Arkansas’ Premium Assistance Model Prioritizes Plan Participation Over Price

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In September, Arkansas received approval from the federal government to expand Medicaid using a premium assistance model or "private option" for 2014 through 2017.
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Under this model, Arkansas will enroll an estimated 225,000 new Medicaid beneficiaries into plans sold on their exchange. The Medicaid program will pay 100 percent of a beneficiary’s premium costs and will wraparound the benefit to reduce cost-sharing to Medicaid statutorily defined levels; 62,000 beneficiaries have already enrolled.

With no private Medicaid plans operating in Arkansas, the premium assistance model enables the state to enroll new beneficiaries in managed care. The approach also stands to benefit the state exchange by increasing expected enrollment, potentially recruiting new health plans that may not previously have sought to compete with Arkansas Blue Cross Blue Shield.

Beneficiaries newly qualifying for Arkansas’ Medicaid private option can enroll in any silver level exchange product available in their region, regardless of premium. While most exchange enrollees are expected to be highly price sensitive, Medicaid private option enrollees will pay nothing in premium costs. Therefore, beneficiaries may choose a plan based on brand recognition, inclusion of their physicians in the provider network, or coverage of their drugs on the formulary. While details of the private option plan emerged after plans had submitted exchange bids for 2014, the approach could change health plans’ strategies in future years shifting their focus from offering the lowest premium in the exchange to attracting Arkansas Medicaid beneficiaries with broad networks and drug coverage.

This article was excerpted from the September issue of Medicaid Monthly, which tracks the latest federal and state Medicaid activity in one comprehensive source. For access, contact Tiernan Meyer.

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