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Health Plans Left in Limbo on Subsidies, Medicaid Funding

Analysis  |  By Gregory A. Freeman  
   May 31, 2017

Insurers are finding it difficult to set premiums and plan for the future when key elements of healthcare reform are still up in the air. They are most concerned over subsidies for low income consumers and changes in how Medicaid is funded.

Health plans are struggling to plan for 2018 and the years ahead because of the uncertainty over subsidies for low income consumers and the funding structure for Medicaid, says the CEO of the largest publicly operated health plan in the United States.

That kind of uncertainty is never good for business or for consumers, he says.

Questions over how Congress will reform the Affordable Care Act have left insurers in limbo, says CEO John Baackes of L.A. Care, which recently hit the 2 million Medi-Cal member mark and is the only publicly operated health plan in the state of California to have a product on the exchange.

President Trump suggested that Republican efforts at healthcare reform might not include a continuation of the subsidies that allow insurers to provide coverage at a low price for very low income consumers, and there was no appropriation for those funds in the continuing resolution passed April 28.

"For those of us in the individual market through the exchanges, we're sitting here trying to decide what our rates are going to be in 2018 and whether the subsidies will affect our rating decisions. With Congress not acting and the president not being clearer, that's doing way more damage to the future of the exchanges than anything that is in the Affordable Care Act," Baackes says.

"We have no clue as to whether the subsidies are going to be continued or not. The speaker of the House says yes, the president says yes, but there's no appropriation in Congress to get the money. The indecision in the individual market is way more concerning than any debate over pre-existing conditions and other issues."

In California, the state has asked plans to submit two rates for 2018, one that assumes the subsidies will continue, and one that assumes they will not. L.A. Care's premiums will increase by a single digit if the subsidies continue, but the health plan is still determining what the increase would be without them, Baackes says.

On top of the subsidies question, health plans are bracing for however Congress ends up changing Medicare, Baackes says. All signs point to a fundamental change in the way Medicaid has been funded for 52 years, he says.

"They're changing the agreement that the federal government made with states when they got them into Medicaid, proposing to throw that out and determine a dollar amount through a formula and then pay 50% of that," he says.

"That's a huge fundamental change that goes way beyond the Affordable Care Act and it's getting no attention. But those of us who are in it say that's the real sleeper issue here that could have a raft of unintended consequences."

That concern stems from how the House bill would require states to redetermine Medicaid eligibility for millions of beneficiaries every six months, a change from the current 12-month eligibility redetermination process.

About 700,000 of L.A. Care's 2.1 million customers came through the Medicaid expansion in the Affordable Care Act, Baackes notes, and every redetermination results in some beneficiaries temporarily losing coverage because of missed deadlines or other factors. The House reform bill calls for the federal government's portion of Medicaid funding to drop from 90% to 50% for those expansion enrollees who are uninsured for more than 30 days.

"The Congressional Budget Office said that in two years two-thirds of the people would be dropped to that lower level of reimbursement. That's another huge transfer of costs to the states," Baackes says.

"We know that will be a significant burden to the states that have to make up the difference, and those of us in the in Medicaid business are wondering what we can expect. It's a huge uncertainty when you're planning for the future."

Gregory A. Freeman is a contributing writer for HealthLeaders.


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