State of the States: Fall 2020

State Election Results

Republican dominance in state elections could hinder new Democratic health initiatives

Going into the 2020 election, Democrats expected a “blue wave” at the state level that would build upon substantial gains in 2018, when they won back most of the record number of legislative seats they had lost since 2010.  Democrats had high hopes to flip chambers in key states like Florida, North Carolina, and Texas that would give them some path to finally expand Medicaid, as well as Arizona, Michigan, and Pennsylvania where Republican legislatures had long-stymied other efforts to implement or protect the Affordable Care Act (ACA). However, Democrats’ success in the Presidential and U.S. Senate races did not translate down ballot as they not only failed to make any state-level gains but lost at least 70 seats nationwide, including two chambers (the New Hampshire House and Senate).
The victories were critical for Republicans who preserved their ability to control the redistricting process in most states over the next decade. Overall, Republicans now control 62 chambers in state legislatures (compared to only 37 for Democrats) including 23 “trifectas” where they control the governorship, House, and Senate (Democrats have only 15).  Republicans also hold a “supermajority” status (where they can override gubernatorial vetoes) in 31 states (adding the Montana House)-and nearly a “supermajority” status in Florida, North Carolina, and Wisconsin.
There was little turnover among governors or state attorneys general, where Republicans continue to hold slight leads nationwide (27-23 for governors, 26-24 for AGs).  The only “flip” was the Republican win for Montana governor (giving them a “trifecta”).
The coronavirus pandemic dramatically limited the number of voter referendums (only 37 compared to a high of 60 in 2018).  The most prominent victory created a paid family and medical leave program for Colorado (the ninth in the nation, but first to be enacted via the ballot). Voters in Arkansas, Florida, and North Dakota also rejected Republican efforts to make it more difficult for citizens to put referendums (such as Medicaid expansion) on future ballots.
Republican dominance at the state level may limit the ability of Democratic governors or the Biden Administration to implement their health reform agenda, such as efforts to expand the ACA through public or Medicaid “buy-in” options.  However, state reforms that have substantial bipartisan support such as guardrails protecting consumers from copay accumulator adjusters (being pursued in at least a dozen states including California, Florida, and Texas), balance or “surprise” billing, and step therapy should continue to progress nationwide in 2021. Budget deficits created by the COVID19 pandemic may also renew pressure on the dozen states still opting out of the ACA Medicaid expansion to accept billions in federal funding to participate.

Marketplace and Medicaid Developments

Marketplace and Medicaid enrollment spikes due to COVID19 pandemic

Following the December 15^th end of the 2021 open enrollment period in most states, the federal Centers for Medicare and Medicaid Services (CMS) announced that total enrollment in ACA Marketplaces run by the federal government jumped 6.6 percent (even though the number of participating states declined to 36 as New Jersey and Pennsylvania transitioned to state control.)
Federally-facilitated Marketplace enrollment had declined each year since 2015 as states increasingly opted to participate in the ACA’s Medicaid expansion.  The dramatic increase for 2021 was driven by the COVID19 pandemic as more than 12 million Americans lost employer-based coverage by August 2020. States refusing to participate in the ACA Medicaid expansion saw Marketplace enrollment spike by an average of 9.7 percent (led by Texas at 14.9 percent), while enrollment in expansion states declined by 0.5 percent.
CMS will not release open enrollment data for state-based Marketplaces (SBM) until early 2021, as 13 states extended their deadlines past December 15^th.  However, the Maryland SBM (which closed December 15^th) announced a new record of more than 166,000 enrollees (see below).
CMS also announced that Medicaid enrollment increased by 9.1 percent (or 5.8 million individuals) from February-August 2020 also due to the COVID-19 pandemic, led by spikes of up to 15 percent in Kentucky and Missouri. By virtue of accepting the enhanced federal match under the Families First Coronavirus Response Act, states remain prohibited from altering Medicaid eligibility levels or terminating coverage through the end of the public health emergency (which currently is set to expire on January 20^th).  However, the Medicaid and CHIP Payment and Access Commission acknowledged during its fall meeting that such dramatic spikes in Medicaid enrollment will subsequently force states to impose severe cuts to eligibility and benefits without an influx of federal funding, either through further Congressional relief packages or by finally opting into the ACA Medicaid expansion.

CMS gives states six months to verify Medicaid eligibility after COVID19 emergency ends

CMS has agreed to give states a grace period of up to six months to complete redeterminations of eligibility for Medicaid and the Children’s Health Insurance Program (CHIP) following the expiration of the COVID19 PHE.
Under the Families First Coronavirus Response Act, states received a temporary 6.2 percent increase in federal matching funds for their Medicaid programs, on the condition that they not make any adverse changes to eligibility. Although several states continued to make routine redeterminations of eligibility during that time, they were prohibited from terminating coverage for beneficiaries found to no longer be eligible.
A new CMS guidance document published December 22^nd requires to states to fully resume redeterminations and terminations the end of the month following the expiration of the PHE (although the matching fund increase continues until the end of that quarter).  However, CMS warns states that they all should start processing pending post-enrollment income and eligibility verifications now in order to stay within the six-month timeline, acknowledging complaints from larger states like California that it could take up to 12 months to eliminate the backlog.
Even though CMS agreed to give states the six-month grace period, it did not extend the ten-day window in which beneficiaries must respond to a notice of termination (in order to request a hearing) before losing coverage.  Consumer advocates had argued at the Medicaid and CHIP Payment and Access Commission fall meeting that this window was far too short given the job losses or medical issues that many beneficiaries may still face when the PHE expires. However, the CMS guidance notes that states can offer beneficiaries a 90-day reconsideration period if they failed to timely respond to the initial notice.
CMS also acknowledged that significant numbers of beneficiaries will lose Medicaid/CHIP coverage once the PHE ends and directed states to develop a Post-COVID Eligibility and Enrollment Operational plan to prepare for these losses. States should also identify which of the temporary COVID19 flexibilities CMS granted last spring should be made permanent.

State-Specific Actions

Michigan enacts new protections against surprise billing 

Governor Gretchen Whitmer (D) signed legislation in October making Michigan the 32^nd state to enact protections against balance or “surprise” billing from out-of-network providers contracted with in-network facilities.
Under House Bills 4459, 4460, 4990, and 4991, out-of-network providers that furnish care within an in-network setting must provide patients at the “first point of contact” (such as scheduling the appointment) with a “good-faith estimate of the cost of the health care services to be provided.” In emergency situations, the out-of-network provider must accept payment equal to the median amount within the region that a health insurer pays an in-network provider or 150 percent of what Medicare pays for a medical service, (whichever is greater).
The bills were largely favored by insurers and opposed by providers (who prefer an arbitration process to setting a median “benchmark” rate). However, they do allow providers to request added payment for care in emergency cases if they can document a “complicating factor” showing the patient had an unusually severe condition or otherwise required an exceptional amount of time, intensity, and resources.
Although the new law was effective October 22^nd, sanctions for non-compliance were not assessed prior to January 1^st by the Department of Insurance and Financial Services (per House bills 4990 and 4991).
New balance billing protections also went into effect in Georgia and Virginia on January 1^st (and are awaiting the governor’s signature in Ohio.)  However, state protections can apply only to state-regulated plans (i.e. those offered in the individual and small group markets).
Federal surprise billing protections that will apply to all large employer and self-funded plans (and are more amenable to providers) were ultimately enacted in December as part of the latest omnibus spending bill passed by Congress. However, those will not go into effect until the start of 2022 once federal agencies finalize implementing rules this summer.

Maryland renews COVID-19 special enrollment period, weighs young adult subsidies

Maryland Health Connection (MHC) has announced that it will create a new special enrollment period (SEP) from January 1-March 15 due to the ongoing COVID-19 pandemic.
MHC has been the most flexible ACA Marketplace in the nation, creating several SEPs since the pandemic began last March (the latest expired on December 15^th).  More than 33,000 Marylanders were able to use these SEPs to obtain private plan coverage, after becoming uninsured outside of the annual open enrollment period.
As a result of job losses sustained during the pandemic, MHC notes that enrollment in Medicaid also increased by 70,000.
Maryland is one of 15 states with an approved federal waiver to create a reinsurance program that compensates individual market insurers for exceptional claims. According to the Maryland Health Insurance Coverage Protection Commission, the reinsurance program has dramatically reduced individual market premiums by more than 30 percent since 2018.
State funding for reinsurance is provided through an assessment on health insurers.  According to a report commissioned last year by the legislature, this fee could be split to provide premium subsidies for young adults without adversely impacting the reinsurance program or requiring an amended waiver.
As a result, the Maryland Commission is recommending the legislature authorize a state-subsidy program in 2021 similar to state subsidies recently enacted in California, Colorado and New Jersey (and in place prior to the ACA in Massachusetts and Vermont).  State subsidies would initially be available to young adults (up to age 40) and supplement those provided under the ACA for those earning up to 400 percent of the federal poverty level.  The Commission recommends that the legislature consider expanding the subsidies to 600 percent of poverty in future years.

Montana Medicaid expansion receives temporary extension amid potential changes

The Department of Health and Public Services (DHPS) announced in December that CMS has temporarily renewedMontana’s Medicaid expansion plan through 2021 while it works through the full waiver extension the legislature submitted in 2019.
Montana initially expanded Medicaid under the ACA in 2015 and the program has been very popular, currently enrolling nearly 90,000 Montanans (and increasing Medicaid enrollment by 78 percent). The initial five-year federal waiver was good through 2020 but required legislative re-authorization in 2019 to avoid triggering an early sunset provision.
The Republican-controlled legislature did reauthorize the expansion for six more years after voters refused to approve a ballot initiative that sought to fund the state share of the expansion through a cigarette tax. It had reached a compromise with then Governor Steve Bullock (D) and the state provider associations to include work reporting requirements (which is projected to reduce enrollment by 4-12 percent), while also raising premiums on the expansion population from two to four percent of income.  The revised waiver was submitted in 2019.
CMS indicated that the ongoing COVID19 pandemic has prevented the agency from fully considering these changes and agreed to issue the one-year extension in the interim. The delay gives new Governor Greg Gianforte (R) time to seek additional changes to the expansion that he favored as a candidate, including wellness incentives and more stringent asset and eligibility verification.  However, he previously insisted that he would not terminate the expansion.
The U.S. Supreme Court has agreed to review federal court decisions that have consistently struck down Medicaid work reporting requirements for not being compatible with federal Medicaid law.

Indiana gets unprecedented ten-year extension for Medicaid expansion alternative

CMS announced in October that it has approved Indiana’s request to continue its Healthy Indiana plan for an additional ten years.
Healthy Indiana is the state’s “conservative” alternative version of ACA Medicaid expansion. More than 572,000 low-income Hoosiers are enrolled in the program, which uses ACA matching funds to put those newly-eligible for Medicaid into high-deductible health plans that are combined with a health savings account. Participants must contribute two percent of their income (although that provision has been suspended during the COVID19 pandemic, during which more than 100,000 new participants have enrolled).
CMS Administrator Seema Verma, who helped design Healthy Indiana while a consultant to then-Governor Mike Pence, granted the state’s unprecedented request for a ten-year extension, which goes far beyond the three-to-four year extensions that the agency typically approves. In its approval letter, CMS agreed with the Indiana Family and Services Administration that some aspects of the Healthy Indiana plan are unique, making the impact on beneficiaries “challenging” to evaluate within shorter time periods.  However, CMS limited its approval of Healthy Indiana’s proposed work reporting requirements (and “lock-out” periods for non-compliance) to only five years, should both be upheld by the U.S. Supreme Court later this year.

Florida submits drug importation plan after FDA approves final regulations

Governor Ron DeSantis announced in November that Florida has submitted its Section 804 Importation Proposal (SIP) to the federal government, which if approved would allow Florida wholesalers and pharmacies to import certain prescription drugs from Canada.
The program, which was authorized by the legislature in 2019, would initially be limited only to drugs to treat asthma, HIV/AIDS, or diabetes that are covered by public payers (such as Medicaid or the Department of Corrections). The Governor’s press release acknowledges that Florida’s Agency for Healthcare Administration (AHCA) has yet to contract with a vendor to manage the program prior to the December 2020 deadline it set forth in its Invitation to Negotiate, which the National Academy of State Health Policy notes may be due to its limitation to public payers.
The Governor emphasized that the proposal complies with new regulations for prescription drug importation that the federal Food and Drug Administration (FDA) finalized on November 30^th, as well as Department of Health and Human Services guidance from last July. At least five other state legislatures have authorized similar importation programs, while three others (Colorado, Maine, and Vermont) have already submitted Section 804 SIPs under the final rule. However, it is not yet clear what position the incoming Biden Administration will take on these proposals particularly in light of Canada’s decision to block exports of certain drugs to the United States following the finalization of the FDA rule.

New Jersey issues cease and desist order to health care sharing ministries

The New Jersey Department of Banking and Insurance (BOI) issued a “cease and desist” order in December against Aliera Companies and its subsidiary Trinity Healthshare for deceptive practices that made consumers falsely believe they were purchasing comprehensive health insurance coverage through a health care sharing ministry (HCSM).
HCSMs are non-profit organizations where a group of members with common religious or ethical beliefs make regular (often monthly payments) to cover the medical expenses of a member in need.  HCSMs do not meet federal or state definitions of health insurance and are not subject to the consumer protections of the ACA.
According to BOI, Aliera (which serves more than 1,200 consumers in New Jersey) deliberately marketed these plans as if they were ACA-compliant, leading members to believe they were receiving comprehensive coverage of essential benefits through the Get Covered New Jersey Marketplace that would not discriminate based on pre-existing conditions. Members were often unaware of the plan’s deficiencies until receiving a notice of benefit denial.
Aliera has been subject to similar adverse actions by insurance regulators and class action lawsuits in several states including Connecticut, Georgia, Missouri, New Hampshire, New York, and Washington (where it was forced to pay a $1 million fine.)  Colorado regulators created a special enrollment period in 2020 just for consumers who were the victim of Aliera’s deception.
BOI used the Aliera notice to caution consumers about purchasing any type of limited benefit coverage including HCSMs and short-term health plans, which need not comply with the ACA.