Wither Insure Oklahoma?

In announcing that Oklahoma would not take advantage of the opportunities provided by the Affordable Care Act (ACA) to expand Medicaid to cover low-income adults, Governor Mary Fallin stated she was committed to developing an “Oklahoma Plan to reduce the number of uninsured and the costs of healthcare”. According to several news reports, the options under consideration include expansion of Insure Oklahoma.

Insure Oklahoma involves a mix of public and private funding, and includes a modified benefit package compared to traditional Medicaid, along with greater cost-sharing responsibilities for participants. These features of the program have made Insure Oklahoma popular with some elected officials who are typically less than fully supportive of traditional Medicaid, and have led some to hold out Insure Oklahoma as an alternative to expanding Medicaid under the ACA.

However, with the full implementation of the Affordable Care Act in 2014, the future of programs like Insure Oklahoma becomes highly uncertain. The federal government is unlikely to extend Insure Oklahoma in its present form and may not extend it at all. Even if the program could be continued in some form, its financial terms are far less favorable to the state than the Medicaid expansion proposed by the Affordable Care Act. Rather than trying to preserve Insure Oklahoma, the state would be much better off by expanding Medicaid in a way that takes advantage of federal willingness to provide flexibility regarding benefit packages and cost-sharing for the newly-eligible Medicaid population, and by pursuing premium assistance options within the Medicaid program.

Insure Oklahoma is a health insurance program created in 2005 under a Medicaid 1115 waiver to provide coverage for low-income adults. The state’s share of funding for Insure Oklahoma comes from a portion of the tobacco tax revenues approved by Oklahoma voters in 2004 that generates over $40 million annually for the program. There are two components of Insure Oklahoma:

• Employer-Sponsored Insurance (ESI) provides premium assistance to employees and their spouses with income up to 200 percent of the poverty level to purchase employer coverage. Businesses with fewer than 100 employees are eligible to participate in Insure Oklahoma. Employers and employees pay a portion of the cost of coverage, and Medicaid covers the rest;
• The Individual Plan (IO) allows qualified adults and their dependents with incomes below 200 percent of the poverty level to buy into Medicaid coverage. It is available to employees of small businesses with fewer than 100 employees who are not eligible for employer-based coverage, self-employed adults, the temporarily unemployed, and some adults with disabilities. Members pay up to 5 percent of their income towards the cost of coverage, with the remainder paid for by Medicaid.

Insure Oklahoma currently covers 30,693 members, of whom 54 percent (16,620) are insured through Employer-Sponsored Insurance and 46 percent (14,073) through the Individual Plan. Currently, 96 percent of IO members are adults, with the remainder being dependent children and students.

The Affordable Care Act has, in some ways, made a program like Insure Oklahoma redundant. IO members with income above 100 percent of the federal poverty level – some 22,000 individuals – will qualify for tax credits, paid for entirely with federal funds, to purchase insurance on the new health insurance exchanges, which, in Oklahoma, will be operated by the federal government. IO members with incomes below the poverty level, some 8,600 current members, were expected to become eligible for Medicaid, with the federal government assuming 100 percent of the cost for the first three years (2014-16) and 90 percent from 2020 onwards. With Governor Fallin’s rejection of Medicaid expansion, IO members with incomes below the poverty level are likely to join the ranks of the roughly 130,000 uninsured working-age Oklahomans who will be stuck in a coverage crater, earning too little to qualify for tax credits.

What will happen to Insure Oklahoma beyond 2013? The Tulsa World reported in December that federal officials informed the Oklahoma Health Care Authority they are not interested in continuing partnerships like the Insure Oklahoma program once the ACA’s new coverage options kick in. More recently, sources have indicated that states have been told they can request extensions of premium assistance waiver programs, although waivers are unlikely to be approved in their present forms. Yet even if Oklahoma were to gain approval for an extension of Insure Oklahoma, it would be fiscally irresponsible to follow that route since the state would be required to pay the traditional Medicaid state match of roughly 35 percent, rather than having the federal government foot 90 to 100 percent of the bill.

At the same time, the federal government is signaling a clear willingness to allow states that expand Medicaid increased flexibility in shaping coverage for those newly eligible for Medicaid.  In a recent set of Questions and Answers to Governors, Health and Human Services Kathleen Sebelius wrote:

For the newly eligible adults, states will have flexibility under the statute to provide benefits benchmarked to commercial plans and they can design different benefit packages for different populations. We also intend to propose further changes related to cost sharing.

In addition, Oklahoma could retain a premium assistance component as part of its Medicaid expansion through what are known as  Section 1906 premium assistance programs, which many other states already do as part of their regular Medicaid program.

The Governor has said publicly that she plans to reduce the number of uninsured and the costs of healthcare.  Yet by rejecting Medicaid expansion, Oklahoma gives up the chance to have federal funds cover the lion’s share of the costs of insuring a large share of the state’s uninsured population, while leaving itself in a worse position to continue the Insure Oklahoma model in some future form. That sounds like no plan at all.