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Big deal in Arkansas: State gets OK on plan to circumvent Medicaid

With 'sunshine provision,' state could back out after three years

Topics: Health Policy, Market Trends, Strategy, Reimbursement, Finance, Revenue Cycle

February 27, 2013

The federal government says it will pay for Arkansas' plan to expand health coverage to low-income residents through the Affordable Care Act's (ACA) insurance exchanges rather than the Medicaid program.

  • Need a refresher on the state health exchanges? We've got you covered with a quick review of the ACA marketplaces, including when they're rolling out, how they work, and what it means for you.

Gov. Mike Beebe (D) met with HHS Secretary Kathleen Sebelius on Friday to discuss the plan. Like the ACA Medicaid expansion, the plan will extend insurance coverage to all residents below 138% of the federal poverty limit.

Although newly insured residents may face some co-payments, the federal government has agreed to cover the entirety of their premiums for the first three years. As with the Medicaid expansion, the state will then begin increasingly covering a share of the costs, until it reaches 10% of the costs in 2020. 

Altogether, the move is expected to cover more than 200,000 uninsured Arkansans. The move is not considered a "partial expansion"—which the Obama administration has said it would not cover—because it will cover the same number of residents as a full Medicaid expansion under the ACA.

Will the legislature support it?

The deal requires approval by the state legislature, which has previously expressed opposition to Medicaid expansion. However, Beebe says that lawmakers have responded positively to federal approval of the plan.

Beebe also included in the deal a "sunset provision," an idea pioneered by Florida in which the legislature would need to re-approve the measure in 2017, when states start paying a share of the Medicaid expansion.

Since purchasing private insurance will likely be more expensive than expanding Medicaid coverage, the deal is expected to increase costs for the federal government. It is also expected to make expansion more expensive for the states after 2017. Beebe notes that the sunset provision allows future lawmakers to either "go back to full Medicaid instead of running it through an exchange… keep it as an exchange… [or] not to do anything. That's one of the things that would be available for a legislator and another governor to decide."

Possible impact: Good for insurers, hospitals, and the exchanges

According to the Arkansas Times, the "game-changer" deal is expected to benefit insurance companies, which would see an influx of customers, and hospitals, which are typically reimbursed at higher rates from private insurers than Medicaid.

John Selig—who leads the state health department and supports the proposal—says that the deal would also simplify the exchange. "The most difficult part of the exchange was going to be people going from Medicaid to private insurance, back and forth as they went up and down [the] income line," he told the Arkansas Times, adding  "[n]ow, you just keep [the private insurance company] as you go up or down. In a lot of ways this simplifies what happens on the exchange" (Ramsey, "Arkansas Blog," Arkansas Times, 2/26).

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