There was an interesting study published in JAMA this week that compares the health status of low-income individuals in two states that expanded Medicaid (Arkansas and Kentucky) with a state that did not (Texas). Respondents in Arkansas and Kentucky were 5% more likely to than their peers in Texas to say they were in excellent health at the end of 2015. This is a wider gap than was seen when the same question was asked at the end of 2014, when Medicare expansion was a year old. Because it takes time for someone to benefit from having insurance – due to the time it takes to actually get care and then for the care to have a positive impact on health – we may see continued improvement in Arkansas and Kentucky relative to Texas. While the study does not prove that Medicaid expansion caused people to be healthier, it makes sense that having insurance would have a positive impact on one’s health. This made me wonder whether the ACA has also had a positive impact on the health of those in employer-sponsored plans. Certainly the mandate for 100% coverage for preventive care comes to mind, although many employers covered preventive care prior to the ACA (and utilization is still not what we would like to see). Will the individual mandate mean more individuals seek coverage in employer-sponsored group coverage, and will that in turn result in better health in the workforce? Ultimately, it may be that because so many aspects of employer-sponsored coverage have changed since the law passed, it will be difficult to attribute any change in the health status of employed Americans (good or bad) to the ACA.
July 30 marks the 50th anniversary of the law that created Medicare and Medicaid. Let’s take a look at how much has changed since the programs were first conceived — and also at the role they play in employer-sponsored health care.
Medicare — When Medicare was established in 1965, as Federal health insurance for the elderly or disabled, there were fewer than 20 million Americans over the age of 65. Nearly half of them were uninsured, and the elderly population was viewed as politically disconnected. Today, Medicare covers 55 million people — one in six Americans. Each day 10,000 more people become eligible, while the number of workers paying the tax to fund the program decreases. And these seniors are “uber-citizens” who can’t be ignored. They are a political force to be reckoned with, and their health coverage is of great importance to them. Half of the covered individuals have four or more chronic conditions. When the George W. Bush administration expanded Medicare coverage to include prescription drugs, many employers decided to discontinue sponsoring plans for retirees over age 65.
Medicaid — Medicaid was originally intended only to provide coverage to children, pregnant women, and disabled persons. After the ACA expanded the scope of Medicaid to include residents with incomes as high as 133% of the Federal poverty level, the Supreme Court decided states could have the option to expand coverage or not, and 20 have chosen not to expand. Even so, a whopping 70 million people are enrolled — that’s one in four Americans. The annual cost of $500 billion is shared between the Federal government and states, where it tends to be one of the largest budget items. States manage cost by cutting payment rates to providers or reducing benefits, creating access challenges for members. As a potential coverage option for low-paid and part-time employees, Medicaid takes some of the pressure off employer-sponsored plans to provide affordable coverage to all.
What lies ahead for these landmark programs, and how can employers prepare? Consider that Medicaid is the only safety net for millions of middle-class people who need long-term care at home or in nursing homes — in fact, more than 60% of nursing home residents rely on Medicaid for assistance. Not surprisingly, Medicaid programs are working to shift people from costly nursing homes to less costly services at home or in community settings. Your employees should consider what they would want for their parents, or themselves, should they need this type of assistance. Advance planning for long-term care is a good thing to include in financial wellness coaching.
Medicare and employer programs have a symbiotic relationship. According to the Urban Institute, reducing the rate of chronic disease by just 5% would save Medicare and Medicaid $5 billion per year by 2030; 25% reduction would save $26.2 billion per year. Employer investments to help workers avoid and/or manage chronic conditions have the potential to contribute to significant savings. At the same time, the vast purchasing power of Medicare has the potential to move the market in productive ways. In 2014, 20% of Medicare spending ($72 billion) went to providers under contracts that gave them incentives to coordinate care to drive better quality and lower costs. This effort is parallel to employer efforts to utilize Accountable Care Organizations and patient-centered medical homes to achieve the same goals. The more pressure on providers to provide care this way, the faster we will be able to make progress.
This article in the New York Times gives an overview of what would have happened if the US Supreme Court had not ruled Medicaid expansion was optional for states under the ACA. Twenty-four states opted not to expand, and this analysis suggests three million more Americans would have health care, compliments of Medicaid, if they had. As you can see in the maps, many of the southern states were the hold outs, both for political reasons and for fear they would not be able to foot the bill in later years. For participants, Medicaid premiums are typically low, as are out-of-pocket costs when care is needed. The disadvantage of Medicaid compared to employer-sponsored coverage is that it can sometimes be difficult to find doctors who will treat Medicaid members. But surveys have shown that the program is popular among the people who use it. Employers may have already benefited in 2014 if low-paid employees who qualified elected to enroll in Medicaid rather than sign up for their employer-sponsored plan.
Medicaid expansion under the ACA has been a key factor in the drop in the number of uninsured. But getting insurance is not the same thing as getting care, and a new report from HHS says that many Medicaid enrollees face either very long waits for appointments or must travel long distances to get to providers. Most states hire insurance companies to provide services to Medicaid enrollees through provider networks. While Federal rules say these plans must provide adequate access to all services covered, states can define what “adequate” means. According to the report, state standards for access to care vary widely, and HHS is calling for federal and state Medicaid officials to adopt stronger standards and do more to enforce them. Obama administration officials face similar issues as they set standards for health plans on the public exchanges. Employers can expect to feel the squeeze in their own health plans as primary care doctors take on more newly insured patients. The time is right to take another look at strategies to ease the strain, such as onsite clinics or telemedicine.
The article gives the highlights from a report on focus groups with new Medicaid enrollees in three cities (Denver, Chicago and Portland). While many said they were happy to have the coverage, not surprisingly there was a lot of feedback about the challenges of finding physicians willing to take Medicaid, and some enrollees were unhappy to find out how limited the dental coverage is. While individual experiences will vary by person and by market, the temporary boost from the ACA for Medicaid provider reimbursement generally should help improve access. Companies with variable-hour employees not eligible for an employer-sponsored health plan should make them aware of other options by directing them to contact the public exchange via healthcare.gov or the toll-free number (1-800-318-2596). The exchange will direct the individual to either the public exchange or Medicaid, based on their situation. Some employers with large non-eligible populations have developed special communication campaigns and even provided navigator services to help individuals seek coverage from the public programs.
Mercer’s Branch McNeal, National Practice Leader for Government Human Services Consulting, and Dorian Z. Smith, an attorney in Mercer’s Health and Benefits business, sort out some of the complexities of Medicaid expansion for employers looking to develop informed contribution strategies.
With decisions for finalizing 2015 medical plan designs right around the corner, it’s important to consider the potential implications of Medicaid expansion on your overall contribution strategy — and to determine whether you’ll want additional communications in your enrollment materials about any related new options available to employees.
Under the ACA, states have been given access to additional federal funds to expand Medicaid coverage to all individuals with household income up to 138% of the federal poverty level (FPL). From 2014 to 2016, the federal government will cover 100% of expansion costs; between 2017 and 2020, the federal share gradually drops to 90%.
Even if your state isn’t one of the 26 states that have already expanded Medicaid, it’s possible that it will do so in the future — through either traditional expansion or an alternative customized approach (some states have obtained Section 1115 waivers to use matching federal dollars to cover adults up to 138% of FPL through private insurance and greater cost-sharing). In fact, the adoption of “alternative methods” may well reflect concession by initially staunch opponents that the expansion has an important role in the greater effort to reduce the number of uninsured Americans. Still other states may simply be deciding that they don’t want to lose valuable federal tax revenue to another state. Regardless, Medicaid numbers are climbing. The Department of Health and Human Services recently announced that 7.2 million new participants have been added to the rolls of Medicaid and CHIP since October 2013. Currently, Medicaid enrollment stands at 66 million people, or approximately 20% of the US population.
For employers that have a significant segment of part-time and/or low-wage employees who may be Medicaid-eligible and for whom employer health coverage is either not available or not affordable, the expansion represents another piece of the total health-care delivery pie. Together with the public exchanges — through which non-Medicaid-eligible employees having household income of between 100% and 400% of FPL may be eligible for federal premium assistance tax credits — Medicaid expansion is providing greater access to affordable coverage for lower-income workers.
Here are a few considerations to keep in mind as Medicaid continues to put up greater numbers across the country and employers continue to sort out details around the ACA’s employer shared responsibility requirements.
1. In expansion states, employees at or below 138% of FPL, who go to the public exchange, are not eligible to receive premium assistance tax credits but instead are automatically directed to Medicaid with no shared responsibility assessment for the employer.
That said, some states periodically take up legislative efforts to impose penalties on employers to discourage them from sending lower-paid employees to Medicaid. Vermont is the most recent to enact legislation that subjects employers to a quarterly fee for “uncovered employees,” so keep an eye on legislation in your state.
2. The numbers of uninsured patients seeking care through safety net hospitals began to drop almost immediately after Medicaid expansion took effect in January. (See Beth Umland’s June 9 post “Hospitals Seeing Drop in Uncompensated Care Under ACA” and link to related USA Today article.) Many who come through the public exchanges are discovering that they either have been Medicaid-eligible all along or are now eligible under the expansion and are taking advantage of the coverage. These decreases in uncompensated care bode well for lower hospital costs overall and may be a discussion point for employers during medical plan renewal negotiations.
3. Employers in states that have not expanded Medicaid may want to consider using the employer-shared-responsibility FPL safe harbor when determining whether their coverage is affordable. That’s because any employee at or above 100% of FPL will have an offer of affordable coverage based on the FPL safe harbor, and thus the employer will be shielded from shared responsibility assessments. In addition, any employee who is below 100% of FPL will not be eligible for premium assistance tax credits to purchase public exchange health coverage, and thus the affordability analysis is irrelevant.
But in states that have expanded Medicaid, the FPL safe harbor may not be the best approach if an employer’s goal is to maximize employee contributions and still avoid shared responsibility assessments. That’s because the FPL safe harbor typically provides the lowest threshold allowed for the employee monthly contribution. Employers in these states may want to consider use of the Form W-2 and/or rate-of-pay safe harbor methods, which generally allow the employer to set a higher employee monthly contribution and still avoid assessments, keeping in mind that ACA allows for use of more than one safe harbor for employees (or any reasonable category of employees), provided that it’s done on a uniform and consistent basis.
4. For states that haven’t expanded Medicaid and have, for example, a threshold of 75% of FPL for Medicaid eligibility, certain individuals will fall into the coverage gap, because they have household income between 75% and 100% of FPL and also are not eligible for federal premium assistance tax credits to purchase public exchange coverage. Employers in these states might want to consider possible changes in strategy to address low-income employees who get caught between where Medicaid ends and federally subsidized public exchange coverage begins — particularly large, multi-state employers whose policy is to treat everyone the same, but whose employees will fare differently based on where they’re located.
5. States that don’t expand Medicaid likely will experience greater percentages of public exchange enrollment, particularly by low-wage (and often high-utilization) employees who are not eligible for Medicaid. These increased numbers almost certainly will drive up costs.
In today’s complex post-reform world, Medicaid is yet another component for employers to keep tabs on and take into account when developing their health benefit strategies.
There were several articles last week about the significant decline in the uninsured rate in some states — with Arkansas, Kentucky, and Delaware at the top of the list. Arkansas reported a 45% decrease in its uninsured (from 22.5% to 12.4%). The state sent a letter to those enrolled in the food-stamp program that made it easy to enroll in "health insurance with no monthly premium cost" by sending back a form. Two things for employers to consider in thinking about their state's uninsured rate. First, as the uninsured rate drops, hospitals experience less uncompensated care — which should mean less cost shifting to private payors, including employer-sponsored plans. Second, keep in mind that some of your lower-paid, variable-hour employees may stand to benefit from access to the exchanges or Medicaid. Check back on Wednesday for Mercer's perspective on Medicaid expansion and employer-sponsored health benefits.
In making the case for health reform, proponents argued that as more people got health coverage, emergency room utilization would fall and hospitals would see less uncompensated care. In a welcome bit of good news, it seems that's happening already ‒ and it’s improving the bottom line of safety-net hospitals around the country. These hospitals, which typically treat a disproportionate number of poor and uninsured people and are left with unpaid bills totaling billions of dollars, started to see their numbers of uninsured patients dropping almost immediately after the Medicaid expansion took effect in January. Rather than having to rely on emergency rooms for all care, newly insured patients can visit primary care doctors and get diagnostic tests and prescription drugs. And the improvement in uncompensated care hasn't been limited to safety-net hospitals, but is having a general positive impact on hospitals throughout Medicaid expansion states. Theoretically, this should result in lower hospital prices for all...so stay tuned. Employers might want to ask about this positive market impact during upcoming medical plan renewal negotiations.
The White House claimed victory last week, projecting that 7.1 million enrolled in the public exchange as of the March 31 deadline - in addition to the 4 million newly enrolled in Medicaid and another 2-3 million covered by employers as a result of the expanded dependent eligibility requirement. The big question is to what extent has the ACA has reduced the number of uninsured individuals in the US, rather than simply provided a different means of accessing coverage to those already insured. The Urban Institute has been tracking the uninsurance rate since 2013 and their early estimates show 5.4 million uninsured adults have gained coverage — although we can expect this early estimate to rise because it doesn’t capture the enrollment surge that occurred at the end of March. Another big question is the health risk of people enrolled in the public exchange plans and what that means for premium increases for next year. Employers are watching all of these numbers closely. Although Mercer survey data shows that the great majority of employers are committed to sponsoring coverage for their active employees for at least the next five years, they have keen interest in the public exchange as a potential source of coverage for retirees under age 65.
According to Mercer's latest survey of more than 700 employers conducted after 2014 open enrollment, 9% of respondents reported that some of their employees left the company-sponsored plan to enroll in Medicaid in 2014. This article provides some useful tips for people who live in a state that has not expanded Medicaid and whose income is too low to make them eligible for a subsidy in the public exchange. Employers with part-time employees not eligible for benefits may want to pass along this helpful information.
In September 2013, most adults 18-64 were not aware of the coverage provisions under the ACA. For example, when asked about preventive care with no cost sharing, 45% indicated they had heard “nothing at all” about this ACA provision. Similarly, almost 45% of adults were unaware of their state’s decision on Medicaid expansion. Employers are in a unique position to leverage their direct communication channel to educate employees about provisions that may support increased wellness or lead to more affordable coverage through Medicaid.