Tag Archive: HHS

GAO report points to low Medicaid reimbursements as impetus for “Arkansas plan”

A recent critical assessment of Arkansas’s use of federal Medicaid dollars to subsidize the purchase of commercial individual health plans by low income people through the state’s health benefit exchange indicates a lack of health care providers willing to accept standard Medicaid reimbursement played a key role in the move. The repurposing of the Medicaid funding was authorized under a 3-year-long demonstration project waiver issued in the U.S. Department of Health and Human Services (HHS) in 2013.

The U.S. Government Accountability Office (GAO) issued a report earlier this month criticizing the waiver as contrary to HHS’s policy of requiring such waivers not incur costs beyond existing state Medicaid program expenditures. The report concluded that $4 billion HHS approved for the demonstration project was approximately $778 million more than the state would have spent for adult beneficiaries under its then-existent Medicaid program. HHS disagrees with the report’s conclusion, contending GAO too narrowly analyzed HHS’s budget neutrality policy governing Medicaid demonstration programs and Arkansas’s Medicaid cost data and failed to take into account the effect of Medicaid program expansions.

The stated policy intent of the demonstration is to ensure access to care and continuity of coverage since individuals could stay enrolled in the same health plan regardless of whether their coverage is financed through Medicaid or federal subsidies. The GAO report noted that according to Arkansas’s waiver application, the state’s network of Medicaid providers was at capacity. “By purchasing [exchange qualified health plan] coverage for newly eligible [Medicaid] beneficiaries, the state suggested it could improve access to care because beneficiaries would have access to expanded provider networks” through commercial plans sold on the exchange.

The GAO report takes issue with “questionable assumptions about provider payment rates,” noting the demonstration program projected the cost of expanding Medicaid without the demonstration assumed Arkansas would have had to pay its Medicaid providers rates comparable to private insurance payment rates—significantly higher rates than the rates the state was paying its [Medicaid] fee for service (FFS) providers—to ensure access for newly eligible beneficiaries.

For example, the report noted, the state assumed that it would have to pay 67 percent above its Medicaid reimbursement rate for primary care services and 10 percent above Medicaid reimbursement rates for higher-cost services such as inpatient and long-term care. “HHS approving officials told us that they thought the state’s underlying concern about the insufficient capacity of the state’s Medicaid provider network was valid given a projected 25 percent increase in the number of individuals covered under the state’s Medicaid program,” the GAO report states.

HHS has approved similar demonstration waivers for Iowa and Pennsylvania, allowing those who would otherwise be eligible for Medicaid coverage to purchase coverage through those state’s health benefit exchanges. Interest has also been shown by New Hampshire and active negotiations underway between HHS and Utah.

“Arkansas’s demonstration may prove an important test of whether using Medicaid funds to finance coverage offered through exchanges will improve access to care and continuity of coverage for the adult population that the demonstration aims to cover,” the GAO report concludes. “However, the increasing use of demonstrations has shifted a significant portion of federal Medicaid funds into financing care that is not subject to all of the federal Medicaid requirements. While HHS policy requires that demonstrations be budget-neutral and therefore not increase the costs to the federal government, we have had long-standing concerns about the Department’s ability to ensure budget neutrality given HHS’s flexible approach towards approving spending for new demonstrations.”


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

HHS: Half of 2011 health insurance rate increases reduced; 12% withdrawn

In May 2011, federal Department of Health and Human Services (HHS) promulgated a final rule implementing Section 2794 of the Public Health Services Act requiring HHS to establish an annual rate review process to identify “unreasonable” health insurance rate increases. What’s considered reasonable (and not)?  According to HHS, here’s how the regulation, found at 45 Code of Federal Regulations (CFR) Part 154 works:

Starting on September 1, 2011, health insurance companies in the small group and individual markets must submit information on all rate increases with an annual impact of 10 percent or greater for their non-grandfathered plans.  Insurance companies cannot raise premium rates by 10 percent or more without first justifying the increase to a Rate Review Program.  Insurers proposing increases of at or above 10 percent must submit for review clear information indicating the factors contributing to the proposed increases.  HHS or Effective Rate Review Programs (see insert below) review insurers’ projections, data, and assumptions to assess whether premium increases are based on sound, up-to-date information on health care costs and use of covered services.  Proposed rate increases may be determined to be unreasonable if for example, the proposed increase is based on faulty assumptions or unsubstantiated trends or if the rate increase charges different prices to people who pose similar cost risks to the insurer.  Information collected through this program, including explanations of the final determination, is made available to the public on HealthCare.gov.

The regulation is enforced jointly by HHS and state regulators or HHS alone if states opt not to participate. HHS announced today that as a result of the review process used under the rule, one half of 2011 insurer rate increases resulted in consumers receiving either a lower rate increase than requested or no increase at all.  In addition, HHS said 12 percent of the rate increases were withdrawn prior to review “in part because some insurers were not willing to have their proposed rate increase labeled as ‘unreasonable.’”  According to HHS, states made the call on reasonability in 69 percent of the proposed increases and HHS reviewed the remaining 31 percent.  HHS’s 2012 Annual Rate Review Report along with estimated savings for policyholders in the individual and small group markets can be viewed here.

In addition, the Section 1311(e)(2) of Part II the Patient Protection and Affordable Care Act (PPACA) gives state health benefit exchanges a degree of leverage over premium rates for health plans sold on the exchanges.  It mandates exchanges to require health plans seeking certification for “listing” on the exchanges as qualified health plans to submit a justification for any premium increase prior to implementation and to prominently post the justification on exchange websites. The Act also allows exchanges to take into account insurer rate reviews under the abovementioned section 2794 of the Public Health Service Act when determining whether to allow the plans to be offered on an exchange as well as “any excess of premium growth outside the Exchange as compared to the rate of such growth inside the Exchange, including information reported by the states.”

Meanwhile, in November 2014 California voters will decide whether individual and small group health insurance rates should be regulated under a prior approval scheme like that created by 1988’s Proposition 103 for property/casualty insurance rather than the current retrospective rate review scheme.  The initiative statute can be viewed by clicking here.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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