KHI News Service

Health reform: What’s next for Kansas?

By M. Suzanne Schrandt, J.D. | April 06, 2010

The health care reform legislation that President Obama recently signed into law is ambitious in its scope. It requires individuals to carry insurance while also making it more affordable by creating purchasing exchanges and providing subsidies and tax credits. It protects consumers from long-criticized insurance industry practices. And it seeks to improve the health of Americans through its call for the development of a national strategy to improve public health and its authorization of pilot projects to examine the way health care is delivered and paid for.

As the details of the legislation’s impact on states are defined in the coming weeks and months, state officials will begin preparing for additional requirements and regulations. Given the state’s budget constraints, new funding and grant opportunities contained in the legislation may be particularly important.

The information below has been compiled with assistance from the Kaiser Family Foundation’s summary of the legislation, which may be accessed here.

Medicaid and CHIP changes

The new law will expand Medicaid eligibility to 133 percent of the Federal Poverty Level (FPL). The determination will be based on modified, adjusted income levels, but generally, 133 percent of FPL is an annual income of about $24,352 for a family of three.

Adults typically do not qualify for Medicaid in Kansas, unless they are both low-income and either disabled or pregnant. Parents of minor children may qualify for the program if they have very low monthly incomes. Eligibility levels vary by county, with some areas as low as 25 percent. Kansas is among 10 states with the lowest income eligibility thresholds for working parents.

The law will also increase the amount of federal funding for the Medicaid program. The federal government will fully fund the newly eligible families’ costs from 2014-2016. Kansas must assume 5 percent of the program’s cost in 2017, and gradually increase its share to 10 percent in 2020 and subsequent years.

The Kansas Health Policy Authority commissioned a study last year, based on an earlier bill approved by the Senate Finance Committee, which estimated that the federal legislation could add about 60,000 new beneficiaries to the Kansas Medicaid program. Even with the expanded coverage, the state could see net savings between $0 and $50 million with the additional federal assistance. However, the exact impact of this new law is unknown.

The Children’s Health Insurance Program will be maintained in its current form until 2019. Children who are ineligible for CHIP because of the program’s enrollment caps will be eligible for tax credits to purchase insurance in state exchanges. The legislation requires that the federal government increase the amount it contributes to state’s CHIP programs by 23 percentage points, beginning in the year 2015.

Even though the program and eligibility requirements will not be affected by the health reform legislation until those components take effect in 2014, enrollment in Medicaid and CHIP could eventually increase as a result of the legislation’s mandate that all individuals are enrolled in an insurance program

While the influx of new enrollees will add workload for state Medicaid agencies, the efficiency of that process in Kansas could be aided by the health policy authority’s new automated eligibility system that is planned to be implemented in 2014.

There are multiple optional Medicaid pilots and programs states may implement, many of which include a related enhanced federal matching rate. One such program provides states with new options for offering Home and Community-Based Services through a Medicaid state plan rather than through a waiver.

Another establishes the Community First Choice Option, which offers community-based attendant care for individuals who have previously required institutional care.

Individual and employer requirements

The new health reform law will require U.S. citizens and legal residents to have health insurance or face a tax penalty. Currently, about 12.4 percent of Kansans – 340,000 individuals – are uninsured. The law will provide federal subsidies for Kansans who are at or below 400 percent of the FPL, or about $73,000 for a family of three.

Of employed adults in Kansas, 36 percent do not currently have access to employer-sponsored insurance. And according to some estimates, approximately 50,000 Kansas businesses are “small employers” as defined by the federal health reform legislation.

Small employers, or those with fewer than 50 employees, are exempt from the law’s requirements. However, tax credits will be available as early as the 2010 tax year for those small employers who provide health coverage. To qualify for the credits, the businesses must have fewer than 25 employees who earn an annual average wage of less than $50,000.

In 2014, employers of companies with more than 200 employees must automatically enroll all of their workers in the company’s group health insurance plan, although employees may choose to opt out of the group coverage.

But so-called “large employers,” or those who employ more than 50 workers, will face tax penalties if they don’t provide insurance coverage at all, or if they don’t provide coverage that is adequate and affordable. In both cases, the penalty will be triggered when an employee receives a federal subsidy to purchase insurance through the nationwide health insurance exchange established by the new law.

For employers who don’t provide coverage, the penalty is $2,000 per employee, minus the first 30 employees. Those employers who do provide coverage, but whose benefit package has an actuarial value of less than 60 percent and a premium cost-share of more than 9.5 percent of an employee’s income will be fined the lesser of $3,000 per each employee who receives a federal subsidy or $2,000 per employee (including those not receiving federal subsidies).

Large employers with workers at or below 400 percent of FPL must provide “free choice vouchers” when their share of premium costs exceeds 8 percent (but less than 9.8 percent) of the employee’s annual income. These vouchers can be used to purchase a plan through the health insurance exchange and should equal the amount the employer would have paid for the cost of covering the worker under the employer’s plan. Employers providing free choice vouchers will be not penalized for employees that receive federal subsidies.

It is not clear yet who will enforce the small business mandate, as the Kansas insurance department has jurisdiction over insurers, not employers. The National Association of Insurance Commissioners and the U.S. Department of Health and Human Services are now working to produce these rules and regulations.

Public health

The law mostly addresses health insurance and cost containment measures, but there are a number of other proposals that address public health.

The reform law establishes the National Prevention, Health Promotion and Public Health Council to coordinate federal prevention, wellness, and public health activities and also requires that a national strategy “to improve the nation’s health” be developed within one year of enactment. A prevention and public health fund will be established, for investments in public health activities, education and outreach. In fiscal years 2010 through 2015, $7 billion will be appropriated to the fund, and an additional $2 billion will be appropriated for each fiscal year thereafter.

Beginning in fiscal year 2010, grants will be awarded for evidence-based, community-based prevention and wellness programs—with preference given to areas designated as rural or frontier, of which Kansas has many. Also in 2010, qualified health plans must cover, at no cost to patients, preventive services as deemed appropriate by the U.S. Preventive Services Task Force, as well as recommended vaccinations, preventive care for infants, children and adolescents, and additional preventive care and screening for women.

In 2011, grants will be available for employers to develop employee wellness initiatives. In 2014, employers will be able to provide premium discounts and other monetary awards for participation in a wellness program, and, that same year, 10 states will be selected to implement pilot wellness programs in their individual insurance markets.

The new law requires that the nutritional value of food sold in chain restaurants and from vending machines must be displayed, either on menus or on the machines themselves. The labeling regulations are set to be released within one year of enactment of the bill.

The law also increases funding for graduate medical education and will add more slots for residency programs, particularly in primary care programs. Providers will also be able to take advantage of incentives for primary care services. Primary care Medicaid providers, for instance, will be reimbursed at 100 percent of Medicare reimbursement rates in years 2013 and 2014.

Safety-net clinics will also benefit from the new legislation. The federal government has added $11 billion in funding for Federally Qualified Health Centers (FQHCs). Federal workforce grants and other measures will take effect to shore up a lagging health care workforce. The rural health workforce in Kansas is of particular concern because of the number of counties considered “rural” and “frontier.”

State and private stakeholders will need to stay informed of and be ready to apply for grant and funding opportunities as they become available.