Is There a New Premium Assistance Option in the Air?

So as I mentioned in my last blog on the Secretary’s Q and A in December, which most notably said waivers to do a partial Medicaid expansion are not on offer, an extremely obscure premium assistance option has been dusted off and featured in the Secretary’s letter – drum roll please — Section 1905a of the Social Security Act.

Not to be confused with the more common premium assistance option, Section 1906a, this option is so obscure that even in my efforts to keep a close watch on all matters premium assistance was only vaguely familiar with it. And don’t bother reading the statute unless you are really a glutton for punishment – the section runs many pages and the premium assistance aspect of it is incredibly challenging to unearth.

A handful of states – no one seems sure how many although the very useful 2010 GAO report on premium assistance identified six in a footnote– have apparently been running these programs which allow states to subsidize coverage in the individual market – perhaps in some cases for student health plans.

In the 2009 CHIPRA legislation Congress moved away from using Medicaid and CHIP dollars to subsidize the purchase of individual market coverage – largely because it has been expensive and often shoddy coverage. New options to do premium assistance explicitly prohibited their use in the individual market. But, post ACA, with its establishment of new marketplaces and tax credits to purchase coverage on the individual market, and new insurance reforms – the world has changed. The individual market inside the exchange will be a more hospitable place to get coverage.

So states have wanted to know if they could use Medicaid and CHIP dollars to purchase coverage in the exchange – from a whole variety of different perspectives. On one extreme, a state which loves the concept of premium assistance, and is not crazy about Medicaid, using Medicaid and CHIP $ to put as many people as possible in the exchange may be the goal. In other states, a more targeted use of premium assistance may be contemplated – such as purchasing whole family coverage and using CHIP $ to pay for the kids to be covered with their parents who might be receiving tax credits to purchase in the exchange, or providing wraparound services to pregnant women who were on Medicaid at 150% of FPL but are moving to the exchange.

The proposed Medicaid eligibility rule includes a short section at 435.1015 which outlines the rules for using Medicaid dollars to buy individual market coverage and makes clear that premium assistance must be done the right way – i.e. benefits and cost-sharing protections remain in place for those who move to private coverage. And the cost-effectiveness test must include administrative costs, which have often proven to be very high because premium assistance programs often have very small enrollment.

That’s good news, although the rule needs to be tightened up a bit in the area of cost-effectiveness as our comments will suggest. And, there are reasons to be concerned that children, for example, even with the wrap requirement may lose access to some EPSDT services if their families are not well informed of their right to wrapraround services and how to access them. There is little data on this question, but what little we do know suggests that states may not be paying for much in the way of wraparound services.

Still the new world of ACA suggests that renewed interest in new iterations of premium assistance options is at hand. Stay tuned to SayAhh! for more.

Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy.