Q2 ended on June 30, and the earnings calls have started. The first of the “Big Five” Medicaid managed care companies out of the gate was Elevance Health. The financial analysts on last week’s call had a number of questions relating to the Medicaid provisions of the Budget Reconciliation Law (BRL) P.L. 119-21, that create headwinds for the companies. The following exchange, relating to the BRL’s work reporting requirements, was particularly notable:
Michael Ha (Baird): As we look ahead, and as it relates to work requirements, as we think about Georgia, Arkansas precedents, what we’ve just experienced with redeterminations, the large disenrollments from procedural reasons, and now with the new timeline starting in 27, all the preparations they’d need, especially with what you mentioned with how they struggle with all the volume of processes, how do you gain comfort that work requirements won’t catalyze another big procedural disenrollment situation, and why didn’t that rate acuity mismatch [grow] even further over the next few years?
Felicia Norwood (EVP and President, Government Health Benefits): Thank you for the question, Michael. You know, I’ll start by saying that we have very good experience in terms of work requirement programs and working collaboratively with our state partners. When it’s all said and done, you know, we’ve operated in multiple regulatory environments, and the expectation from us is to be a good state partner in helping them through some of the operational challenges. So we are going to be providing them with opportunities to understand how you can do this more efficiently. States certainly are always pressured when it comes to resources and staffing to support this kind of activity. And so we are there to make sure that we bring innovative programs to help them meet the needs of beneficiaries. We had that experience in Indiana, which early implemented work requirements. Georgia is another state where work requirements are in place today. And I think we have been able to work very effectively with our state partners to make sure that we are bringing the value to the table to support our states and equally important, support members and individuals who rely on Medicaid programs to make sure that they continue to have access for necessary care as we go through this period.”
There is no doubt that, as Mr. Ha’s question suggests, the BRL’s work reporting requirements will trigger “a big procedural disenrollment situation.” The only questions that remain are how many expansion adults will lose Medicaid coverage and how quickly they will lose it. (The Center on Budget and Policy Priorities estimates that between 9.9 and 14.9 million are at risk of losing coverage in 2034). There is also no doubt, as Ms. Norwood’s response indicates, that Elevance Health, like other Medicaid managed care companies, would very much like to “work collaboratively” with the state Medicaid agencies with which they contract to mitigate the red tape disenrollments from work reporting requirements.
There’s only one problem: section 71119(c) of the BRL, which expressly prohibits state Medicaid agencies from using managed care organizations (MCOs) to “determine beneficiary compliance” with the requirement that they demonstrate community engagement—i.e. report 80 hours of work per month. It also expressly prohibits state Medicaid agencies from using any contractor that has a “direct or indirect financial relationship” with an MCO to “determine beneficiary compliance.” While the text of this prohibition is not without some ambiguity, it clearly does not support effective collaboration between state Medicaid agencies and MCOs (or MCO contractors) in implementation of the work reporting requirements.
This provision, titled “Prohibiting Conflicts of Interest,” was not in the bill when it passed the House on May 22. It first appeared in the draft posted by the Senate Finance Committee on June 12. Less than a month later it passed the Senate and then the House unchanged. Because the Finance Committee did not hold hearings or markups on the bill, and because there is no Senate Budget Committee report, those of us who were not in the room where it happened do not understand the origins of the provision or exactly what it is intended to prohibit.
One possibility is that the authors of the provision were focused on increasing administrative burden on the adults and state Medicaid agencies that section 71119 targets. Of the 41 Medicaid expansion states (including DC), all but six (CT, ID, ME, MT, SD, and VT) contract with MCOs to furnish covered services to enrollees. It would make sense for these states to consider MCOs—or administrative vendors or consultants that also contract with MCOs—as an option for assisting in implementation of the work reporting requirements. After all, another provision in the bill, section 71103, expressly identifies MCOs as a “reliable source” of enrollee address information if the information is provided to, or verified by the MCO directly with, the enrollee. Nonetheless, the “conflict of interest” prohibition in section 71119 forecloses state agencies from using MCOs (and their contractors) to determine beneficiary compliance with work reporting requirements, perhaps because MCOs have a financial interest in retaining enrollees and the capitation revenues they bring in.
In any event, we may see guidance on this provision from CMS, perhaps in the Interim Final Rule the agency is directed to issue by June 1, 2026. Recently, CMS announced that it would no longer support state efforts to provide continuous eligibility to children aged 0 to 6 or other populations. It explained that this new policy “reflects a recalibrated approach that reinforces statutory boundaries, enhances oversight.” If this “recalibrated approach” carries over into the CMS guidance on section 71119, the prospects for state agency-MCO collaboration in implementation of work reporting requirements are slim to none.