Arkansas Sidesteps Some Obamacare Problems with Unique Mix

Arkansas Sidesteps Some Obamacare Problems with Unique Mix
Ray Hanley, president and CEO of the Arkansas Foundation for Medical Care: “Arkansas has a lot to be proud of.” (Daniel Moody)

The federal Affordable Care Act has been a mixture of good news and bad news for Arkansas, but the state’s unique approach to expanding Medicaid has resulted in a different experience from that making national headlines.

“There is no other option anyone in the United States is pursuing that is more financially solvent, financially sound and is better for their states and taxpayers than Arkansas’,” said state Rep. Charlie Collins, R-Fayetteville, who co-chairs the Arkansas Legislative Health Care Task Force.

Across the country, monthly premiums for private insurance sold through government-run exchanges are skyrocketing by an average of 25 percent starting in 2017. Those increases, affecting in varying degrees the 4 percent of Americans who buy individual insurance on the exchanges, has become a centerpiece of Donald Trump’s campaign for president, with the Republican nominee vowing to repeal the law that he describes as a “total disaster.”

Several insurance companies also have given up on Obamacare, saying the exchanges are not profitable. Earlier this year, UnitedHealth Group said that in 2017 it won’t sell insurance on the exchanges in 34 states, including Arkansas, and QualChoice Life & Health Insurance Co. of Little Rock is withdrawing from certain counties.

Get the Lists: The Largest Arkansas Insurance Agencies and the Largest Property & Casualty Insurance Companies

The premiums on policies sold through the exchange to about 60,000 Arkansans are increasing significantly in 2017 — averages of 10 or 11 percent — but nothing like the monstrous increases being reported in some states.

And the ACA, through the exchanges and voluntary state-level expansion of Medicaid to the working poor, has brought the percentage of Americans who are uninsured to an all-time low — from 16.6 percent of non-elderly Americans in 2013 to 10 percent in the first quarter of 2016, according to the Kaiser Family Foundation, a California nonprofit that studies health care issues. (Seniors have near-universal coverage through Medicare, so the uninsured rate of all Americans is down to 8.6 percent.)

The reduction in the uninsured rate among Arkansans has been even greater, falling from 22.3 percent in 2013 to less than 9 percent in 2016.

This is both the good and bad news about Obamacare in Arkansas: Instead of expanding the traditional Medicaid program, as most states have done with federal ACA dollars, Arkansas used the money to buy private insurance for the working poor from the same exchanges used by the self-employed or workers whose companies don’t provide affordable insurance.

As a result, almost 11 percent of Arkansans — about 325,000 out of nearly 3 million — are insured through the exchange. That’s well over twice the national rate and four times the rate of Mississippi, a neighboring state with almost identical population that did not expand Medicaid at all.

Arkansas Works, the name now applied to the private insurance purchased with Medicaid expansion dollars, may have been too successful. The state guarantees payment of the premiums to nearly 270,000 people, which is about 20 percent more than was projected when the first incarnation known as the “private option” was adopted in 2014, and that population has turned out to be sicker than expected.

The federal government has so far paid 100 percent of the cost for the expanded Medicaid coverage, but next year the state will be responsible for 5 percent, or $50 million. By 2020 the state will have to pay 10 percent of the cost.

Collins, the Fayetteville Republican who co-chairs the Health Care Task Force, said he thinks the Legislature will continue to fund Arkansas Works because the alternatives are more expensive.

“What we’re doing is the absolute cheapest way to go of any state in the country,” he said.

Collins also said that five other states are implementing or are in the planning stages to put in place similar Medicaid expansion programs like Arkansas’ private option. Those states are Iowa, Michigan, Indiana, New Hampshire and Montana.

‘A Mixed Bag’
The cheapest way, naturally, isn’t the most profitable for providers of health care and health insurance.

QualChoice expects to lose about $20 million this year as a result of the ACA, President and CEO Michael Stock told Arkansas Business last week.

Overall, he said, Obamacare has been “a mixed bag in terms of its financial performance.”

He said the ACA gave QualChoice about 70,000 new customers, which in turn increased revenue. But that also increased expenses, including the need to add about 100 workers.

Pharmacists around the state also have seen more expenses as a result of the wave of the newly insured Arkansans, many of whom didn’t know how their benefits worked.

“A lot of that has really fallen on the pharmacist to almost be care coordinators to help them understand how to navigate the system,” said Scott Pace, executive vice president and CEO of the Arkansas Pharmacists Association.

The ACA’s financial impact on pharmacists has “at best been a wash,” he said. And at worst, pharmacies are losing money because of the additional operating expenses, including additional employees, required to respond to the increased patient volume.

“It certainly hasn’t been a windfall for the pharmacy industry,” Pace said.

Ray Hanley, president and CEO of the Arkansas Foundation for Medical Care, said Pace is correct in his anecdotal evidence.

Most pharmaceutical prices aren’t set by pharmacists. So a $500 drug might result in a profit to the pharmacist of $10-$12, Pace said.

Still, Hanley touted the impact Obamacare has had on Arkansans’ lives.

“We have the potential to be a lot healthier state now that we’ve got people covered and in the system of care,” Hanley said. “It’s done a great deal to shore up the health care infrastructure in the state, from rural hospitals to pharmacies to physicians.”

No state has had a greater reduction in its uninsured rate. “Arkansas has a lot to be proud of,” Hanley said.

(For more, see Address Design Flaws of Affordable Care Act, Participants Say.)

Arkansas’ Unique Approach
After the ACA was signed into law in 2010, no one was sure what the impact would be — or if it would even survive. Starting on Jan. 1, 2014, the centerpiece of the legislation — the “individual mandate” — required Americans to have health insurance and offered financial assistance in the form of tax credits for those who couldn’t afford it on their own.

The law has been the subject of repeal attempts since day one. The individual mandate survived a challenge at the U.S. Supreme Court. But the same ruling gave states the option of expanding the Medicaid program, mainly with federal dollars, to households with income just above the poverty line — the working poor who earn too much for traditional Medicaid but too little to afford health insurance.

Nineteen states have rejected Medicaid expansion. Arkansas, however, accepted the federal money but crafted a unique approach that used the federal dollars to buy private insurance for eligible Arkansans rather than covering them through the traditional state-run Medicaid program. This plan was known first as the “private option” but has been tweaked and renamed Arkansas Works.

The out-of-the-box variation caused hand-wringing among insurance carriers.

“There was absolutely no data available on this new population [on which] to base the rates,” said Max Greenwood, spokeswoman for Arkansas Blue Cross & Blue Shield, the state’s dominant health insurer.

In Arkansas, insurance companies must file notice of their rates with the state Insurance Department in May to take effect the following January. So in 2014, insurance companies only had experience from one full quarter of the private option on which to calculate their rates for 2015.

At first, ABCBS saw a slow uptick of the newly insured using health care services.

“Of the private option population, most of these folks had never had access to the health care system before, did not know how to use it, and likely a lot of them didn’t even realize they now had insurance,” Greenwood said.

Now that’s changed. “People are using their services, and they’re using a lot of them,” Greenwood said.

More of the newly insured are generally unhealthy, health insurance companies said in filings at the Arkansas Insurance Department.

QualChoice asked the Arkansas Insurance Department to approve a 23.8 percent average increase in premium for 2017, but Insurance Commissioner Allen Kerr agreed to an 11.1 percent increase for individual polices sold on the health insurance marketplaces.

Arkansas Blue Cross asked for an average increase of 14.7 percent, but it was approved for only a 9.7 percent increase.

Apples to Apples
Insurance Department Spokesman Ryan James said the numbers, however, are the average increase for all a company’s products on the exchange. Some marketplace plans might see an increase, while others may not.

Stock, the CEO of QualChoice, said that because QualChoice didn’t get the rate increases it wanted, it won’t be selling insurance on the exchanges in counties in northeast, southwest and west-central Arkansas in 2017.

He said QualChoice lost too much money in those regions for it to continue selling insurance.

Percentage changes, of course, tell little without knowing the starting point for the policies, which can vary widely across the country. The Kaiser Family Foundation released a report last month that compared the second-lowest silver plan, which is one of the most popular plan choices in the marketplace, for a 40-year-old nonsmoker.

(A PDF version of the report is available for download.)

In Little Rock, that person would pay $314 a month next year, which is before the tax credit is included, according to the Kaiser Family Foundation report. That amount is up only 1 percent from the previous year, making Arkansas’ the fourth-lowest increase in the country.

In Jackson, Mississippi, a person with that plan will see a 25 percent jump to $352 a month. That price can be reduced significantly by tax credits for households earning less than 400 percent of the poverty level, but because Mississippi chose not to expand Medicaid, the working poor are still priced out of the market.

“If you are poor and sick in Mississippi, you’re in trouble,” Hanley said. “If you’re below 100 percent of poverty and not eligible for Medicaid … you don’t qualify for anything.”

The highest increase Kaiser found was in Phoenix, where premiums for the 40-year-old nonsmoker will increase 145 percent to $507 a month.