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May 31, 2018

Virginia, after 5 years of controversy, is set to become the 33rd state to expand Medicaid

Daily Briefing

    Virginia's Legislature on Wednesday passed a budget bill (HB 5002S1) that includes a provision to expand Medicaid under the Affordable Care Act (ACA) to an additional 400,000 low-income state residents, positioning the state to become the 33rd state to expand the public health insurance program under the ACA.  

    Upcoming webconference: How to succeed under Medicaid risk

    The road to passage

    The ACA allows states to expand their Medicaid programs to people with incomes up to 138% of the federal poverty level (FPL), which equals an annual income of about $16,643 for an individual. Under the ACA, the federal government matches nearly all funding for those enrolled under Medicaid expansion, with the federal government matching at least 90% of expansion costs beginning in 2020.

    Seventeen states have so far chosen not to expand their Medicaid programs in part over concerns that the federal government would not deliver on its funding commitment. Republican lawmakers in Virginia have repeatedly defeated attempts to expand the state's Medicaid program, citing similar concerns.

    But some lawmakers in Virginia's House of Delegates dropped their opposition to expanding the state's Medicaid program after Democrats gained more seats in last year's midterm elections. After several months of negotiations, lawmakers were able to win the needed GOP support in the state Senate by adding a Medicaid work requirement provision to the bill. Virginia Gov. Ralph Northam (D), a doctor, is expected to sign the bill. Northam in a statement said, "This budget is the culmination of five years of effort to bring our taxpayer dollars home from Washington and expand Medicaid, " adding, "As a doctor, I'm so proud of the significant step we've taken together to help Virginians get quality, affordable health care."

    About the plan

    According to the Washington Post, Virginia currently has one of the most restrictive Medicaid programs in the country, covering mostly children and disabled adults with annual incomes below $9,700. Childless adults are not eligible for the program and working parents with annual incomes above 30% FPL, or $5,727, are not eligible.   

    By expanding Medicaid under the ACA, Virginia will be able to raise its income limits to $16,750 a year for a disabled person or able-bodied adult, and $28,700 for a family of three. Officials have said the expansion could add up to 400,000 low-income residents to Medicaid.

    Under the plan, Virginia first would expand its Medicaid program and then apply for a federal waiver to impose work or volunteer requirements on certain beneficiaries who do not have a disability. The plan also would require certain beneficiaries to pay premiums for Medicaid coverage.

    Virginia's plan would tax hospitals to help cover the state's 10% share of the expansion costs, about $2 billion annually. The measure would take effect Jan. 1, 2019, if signed into law.

    Industry experts for months have speculated that the Trump administration's willingness to approve Medicaid work requirement waivers could spur more states to expand their Medicaid programs. Virginia is now the first state to do so.

    However, some opponents maintain their concerns that the expansion could be costly for the state. J.C. Hernandez—Virginia state director at Americans for Prosperity, a conservative group—said, "Nobody really knows how much it will cost."

    New Jersey becomes 2nd state to enact insurance mandate

    Meanwhile, New Jersey Gov. Phil Murphy (D) on Wednesday signed into a law a bill (NJ A3380) that beginning Jan. 1, 2019, will require all state residents to have health insurance or pay a penalty, Politico reports. Murphy on Wednesday also signed into law a bill to create a reinsurance program in the state.

    New Jersey is the first state to impose a state-level individual mandate after Congress passed a tax reform bill (HR 1) that will eliminate the ACA individual mandate penalty beginning in 2019. Massachusetts in 2006 became the first state to impose a state-level individual mandate and served as a model for the ACA's individual mandate. However, Congress last year passed a tax reform law that beginning in 2019 effectively eliminates the ACA's individual mandate.

    According to Politico, New Jersey's mandate is similar to the ACA's requirement, imposing an annual penalty of 2.5% of a household's income or a maximum household penalty of $2,085, whichever is higher. State Treasurer Elizabeth Muoio will allow a "hardship exception" for individual who cannot afford coverage, Politico reports. 

    According to Politico, New Jersey expects to collect between $90 million and $100 million in penalties under the mandate. The penalty revenue would help fund the state's new reinsurance program to help insurers cover the cost of insuring consumers who have comparatively higher health care costs. The state plans to submit a state innovation waiver request to get federal funding to cover the rest of the program, which is projected to cost $275 million (Goodnough, New York Times, 5/30; Armour, Wall Street Journal, 5/30; Vozzella/Schneider, Washington Post, 5/30; Weixel, The Hill, 5/30; Jennings, Politico, 5/30; Livio, The Star-Ledger, 5/30).

    Upcoming webconference: How to succeed under Medicaid risk

    The Medicaid population presents a challenge for many health care providers. Low reimbursement rates coupled with high patient complexity are responsible for margin pressure. Join our virtual panel discussion with Advisory Board experts to inform a sustainable Medicaid strategy.

    Register Here

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