North Carolina Republicans Introduce Bill to Expand Medicaid

On April 9, 2019, a group of House Republicans [1] in North Carolina (NC) introduced House Bill (HB) 655 named the “NC Health Insurance for Working Families Act”. The bill mirrors “Carolina Cares” legislation that was introduced in the 2017-2018 legislative session. Under HB 655, the Department of Health and Human Services (DHHS) is required to design a program that would expand Medicaid eligibility to include approximately 543,000 resident adults ages 19-64 who are uninsured or underinsured [2] with a July 2020 go-live date. Under this bill, NC would join 37 other states in adopting Medicaid expansion and taking a step towards improving access to healthcare for residents. This article provides an overview of the legislation and highlights other state Medicaid expansion programs that may provide insight into how such a program could be designed in NC. While stakeholders may not support all aspects of these programs, it is critical to understand the various policy options and to be at the table to engage with DHHS to ensure that the interests of members, providers, and other stakeholders are being addressed.

Cost of Medicaid Expansion

Bill drafters project the program will cost an additional $4.7 billion in state and federal funds, with the federal government covering 90 percent of the costs under federal law. States receive an enhanced federal Medicaid assistance percentage (FMAP) for the expansion population which is much higher than the regular FMAP [3] which ranges from 50 percent to just over 76 percent in 2019. The expansion FMAP phased down from 100 percent in 2014-2016 to 90 percent in 2020 and will remain there. HB 655 requires that DHHS pay for the increase in state funds with a combination of participant premiums, intergovernmental transfers, current hospital assessments, and newly enacted health-care related assessments. States have utilized a variety of state funding sources (beyond their general fund Medicaid appropriation)— from cigarette taxes to sales tax to hospital and health plan assessments— to support the required state match under the expansion. In many states (e.g., AZ, CO, and IN) a large portion of state funding for the expansion comes from allowable provider assessments/taxes and are primarily assessed upon hospitals. [4] Providers support these taxes because they generally experience the cost of the tax returned through increased Medicaid provider payments. It is important to note however that federal regulations stipulate that a provider tax cannot hold providers harmless—there cannot be a guarantee that providers will see the tax revenue returned to them. [5] So providers need to be sure that they understand the assessments as a portion of their revenues and how the state is projecting enrollment over time to ensure that payments will increase with enrollment proportionally to the tax. Because hospitals should see a decrease in uninsured patients and uncompensated care, shifts in these costs should also be considered when assessing the impact of any new taxes and revenues.

Health Care Coverage

Federal law requires expansion states to provide an Alternative Benefits Plan (ABP) to the expansion population. States may offer an ABP that mirrors traditional Medicaid benefits or benchmark coverage that includes certain specified services with the overall benefits at least actuarially equivalent to one of the four statutorily specified Medicaid benchmark coverage packages. [6] This flexibility in design choice allows states to tailor the benefit package to the needs of the expansion population. HB 655 requires DHHS to design the benefit package to provide similar coverage to the 2018 Essential Health Benefits Plan and the BCBS PPO Plan with a focus on preventive care and participant wellness.

Overwhelmingly, ACA Medicaid expansion states have implemented an ABP composed of “Secretary-approved coverage” based on the traditional state plan benefit. A 2018 Congressional Research Service (CRS) report found that of the 32 expansion states (including the District of Columbia) that had in effect a state plan amendment describing the ABP benefit furnished to their expansion population, all had elected benchmark rather than benchmark-equivalent coverage, and 31 (all except North Dakota) elected to use Secretary-approved coverage as the ABP benchmark. [7] Of the 31 expansion states that had elected Secretary-approved coverage, 25 had chosen to align the ABP benefits with traditional Medicaid benefits under the state plan. This policy decision has the potential to minimize the disruptive effect of so-called churn between the ACA Medicaid expansion enrollee eligibility category and other Medicaid eligibility categories.

States such as Indiana have designed multiple benefits packages to incentivize engagement in the program. The Healthy Indiana Plan (HIP) Plus package provides vision, dental, and chiropractic services to enrollees in addition to the ABP coverage available in the Basic package.

States that utilize a package that differs from the Medicaid state plan must identify “medically frail” members and offer these individuals the opportunity to select Medicaid state plan services instead of the ABP. While there is a baseline federal definition for “medically frail,” states have the flexibility to expand the definition and develop a process for making the medically frail determination. Whether a member is identified as medically frail not only affects their benefit package but, in many states, also acts as an exemption from contributions and work/community engagement requirements. Therefore, how DHHS defines the medically frail population is of critical importance to members and advocates, while the process for making the determination is very important to providers. Stakeholders are strongly encouraged to engage with DHHS early on to define this population and design the process to ensure that all clinical and operation issues are adequately considered. [8] NC has the benefit of looking to other states for definitions, best practices, and lessons learned around this important decision point.

Participant Contributions

HB 655 requires program participants to make a monthly contribution set at two percent of their household income as a condition of eligibility. These funds would be utilized by the state as a portion of the state’s Medicaid match requirement. Failure to make timely payments after 90 days would result in the member’s suspension from the program unless the individual qualified for an exemption. Suspended individuals would have the opportunity to retroactively “cure” their suspension by paying the full amount of unpaid premiums. The bill lays out a series of exemptions that DHHS will have to define more clearly if the legislation is passed, such as how to identify individuals who are experiencing a medical or financial hardship. As noted, how states design these programs is important to both potential members and advocates as well as providers who can assist their members in being appropriately assigned within the program to ensure receipt of necessary services.

As of April 1, 2019, seven states have received federal approval of the use of premiums/monthly contributions for the expansion population. [9] A Centers for Medicare and Medicaid Services (CMS) 1115 demonstration evaluation report that compared monthly payments across these demonstrations found considerable variability in the proportion of members required to make contributions (25 percent in Michigan to 100 percent in Indiana). [10] Additionally, the approach by which states set up payments also varies. Some states require payments proportional to a percentage of the individual’s income while others use fixed amounts. Finally, how enrollees are required to make payments and who is responsible for collecting and tracking payments also varies. For example in Michigan, the Medicaid agency has contracted with a single, third-party vendor to manage contributions for all enrollees and in Indiana, each of the four health plans that administer the program must manage their own members’ contributions and report regularly to the state on compliance.

HB 655 requires that DHHS develop cost-effective methods for accepting patient contributions and take into consideration how Indiana designed its Personal Wellness and Responsibility (POWER) accounts. In Indiana, HIP members (both traditional Medicaid and expansion adults) are assigned to health plans. It is the responsibility of the health plans to not only manage the health care needs of members, but also facilitate and track member contributions and work requirements. The health plans are required to accept POWER Account contributions from members by mail, over the phone, online, and via payroll deduction through the member's employer. Each health plan is also required to have designated retail locations around the state where members can make payments in person (e.g., MoneyGram, CVS, Dollar General, Family Dollar, and Speedway Gas).

Each state has differing policies on the consequences of non-payment ranging from suspension to tax return garnishment to disenrollment for a period of six months. While the legislation requires suspension for non-payment, there are varying approaches to implementing that policy which may have significant impact on members. In addition to understanding these policies and processes, it is critical that there is transparency in these policies and as close to real-time tracking and updates in systems that are accessible to providers regarding eligibility status and member compliance with payment and work requirements. Providers are at risk for non-payment for services provided if a member defaults on his or her payment obligations and is suspended. Additionally, providers are uniquely positioned to notify members during visits about their status and provide education to assist members in navigating such requirements. If NC proceeds with designing this program and developing system requirements that will enable DHHS to track, monitor, and evaluate the program, providers will want to engage early and often with throughout the development process to ensure that transparency is top of mind as decisions are made.

Mandatory Employment Activities

HB 655 requires DHHS to increase employment through the establishment of employment activities for program participants that are aligned with the work requirements of the Able-Bodied Adults Without Dependents policy under the Supplemental Nutrition Assistance Program (SNAP). While the legislation sets forth a list of exemptions for certain sub-populations, there is no further detail regarding what the hourly work requirement would be, what would qualify as an employment activity, who would be responsible for tracking compliance, and what, if any, supports would be provided to members to complete required activities.

On January 28, 2018, CMS issued a new policy allowing states to implement work and community engagement requirements as a condition of eligibility for certain Medicaid enrollees. As of April 1, 2019, seven states have received waiver approval from CMS to implement work requirements. [11] While Kentucky and Arkansas’ waivers have been set aside by the court, two states have implemented work requirements in their expansion programs (Indiana and New Hampshire). [12] North Carolina has the opportunity to observe the implementation of these programs and assess the supporting policies and operational requirements to ensure that if it establishes work requirements under this program it is doing so in the most effective and efficient manner that best supports the goals of the legislation.

States have sought to increase coordination among human services agencies (Medicaid, TANF, SNAP) to better meet the needs of beneficiaries and ease the administrative burden. Such efforts have focused on streamlined applications, co-location of services, or integrated systems for eligibility, enrollment, and renewal. State Medicaid programs may refer beneficiaries to existing employment resources, such as job training programs or other support services. [13] Some states have developed processes to connect Medicaid beneficiaries directly to employment resources. For example, under the Montana Health Economic Livelihood Partnership-Link (HELP-Link), applicants are surveyed about their work status and barriers during the enrollment process and are referred to services such as career planning and training offered through the Montana Department of Labor & Industry. Medicaid managed care plans may engage in efforts to connect or provide beneficiaries with employment supports.

However, it is important to note that in many states the funds and resources supporting SNAP employment assistance are stretched thin and therefore may not be able to accommodate the addition of hundreds of thousands of new individuals seeking employment assistance.[14] Additionally, CMS’ policy letter on work requirements clearly states that federal Medicaid funds can not be used to support employment assistance activities. Therefore, while health plans may be required to support employment activities in addition to care management for health care needs, Medicaid capitation rates may not include the cost of employment related supports for the expansion population.

To ensure the success of members seeking employment opportunities, stakeholders will need to engage with DHHS to help assess the availability of such supports and identify resources in the community to assist members. Indiana designed its Gateway to Work program through extensive engagement with community partners and designed a database that provides members access to assessments and connects them to community partners that are able and willing to provide volunteer and employment activities that meet the work requirements for the HIP program.[15]

Measures and Goals

On March 14, 2019 CMS released new state tools and guidance that provide standard monitoring metrics and recommended research methods geared specifically for Section 1115 demonstrations.[16] For each approved 1115 demonstration, states must submit an evaluation design that includes providing CMS with regular reporting on key monitoring metrics upon implementation and utilizes an independent evaluator to conduct required evaluations.

In addition to monitoring and evaluating traditional health care metrics and outcomes, DHHS will need to develop measures and goals that assess the programmatic policies and procedures associated with the waiver requests discussed above such as participant premiums and work requirements. Development of these measures will be an important step in understanding how these polices impact members access to health care and the success of the program. It is important that DHHS maintain transparency with all stakeholders throughout the development of the program and obtain input about the program goals and measures.

Rural Access to Healthcare Grant Program

HB 655 amends Chapter 108B of the General Statutes by adding a new fund that will support the establishment of a special fund run by the DHHS Office of Rural Health for the purpose of addressing the health care needs of citizens residing in the rural areas of the state. Funds will be appropriated to the Rural Access Grant Fund through a tax on the capitation rates of the prepaid health plans that will manage the NC Health Care for Working Families program.

These funds will be available to support eligible activities in rural areas such as: health care provider recruitment, loan forgiveness programs, provider retention incentive programs, expansion of telehealth, new clinical patient services, initiatives that combat opioid abuse, health information technology modernization, and expansion of mental health services.

The development of this fund is in recognition of the fact that providing access to coverage and services through the Medicaid expansion is alone not enough to improve the health of residents across the state of North Carolina. Rural areas of the state have significant provider shortages and if these shortages are not addressed through recruitment and retention initiatives, technology improvements and other efforts the state will not be able to successfully improve the health of those served under the NC Health Care for Working Families program.


[1] State Reps. Donny Lambeth, R-Forsyth; Josh Dobson, R-McDowell; Greg Murphy, R-Pitt; and Donna McDowell White, R-Johnston

[2] Bill projections approximate that 300,000 newly eligible would be uninsured and 200,000 would shift from private insurance or State Health Plan coverage.

[3] Average federal matching rate

[4] Families USA, Options to Generate the State Share of Medicaid Expansion Costs, January 2019. Available at https://familiesusa.org/product/options-generate-state-share-medicaid-expansion-costs

[5] See Social Security Act Section 1903 (w), Payment to states and regulations at 42 CFR 433.68, Permissible health care related taxes.

[6] Four benchmark options that States must choose from: 1) The Standard Blue Cross/Blue Shield Preferred Provider Option offered through the Federal Employees Health Benefit program. 2) State employee coverage that is offered and generally available to state employees. 3) Commercial HMO with the largest insured commercial, non-Medicaid enrollment in the state. 4) Secretary-approved coverage, a benefit package the Secretary has determined to provide coverage appropriate to meet the needs of the population.

[7] Congressional Research Service, Medicaid Alternative Benefit Plan Coverage: Frequently Asked Questions, November 26, 2018. Available at https://www.everycrsreport.com/reports/R45412.html

[8] Community Catalyst, “Medically Frail” Medicaid Rules to Help Consumers: Advocacy in States with Existing Policies. Available at https://www.communitycatalyst.org/resources/publications/document/Medically-frail-Advocacy-IMPROVE-FINAL.pdf?1445967210

[9] Kaiser Family Foundation. Medicaid Waiver Tracker: Approved and Pending Section 1115 Waivers by State https://www.kff.org/medicaid/issue-brief/medicaid-waiver-tracker-approved-and-pending-section-1115-waivers-by-state/#Table2

[10] CMS, Paying For Medicaid Coverage: An Overview of Monthly Payments in Section 1115 Demonstrations. September 2017. Available at https://www.medicaid.gov/medicaid/section-1115-demo/downloads/evaluation-reports/paying-for-medicaid-coverage.pdf

[11] NASHP, A Snapshot of State Proposals to Implement Medicaid Work Requirements Nationwide. Available at https://nashp.org/state-proposals-for-medicaid-work-and-community-engagement-requirements/

[12] On March 27, 2019, the court set aside the Arkansas Works waiver amendment and the reapproved Kentucky waiver. Implementation of the work requirement and other waiver program policies are stopped in these states unless and until HHS issues a new approval that passes legal muster or prevails on appeal.

[13] MACPAC, The Role of Medicaid in Supporting Employment, July 2018. Available at https://www.macpac.gov/wp-content/uploads/2018/07/The-role-of-Medicaid-in-supporting-employment.pdf

[14] Commonwealth Fund, Medicaid Work Requirements: Will They Help the Unemployed Gain Jobs or Improve Health? Available at https://www.commonwealthfund.org/publications/issue-briefs/2018/nov/medicaid-work-requirements-will-they-help-jobs-health

[15] Indiana Gateway to Work Database https://secure.in.gov/apps/fssa/gateway/search

[16] CMS, 1115 Demonstration State Monitoring & Evaluation Resources. Available at https://www.medicaid.gov/medicaid/section-1115-demo/evaluation-reports/evaluation-designs-and-reports/index.html