State OK’d for Medicaid tack
Posted on Wednesday, March 8, 2006
State officials celebrated the federal approval Tuesday of a new Arkansas Medicaid program that will offer low-cost health insurance to small businesses, but the plan received a mixed response from some in the business community.
Arkansas is the 13 th state to use federal Medicaid money to pay for health insurance for private businesses, but state officials say the program is the first to offer coverage only to companies that insure their entire staff.
“We’re not announcing today perfection,” Gov. Mike Huckabee said at a news conference at the state Capitol. “We’re not announcing today a safety net that covers everything for all time for all people. But we are announcing a significant safety net for what could be up to 80, 000 Arkansans per year.”
The program uses employer funds and federal Medicaid matching funds to pay for a basic health insurance plan. The plan will also use $ 18 million of the state’s tobacco settlement money during the next five years.
The program will initially target employers who have 50 or fewer employees, but the program could expand to larger companies. Arkansas has 42, 205 employers with 100 or fewer employees, Huckabee said. Those companies employ 46 percent of all Arkansas employees.
The first phase of the plan will enroll up to 25, 000 people. After an evaluation, the second phase will begin, bringing the total to as many as 80, 000.
The first phase of the program is expected to begin later this year.
Though plan details are not definite, state officials expect that employers would pay $ 15 a month for each employee whose income is less than 200 percent of the federal poverty guidelines, or $ 40, 000 for a family of four. Employers would pay $ 100 per month for those earning more.
The plan annually would pay for six doctor visits, seven inpatient hospital days, two outpatient hospital procedures or emergency room visits and two drug prescriptions. It would not provide catastrophic coverage.
To qualify, every employee in the company must be insured under the plan. The only exception would be employees who are already covered under their spouses’ plan through another employer.
Eric Tinner, owner of the Sufficient Grounds Cafe in downtown Little Rock and employer of six people, said his business would be a good fit for the federal program.
Since his six workers make $ 8 an hour or less, Tinner would pay $ 90 a month to cover his entire staff. Tinner said he’d calculated that it would cost him $ 1, 500 per month through conventional insurance — far more than he can afford. “For the employees that I have, who are mostly younger, that would be perfect,” said Tinner. “That would be a benefit to try and attract better employees.” The plan would not be a good fit for Mark Abernathy, owner of Loca Luna and Bene Vita restaurants in Little Rock.
Abernathy said that to cover all 80 of his employees under the federal program would be too expensive anyway.
He offers health insurance and thus wouldn’t be eligible for the subsidized insurance. To qualify, companies must have been without insurance for 12 consecutive months, which is a provision intended to discourage employers from dropping existing coverage.
Only 15 of Abernathy’s employees are covered because most can’t afford the monthly premiums. But even if he could qualify, he said, he couldn’t afford to foot that much of his employees’ premiums.
“We just don’t have much room to do stuff like that,” he said.
One challenge for the rollout of the program is to overcome inertia, said Richard Eden, founder of the Arkansas-based Chamber Alliance Program, which offers relatively cheap health insurance through local chambers of commerce.
“The hardest sale anybody has to make is to that employer who’s not doing anything right now,” Eden said. “To come along and... start spending $ 1, 000 a month for health care for employees, that employer is taking $ 1, 000 off the bottom line.”
The Chamber Alliance Program has since 2004 grouped small businesses together to negotiate lower premiums and smaller annual increases, as if they were one large employer.
So far, 1, 000 people are covered, with the plan growing by 8 percent to 12 percent each month, Eden said.
Although the federal program offers a cheaper alternative to the chamber plan, Eden said he didn’t see the subsidy as competition because it’s bare bones.
“It doesn’t offer any catastrophic insurance.... If you find out you’ve got terminal cancer, you’re still going to be in the same boat [without coverage ],” he said. “If a small-business owner can’t afford to do what we’re offering to do, [the subsidy ] might be an option for them.”
The federal plan was hatched by a 21-member group of employers, consumers, health-care providers and insurance representatives known as the Arkansas Roundtable. Officials worked for five years to get state and federal approval, with the latter presenting the biggest stumbling block.
Dr. Joe Thompson, the state’s chief health officer, who has been pushing for this program since the idea was conceived, said federal officials have supported the plan but were reluctant to commit to it. He did not specify why federal officials hesitated for so long but said the holdup wasn’t financial. The federal money comes from State Children’s Health Insurance Program allocations that Arkansas was not using.
“It’s our money. Congress has allocated it to the state of Arkansas,” Thompson said. “This is how we want to spend it. So it wasn’t a budget issue with the federal government on our waiver.”
Some state officials said federal approval took several years because the program was so innovative, but a spokesman for the Centers for Medicare and Medicaid Services, which manages Medicaid at the federal level, said Arkansas’s plan is similar to the 12 other state plans in the Health Insurance Flexibility and Accountability Initiative.
“I’m not aware of any kind of hang-up there was with this,” spokesman Mary Kahn said of getting federal approval. “This is exactly the kind of thing the Bush administration is fond of.”
Kahn said approving a plan such as Arkansas’ may take more time if a proposal isn’t precise enough or if federal officials have additional questions.
The federal government will pay 82 cents of every dollar spent on the program for employees with children. It will pay 73 cents of every dollar for those without children. The matching rate is different because the funds will come out of two separate federal funding sources. Employers will pay the equal amounts for both groups.
The $ 18 million in state tobacco money that would be used was set aside in the voter-approved Arkansas Tobacco Settlement Proceeds Act of 2000. The money was specifically intended for expanding Medicaid coverage for adults.
“By the time you include what the employers are putting in, making their commitment and what the federal government’s putting in, our state dollar is getting leveraged about 10 times,” said John Selig, director of the Department of Health and Human Services, which runs the state Medicaid program.
“You just won’t find us leveraging state money any better than that,” he said.
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