 percent. More careful opioid prescribing data collections and oversight has produced a 28.4 percent decline in the number of opioid doses prescribed in Ohio between 2012 and 2017.
While the cost-savings opportunities generated by this value-based system appear tailor-made for simple procedures like joint replacement, its application to more complex care, such as perinatal episodes of care, is not currently clear. While acute COPD and asthma episodes of care costs dropped markedly 2014 and 2016, perinatal costs increased 3 percent, about what Moody would have expected in a conventional fee-for-service environment. “At this stage, these results create new questions,” he said, “for example, how do we make complex episodes more sensitive to value-based results? How do we identify the greatest sources of value in complex care and share that information with providers who can use it to improve?”
Ohio recently expanded its episodes of care data collection from three episodes to 43, which include many opioid clinical and quality measures. “Eventually, all of this needs to be transparent to the public and easily available online — it’s what we need everyone to see to make real progress on population health priorities,” he said.
Moody considers his work in Ohio as the pinnacle of his professional experience. He encourages other states to replicate Ohio’s approach. “You don’t wake up one morning and do this, it took years for us to get buy-in to make this happen,” he said. “This is something any state can do, but it takes time. We spent a lot of time defining the key health care delivery problems in Ohio, inventorying existing resources, and identifying the two to three policy changes that would leverage change, it’s a fairly rigorous process.
“There are now more than 30 states with gubernatorial elections in November, those candidates should start now to develop their policies and approaches,” said Moody, who will step down from his job in December when Gov. Kasich leaves office. “Ohio has created a blueprint to make these reforms. There are other ways to do this and be successful, but it’s critical that candidates start thinking and planning now.”
Read Ohio’s Health Transformation report, Moving Ohio’s Health Care Payment System Upstream.
Hospitals get billions in tax breaks and in return they’re supposed to invest in community health. How can state policymakers ensure that money is spent on the right issues to support state health goals?
Nonprofit hospitals benefited from at least $24.6 billion in tax exemptions in 2011, according to a 2015 analysis that used the most recent data available. In exchange for these exemptions, federal tax policy requires hospitals to invest in activities that benefit the health of their communities. But do these activities truly target the most pressing health needs of area residents?
|Community benefits requirements for nonprofit hospitals:
Policymakers know that 80 percent of people’s health is affected by factors beyond the reach of hospital or clinician care, such as access to nutritious food, safe housing, education, income security, health equity, and other socio-economic factors. Given the importance of these social determinants in shaping people’s lives and health, how can states use their policy levers to ensure that tax-exempt hospitals invest their community benefit dollars in ways that most effectively address and support state health priorities?
The Affordable Care Act (ACA) provides a foundation that states can build on when integrating hospital spending on community health with state priorities. The ACA requires charitable hospitals governed by section 501(c)(3) of the Internal Revenue Code to conduct community health needs assessments every three years, and to adopt a plan to address those needs. It also requires hospitals to establish financial assistance policies and to refrain from charging higher prices to people receiving financial assistance than is generally billed to insured people. The IRS Form 990 Schedule H also requires tax-exempt hospitals to report whether and how they considered community input when creating their community benefits plan.
The interactive Community Benefit Insight tool, supported by the Robert Wood Johnson Foundation (RWJF) in partnership with RTI International and the Public Health Institute, draws on IRS and other data to show how hospitals spend their community benefits dollars. Research shows hospitals spend the majority of their community benefits resources on clinical care — including charity care and Medicaid shortfalls — rather than on community health improvement or community-building activities that can address the social determinants of health. The Community Benefit Insight tool allows users to compare such spending across hospitals and health systems.
States can require hospitals to do more than simply meet the federal requirements. Some states go beyond by requiring hospitals to specifically report how hospitals’ community benefits investments address the social determinants of health or meet the needs of underserved populations. Some states mandate that hospitals spend at least a minimum amount on community benefits.
States also use a range of enforcement strategies to ensure that hospitals comply with state regulations. A new National Academy for State Health Policy (NASHP) table highlights effective state hospital community benefits requirements and related state law requirements in several states. The table can inform state policymakers who want to leverage their states’ community benefits process to improve community health.
States command a range of policy levers that can maximize hospital community benefits spending to address the social determinants of health. To help states deploy these levers effectively and share best practices, NASHP has convened a Hospital Community Benefits Workgroup, composed primarily of officials from state attorneys general and insurance commissioners’ offices, as well as state Medicaid, public health, and justice departments. With support from RWJF and the New England States Consortium Systems Organizations, the workgroup is exploring how states can develop more meaningful hospital community benefits and community-building investments that align with state public health priorities and address the social determinants of health. This mission includes examining:
- How states define and count community benefits;
- How to ensure community health needs assessments are substantive;
- How community health trusts can be used as a tool for community benefits investing; and
- What measurement tools are available to evaluate the benefits of community benefit spending on public health programs.
While the table — and the workgroup — currently focus on the New England states, the list will be expanded to include other states as work progresses. State officials are invited to become involved with the NASHP community benefits workgroup or share their states’ efforts to maximize hospital community benefits investments. Please contact Amy Clary at firstname.lastname@example.org for more information.
Explore the Hospital Community Benefits Comparison Table – New England States, which highlights effective state hospital community benefits requirements and related state law requirements in several states.
Support for this work was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily reflect the views of the foundation.
Medicaid managed care provides a unique opportunity for states to strengthen the structure and delivery of care for children and youth with special health care needs (CYSHCN). The National Academy for State Health Policy (NASHP), studied how six states (Arizona, Colorado, Minnesota, Ohio, Texas, and Virginia) designed their managed care systems to serve CYSHCN and examined some of their best practices and strategies to meet the unique needs of these children in three reports:
- How States Structure Medicaid Managed Care to Meet the Unique Needs of Children and Youth with Special Health Care Needs and an accompanying chart that provides an Overview of Selected State Medicaid Managed Care Programs
- Structuring Care Coordination Services for Children and Youth with Special Health Care Needs in Medicaid Managed Care: Lessons from Six States
- State Strategies to Enhance Medicaid and Title V Partnerships to Improve Care for Children with Special Health Care Needs in Medicaid Managed Care
These studies reveal that while there is variation among states in the design, scope of services, and targeted populations, there are strategies that states can employ in Medicaid managed care to ensure delivery of quality care for CYSHCN, including:
- Assessing the needs of CYSHCN to better coordinate care;
- Establishing network requirements for specialty providers;
- Promoting continuity of care during transitions; and
- Creating quality measures around processes and outcomes.
These three studies build on NASHP’s 50-state scan of Medicaid managed care systems serving CYSHCN and states’ use of Medicaid quality metrics for CYSHCN.
These resources were developed with support from the Lucile Packard Foundation for Children’s Health and the Health Resources and Services Administration (HRSA) of the US Department of Health and Human Services under grant number UC4MC28037 Alliance for Innovation on Maternal and Child Health.
A successful citizens referendum to expand Medicaid stalled in the state Legislature and moved to the courts this week.
Over the past five years, the Maine Legislature has passed several bills to expand the state’s Medicaid program – MaineCare – under the provisions of the Affordable Care Act to cover a greater number of low-income residents. Every year, Maine Governor Paul LePage vetoed the legislation, and the Legislature was unable to muster enough votes to override his veto.
In November 2017, Maine voters approved Medicaid expansion in a referendum with 59 percent of the vote. Under Maine’s constitution, the governor cannot veto a referendum passed by citizens’ initiative, and the referendum became law in early January of this year.
The expansion law lays out a series of actions Maine’s Department of Health and Human Services must take to implement the expansion of coverage to people earning up to 138 percent of the federal poverty level. Specifically, the law directs the department to submit a state plan amendment (SPA) to the Centers for Medicare & Medicaid Services (CMS) no later than 90 days following the effective date of the law, which was April 3, 2018. It also directs the state to adopt any necessary rules required to make certain that people who are eligible for coverage under the expansion are enrolled by July 2, 2019.
In the most recent legislative session, Maine lawmakers reviewed the Medicaid expansion referendum language and debated how much should be appropriated to fund the expansion. Two weeks ago, the legislature adjourned without addressing or funding the expansion.
Governor LePage contends he cannot implement the expansion until it is funded. The law does not link implementation of the expansion to CMS approval of Maine’s SPA, nor does it require the identification of specific funding to underwrite any costs associated with the expansion. It simply compels the state to implement the law in the stated timeline.
To date, the Maine has not filed the SPA required by the language of the law and this week a group of advocates and individuals who would be eligible for Medicaid coverage under the expansion filed a lawsuit in state court to compel the state to file the SPA.
The lawsuit is the first salvo in what promises to be the judicial phase of the protracted struggle over Medicaid expansion in Maine. Frustrated advocates in a number of other states, where expansion has not yet been adopted, are considering mounting a referendum campaign similar to Maine’s. Advocates in Utah and Idaho have collected enough signatures to put an expansion referendum on the ballot, and advocates continue to collect signatures in Nebraska and Montana.
More than 30 states have proposed or are in the process of implementing Medicaid work requirements, in some cases to enable Medicaid expansion. Read what individual states are doing and what’s behind their efforts.
Since January, when the Centers for Medicare & Medicaid Services (CMS) announced it would allow states to require certain enrollees to participate in work or community engagement activities in exchange for Medicaid coverage, three states have secured federal approval to impose the requirements, nine have proposals pending before CMS, four are drafting them, and at least 16 state legislatures have introduced bills.
Under the new guidelines, states can seek CMS permission to add work requirements for non-elderly, non-pregnant, and non-disabled adults as a condition of Medicaid eligibility. State proposals vary in their scope and political context. In some states that implemented the Affordable Care Act’s (ACA) Medicaid expansion, the work requirement applies only to the expansion population. In other states, it affects a broader group of Medicaid enrollees. Some states are presenting work requirements as a compromise to win political support for or to retain Medicaid expansion, although many non-expansion states are also considering them.
Currently, Arkansas, Kentucky, and Indiana are in the process of implementing these requirements for certain Medicaid enrollees (Kentucky’s waiver now faces a court challenge). Additional states have pending proposals before CMS and others plan to submit them in the next few months. Alabama recently closed the comment period on its draft waiver proposal to add work requirements for parents and caretaker relatives covered by Medicaid. This week, Ohio submitted its application to implement work requirements specifically for its Medicaid expansion population.
Utah recently passed legislation that requires state officials to pursue a waiver to implement Medicaid work requirements in conjunction with its request to expand Medicaid up to only 100 percent of the federal poverty level. South Carolina’s governor directed the state Medicaid agency to develop a work requirements waiver, and the state is in the early stages of doing so. South Dakota’s governor mentioned in his annual address that the state would be seeking a Medicaid work requirement waiver, and a workgroup has begun meeting on the topic with plans to submit an application in July 2018.
In some states, Medicaid work requirement discussions are occurring in state legislatures, and are sometimes tied to proposals to expand Medicaid. During Virginia’s special legislative session in mid-April, the House of Delegates passed its most recent version of the budget that includes provisions to expand Medicaid and require the new, eligible enrollees to work. The legislative package now moves to the state Senate, but the Finance Committee will not be meeting until mid-May.
A number of other states that have not expanded Medicaid have proposed bills to seek federal waivers to implement work requirements for certain adults in their traditional Medicaid programs. Tennessee’s legislature recently passed a bill that is now headed to the governor, who is expected to sign it. Other non-Medicaid expansion states that have introduced Medicaid work requirement bills during their 2018 state legislative sessions include:
- Florida: While the House passed a bill, it did not progress past a Senate committee prior to the legislative session ending.
- Idaho: State legislators added Medicaid work requirements to a bill that also included the proposed Idaho Health Care Plan, but the legislature adjourned without advancing it.
- Missouri: In January, a bill was introduced in the Senate and remains in committee.
- Oklahoma: In addition to the governor issuing an executive order in March for the state to begin drafting a waiver, in mid-April, a bill passed the Senate and is now moving to the House.
- Wyoming: Although the legislature has adjourned, legislation did pass the Senate but did not move forward.
In some states that expanded Medicaid, state legislators have introduced bills that include work requirement proposals. Most of them would apply to a broader group than the expansion population and would include all “able-bodied” adults, such as some parents — with varying exceptions:
- Alaska: Bills were introduced in both the House and Senate in February, but they have not moved past the committee level.
- Connecticut: In February, a Senate bill was proposed (exempting individuals who are the sole caretaker of a dependent), but the legislation stalled.
- Illinois: A bill was introduced in the Senate (exempting adults with dependent children), but it did not move forward.
- Iowa: Legislators proposed a bill in the House, but it did not advance because it was deemed to need additional revision and would be too costly to implement. A similar bill in the Senate has also not moved forward.
- Louisiana: There are bills in both the House and Senate that remain in committee.
- Michigan: In mid-April, a bill was approved by the Senate and now moves to the House; however, the governor’s office has expressed opposition to it.
- Minnesota: A bill was introduced in the Senate in mid-March (exempting individuals who are the sole caretaker of a dependent) and is currently in committee.
- Pennsylvania: A bill in the House passed in mid-April and will move on to the Senate; however last year the governor vetoed a similar bill.
In Colorado, a Medicaid work requirements bill failed to pass a Republican-controlled committee in March — the legislator who voted against it suggested the state should assess the implementation process in other states like Kentucky before moving forward with the program change.
CMS’ guidance left many decisions about the parameters of a Medicaid work requirement to state discretion, such as the number of hours that individuals must complete, penalties for noncompliance, the types of qualifying activities, and how often individuals would need to submit documentation to demonstrate they are meeting the requirements. For states considering adding these types of requirements to their Medicaid programs, there are also many other policy and operational issues to address.
For example, tracking whether enrollees are complying with the work requirements as well as determining which individuals qualify for exemptions is expected to be a complex and costly administrative task — and could result in coverage losses for individuals. An additional factor for states to weigh is that according to an analysis conducted by the Kaiser Family Foundation, most non-elderly adults covered by Medicaid already work — 60 percent are employed either in part-time or full-time jobs. Another 32 percent reported not working due to illnesses or disabilities, enrollment in school, or caregiving responsibilities, and consequently many of these individuals may qualify for work requirements exemptions.
Though many state legislative sessions are coming to a close, this issue is expected to continue to receive active consideration by state policymakers. NASHP will continue to monitor states’ work requirement waiver proposals that have been submitted to CMS in this chart.
As states await final federal regulations that will loosen restrictions over the sale of short-term health insurance policies, the clock is ticking for state legislators and regulators to enact policies to protect and inform consumers about the limited and “thin” coverage that these plans offer.
|What Short-Term Insurance Plans Don’t Cover
Most short-term insurance plans offer limited benefits, while this results in cheaper policies, it limits consumer access to many critical health care services. A Kaiser Family Foundation analysis of 24 short-term plans sold in 45 states found:
The sale of these plans, which generally offer less coverage than Affordable Care Act (ACA) marketplace plans, can begin 60 days after the final rule is issued, which means states now have a short window to implement consumer protections. The sale of these short-term policies could begin later this year.
During this legislative session, eight states proposed bills to address these plans, ranging from bills to enable the short-term plan flexibilities allowed by the Administration’s rule (MN HF 4280, MO 1685, VA H 892) to bills that regulate (HI HB 1520, GA H 474) or prohibit (CA SB 910, VT H 892) short-term plan sales. Maryland recently passed a law that limits short-term plans to a three-month coverage period, restricts the ability to renew these plans, and limits the standards by which insurers can rate or deny coverage (medical underwriting) for plans.
As explored in How Will Short-Term Insurance Plans Impact State Insurance Markets?, the rule would extend the period during which plans can be sold from 3 to 12 months and allow for consecutive renewal of short-term policies, meaning consumers can re-enroll in the policies for an indefinite period of time. The intent of the rule is to grant consumers affordable coverage alternatives — studies show that short-term plans charge significantly lower premiums than plans sold through ACA state insurance marketplaces. However, the more “affordable” coverage comes with less coverage. Consumers who purchase these plans face:
- Limited benefit offerings;
- Significant out-of-pocket costs;
- Risk of plan cancellations due to pre-existing conditions; and
- Possible deceptive advertising practices.
Increased sale of these plans to younger, healthy people is expected to draw thousands of these healthy consumers out of state’s individual market’s risk pool, leading to an unhealthy risk mix and subsequent increases in marketplace health insurance premiums.
Below, the National Academy for State Health Policy details the impact these short-term plans are expected to have on states’ markets and the actions states may consider to regulate these plans.
The Impact of Short-Term Plans on Affordable Care Act Coverage
Short-term insurance plans are not new, these temporary coverage plans historically were used to bridge gaps in coverage, such as the loss of a job. The plans target healthy individuals seeking stop-gap coverage (until they find or start a new job) or in the case of an emergency. Rather than provide comprehensive benefits, most short-term plans provide limited coverage and have less costly premiums than other coverage options. Additionally, the plans are not subject to many of the requirements of other insurance plans, such as provisions that require insurers to offer coverage to individuals with pre-existing conditions and requirements that help protect consumers from excessive out-of-pocket costs including:
- Prohibiting issuers from placing annual or lifetime limits on insurance spending,
- Limiting consumer cost-sharing for essential health benefits, and
- Requiring that 80 percent of premium dollars are spent on enrollee care (Medical Loss Ratio, MLR).
These plans are not considered part of the individual market for the purposes of risk pooling, meaning that short-term plans siphon young and healthy individuals from the pool used to spread risk and therefore lower premiums for those who purchase insurance in the individual market. Under the Administration’s proposed short-term insurance rule, officials estimate that 100,000 to 200,000 individuals will switch from marketplace coverage to short-term plans, drawing these individuals out of the individual market risk pool. This is expected to lead to average premium increases of $2 to $4 per month (ranging from 0.7 to 1.7 percent, according to reports) for coverage purchased through state marketplaces An analysis by the Urban Institute estimates that 4.3 million individuals will enroll in short-term plans, resulting in marketplace premium price increases ranging from zero to 30.5 percent due to the combined effect of the sale of the short-term plans and the elimination of the individual mandate penalty approved by Congress in December.
State Options to Regulate Short-Term Insurance Plans
States have wide latitude to regulate short-term insurance sold in their markets. As detailed in a recent Commonwealth Fund Report, three states outright ban the sale of short-term plans, while many other states impose regulations that limit the sale of plans or impose some form of consumer protections, such as mandating specific benefits. Depending on their goals, policymakers have several options if they wish to regulate these plans, beyond imposing outright bans on their sale. States can:
|State Regulation of Short-Term Insurance Plans|
|Prohibits underwritten short-term plans||MA, NJ, NY|
|Limits short-term plan contracts to under 12 months (ranges from 3 months to 185 days)||AZ, CA, CO, CT, IN, MD*, MI, MN, ND, NH, NV, OR, SD|
|Limits total length of time consumers can be covered by a short-term plan (e.g., plan renewability)||CO, MD*, ME, MI, MN, NH, NV, OR, WI|
|Requires coverage of all state-mandated benefits||AR, CO, FL, KS, MD, MN, PA, RI, TX|
|Requires coverage of some state-mandated benefits||CA, DE, DC, GA, HI, IL, IA, ID, KY, ME, MI, MO, NV, NH, NM, NC, ND, OH, OR, SC, SD, TN, UT, VT, WV, WI|
|Source: State Regulation of Coverage Options Outside of the Affordable Care Act: Limiting the Risk to the Individual Market, The Commonwealth Fund, March 2018.||*Maryland’s law limiting short-term insurance plans became law after publication of the Commonwealth Fund report.|
- Impose term limits on plan contracts: By limiting contract terms, consumers seeking long-term coverage will be encouraged to purchase coverage through the individual market instead, strengthening the individual market risk pool and lowering premium costs. This also reinforces the use of short-term plans for limited, stop-gap coverage.
- Prohibit the sale of consecutive contracts or mix-and-match plans: Similar to the imposition of term limits, these policies encourage consumers who need long-term coverage to purchase coverage through the individual market. This also helps to lessen confusion among consumers who purchase a series of short -term policies, each with potentially different benefit and network offerings. This also mitigates potential profiteering by brokers and agents who “mix-and-match” plans and receive a commission for each plan sold.
- Require mandated benefits: While most states require short-term insurers to cover at least some state-mandated health care benefits, most plans do not offer comprehensive benefits, including the 10 essential health benefit categories mandated by ACA. Stricter benefit mandates ensure that short-term policies provide the health benefits that the state requires, such as prescription drug coverage.
- Impose protections for individuals with pre-existing conditions: One of the most significant limitations of short-term plans is they exclude or impose significant cost-sharing on individuals with pre-existing conditions, meaning that these plans are not viable options for most individuals, including the half of all adults with chronic conditions. More alarming, insurers often have wide latitude to rescind coverage if consumers have a pre-existing condition, leaving consumers vulnerable to losing even their short-term insurance protections if the condition is deemed to have originated prior to the purchase of the plan. Stricter policies or oversight to prohibit these practices can protect consumers from losses in the case of such situations. A bill in Georgia, for example, would prohibit short-term plans from defining pre-existing conditions any stricter than how state law describes them.
- Employ other regulatory tools: States have other regulatory tools they can use to fortify coverage offered by short-term plans, or to limit the risk of excessive out-of-pocket spending by consumers who purchase these plans. These include limiting premium rating ratios, requiring caps on consumer cost-sharing for certain or all services, and imposing a modified MLR requirement on short-term plans. States may also consider policies to counteract the effect of these plans on their risk pools, such as imposing an assessment on these plans as a means to raise revenue for a reinsurance program.
- Increase consumer awareness and education: If they permit the existence of these plans, states can fortify efforts to make sure consumers are educated about the risks and potential limitations of purchasing short-term plans. These proposed regulations can require that short-term plan contracts include language to notify consumers that the plans may not comply with federal health insurance coverage requirements. States may compel entities that sell short-term policies (including agents, brokers, and insurers) to use greater transparency or clearer language when assisting consumers with the purchase of a short-term plan. For example, a Missouri bill that grants greater flexibility for the sale of short-term plans, stipulates that short-term notices include information that the plan may not cover certain benefits nor cover pre-existing conditions, “including conditions you may currently have and are unaware of but are not diagnosed until the policy’s term.”
Nevada’s marketplace is poised to become the first to transition from the federal platform to an entirely state-run exchange. Its director explains how the move will save millions and improve residents’ health insurance.
Under the Affordable Care Act, states can either administer their own health insurance marketplaces as state-based marketplaces (SBMs), or default to the federally-run marketplace. Nevada is one of five states that operate a hybrid model – a state-based marketplace that uses the federal platform. These hybrid states are responsible for plan management and outreach and recruitment, which includes marketing activities, running local call centers, and coordinating with the state insurance department, while using the federal government’s technology platform and website to perform eligibility and enrollment functions.
Nevada’s marketplace – Nevada Health Link — is poised to become the first state in the nation to move away from the federal marketplace and transition to a full SBM. By transitioning, Nevada seeks greater flexibility to operate a marketplace tailored for its residents, while enabling the state to save millions in operational costs.
NASHP sat down with Nevada Health Link Executive Director Heather Korbulic to discuss the motivation behind Nevada’s transition, the value of state autonomy, and the future of the marketplaces.
Can you share the history of Nevada Health Link and why you are making this change?
To provide some history, in 2011, Nevada had approved statute to operate an SBM. However, when that SBM launched in 2014, the system did not work, creating significant issues for our consumers and carriers. Nevada had to decide whether to try again or begin using the federal platform—mostly to conduct required eligibility and enrollment functions. The FFM [federally facilitated marketplace] was essentially working at that time, and our board decided to transition to the SBM-FP model [state-based model that used the federal platform].
For the first two years as an SBM-FP, Nevada did not pay to use the federal platform, but in 2015, we were given notice that SBM-FPs would be required to pay a user fee. In 2017, the fee was set at 1.5 percent of premiums of plans sold through the marketplace, going up to 2 percent in 2018, and 3 percent thereafter. For comparison, the FFM collects a 3.5 percent assessment from insurers who offer coverage in FFM states.
In total, Nevada charges insurers in our state an assessment rate of 3.15 percent of premiums to [sell plans and] operate the marketplace. With the planned increases to the user fee, in 2019, Nevada would be left with only 0.15 percent of the assessment to conduct all of the functionality required of the SBM-FPs. We believe this would make the marketplace insolvent and unable to adequately perform its required functions.
Could you help us understand what these functions are—what distinguishes you from the FFM?
SBM-FPs operate local consumer assistance centers and conduct plan certification. We do stakeholder engagement in coordination with sister agencies like Medicaid and the state health department. As a state agency, we comply with all state oversight requirements along with federally-required oversight requirements for the marketplace. We operate the state navigator program, and do all our own marketing and outreach. A significant portion of our budget goes to outreach, as we have seen this as key to generating robust enrollment [which helps drive competition and affordability]. The federal government is responsible for the Healthcare.gov website and operating the integrated eligibility system for the state. (See Table 1 for a comparison of marketplace models.)
I think the role of the SBM-FPs is overlooked in discussions of the marketplace. The Nevada exchange has really honed in on our capabilities as a resource for Nevadans. We have become an important part of our community and have demonstrated success. Our consumers, carriers, state agencies and lawmakers have come to depend on us to answer their questions. Nevada lawmakers and our governor have shown commitment to the value that our marketplace has brought to our state.
This past year has given us some of the best insight into the value of having some state authority over our functionality. The national cuts to marketing and outreach this open enrollment period, and the confusion surrounding the existence of financial subsidies led to enrollment declines in many FFM states. By contrast, Nevada saw an increase in enrollment this year of 2.2 percent. We believe it had everything to do with our marketplace being a resource for Nevadans to connect to subsidies, and our work with our navigators and stakeholders to hammer the message of this year’s shortened enrollment period through focused marketing.
|Table 1. State or Federal Authority over Marketplace Functions in Different Marketplace Models|
|Marketplace Functions||State-Based Marketplaces (SBM)||State-Based Marketplaces Using the Federal Platform
|Federally Facilitated Marketplaces (FFM)|
|Set and collect plan assessments||State||Both*||Federal|
|Qualified health plan review and certification||State||State||Federal**|
|Outreach and Marketing|
|Marketing and advertising||State||State||Federal|
|Integrated eligibility system||State||Federal||Federal|
|Online consumer tools (e.g., calculators, provider directories, formularies)||State||Federal**||Federal|
|Set special enrollment periods||Both***||Federal||Federal|
*Plan assessments are fees paid by insurers to sell their insurance product through a marketplace. In SBM-FP states, the FFM collects a portion of assessments, known as a user fee, to operate the FFM. The SBM-FP user fee was 1.5% of premiums in 2017, 2% in 2018, and will be 3% in 2019.
** While the federal government has primary responsibility for these functions, many states also perform these functions to assure compliance with state standard or to ensure consumers have access to resources tailored to state-specific needs.
*** The parameters for special enrollment periods (SEPs) are defined by federal statute and regulation, but SBMs have flexibility to institute SEPs responsive to exceptional circumstances identified by the SBM.
What sort of improvements and savings do you anticipate after moving to the SBM model?
Nevada is in a good position to negotiate, we are essentially asking vendors for a “marketplace in a box” with all the pieces we need to make this work. We are a state agency with finite resources and want to clearly understand the costs of this packaged system — including technology and call center operations — so we can assess if it is affordable and whether it will be at a lesser cost than the FFM. Many vendors have now developed tested and proven products in this regard, with a limited market to sell them to—it is a win-win for them to work with us. Together, we will find savings and efficiencies to offer a better user experience and help our consumers.
From our initial research, we have found that Nevada could save significantly by moving to a fully functional, demonstrated product. In 2020, the 3 percent user fee will be approximately $12 million for our state, but we estimate that with our own platform operational costs will be closer to $6 million — a savings of 50 percent!
We also believe this is a chance for us to control our own destiny by managing our own marketplace. Having been an SBM-FP for several years now, we have seen the limitations that come with working with the FFM. There is very little flexibility given to states — any small change we request to try to tailor the system is almost impossible to accomplish.
There is also a lack of insight into our own state’s data. Without data, we have no sense of who our consumers are at any given moment. We are periodically provided zip code-level data breakdowns from CMS [Centers for Medicare & Medicaid Services] during the year but, for the most part, we do not know who is actively engaged in the system during the open enrollment season or other detailed information necessary to conduct truly targeted outreach. We think there are budgetary efficiencies to be found by having access to our own data — it will enable us to potentially increase enrollment and gain efficiencies from more direct consumer targeting.
What have you learned from other SBMs that helped guide Nevada’s approach?
I have learned a tremendous amount from my colleagues across the country as far as the technical components of how an SBM operates, however, what I have really walked away with is that no two SBMs are alike. There are so many differences in the ways that SBMs operate depending on how the marketplace fits in the state. This has been a helpful observation for Nevada because we know how we operate now, and we want to bring on a system that can accommodate what we want to do and will work with our state’s insurers and agencies like Medicaid.
|“What I have really walked away with is that no two SBMs are alike. There are so many differences in the ways that SBMs operate depending on how the marketplace fits in the state.”|
What advice do you have for states that are exploring a transition to an SBM?
Potentially, a state would need to pass some enabling legislation. Then they would need to invest in state agency staff and a small budget to operate the marketplace before it can begin collecting revenue. In Nevada, we have set aside $1 million for design, development, and implementation of our marketplace. Ultimately, it is a matter of investing and committing to the values that a SBM brings to a state and finding long-term savings.
There are many pending federal policy changes that bear national significant implications for health insurance coverage and marketplaces. What could these changes mean for consumers in Nevada?
In 2017, and continuing into 2018, we have seen uncertainty related to the ACA. We have come through the legislative endeavors to repeal the ACA last year, and now we are looking at executive rulemaking processes that could create disruption for our markets in Nevada.
I am concerned about rule-making related to Association Health Plans and what ability the state has to regulate those plans. I am also concerned about the Short Term Limited Duration Insurance proposed regulation. There is a time and place for short-term plans — for when consumers are between jobs or if they missed the open enrollment period — but these plans are not long-term solutions. We are concerned that consumers who do not qualify for premium subsidies will see these short-term plans as viable alternatives to qualified health plans, even though they do not offer the same level of benefits or consumer protections. We have seen some brokers try to game the system by directing consumers to enroll in a string of short-term plans, so that they can gain commissions for each enrollment, but ultimately that is not in the best interest of the consumer [who will have limited coverage, and have to manage constant shifts in benefits and networks].
During this upcoming open enrollment period, our marketplace will be focused on education campaigns to make sure we demonstrate to our consumers the value of having continuous coverage that meets the standards required for qualified health plans.
Is there anything else you feel it is important for leaders and consumers to know about your transition?
Everything that Nevada has had control over has been a demonstrable success. We have successfully made ourselves known as a resource in our community and for our consumers; we really are an important institution in our state. I believe the investments we are making in our new platform and the resulting savings we will achieve should be of interest to every state that wants to bring value to their insurance landscape.
View Nevada’s Request for Proposal for a technology vendor to help the state become a fully state-operated program.
Thank you to Heather Korbulic and Janel Davis of Nevada Health Link for their time and contributions to this article. Thank you to Christina Cousart, Trish Riley, Chris Kukka, and Rohan Narayanan for their critical support and feedback to this blog.
NASHP supports the State Health Exchange Leadership Network that provides a platform for state health insurance marketplaces staff and leaders to participate in peer-to-peer dialogue, discuss emerging issues, and share best practices. To learn more about the Network or NASHP’s work with the state-based marketplaces, contact Christina Cousart (email@example.com)