Benefits and Cost-Sharing for Working People with Disabilities in Medicaid and the Marketplace
Background
Medicaid and Marketplace Benefits
Federal law requires all states that participate in the Medicaid program to cover certain benefits and also allows states to cover additional optional benefits.1 Examples of mandatory state plan benefits include inpatient hospitalization and outpatient physician services; examples of optional state plan benefits include prescription drugs (which all states currently cover) and many LTSS important to people with disabilities, such as personal care services. As a result of the broad state flexibility to define Medicaid benefits under federal law, the specific services that states cover (outside the federally required services) vary widely.
Under federal law, states also have the flexibility to offer different Medicaid benefit packages to different populations, provided that certain minimum benefits are covered. This is accomplished by designing an alternative benefit plan (ABP, previously called “benchmark coverage”) based on one of several commercial insurance plans or on a benefit package approved by the Health and Human Services Secretary.2 Prior to the ACA, only a few states took up the ABP option. However, the ACA requires that adults newly eligible through the Medicaid expansion receive an ABP. An exception to this rule is that beneficiaries who are considered medically frail must have access to all the benefits contained in the Medicaid state plan package, to the extent that it differs from the new adult ABP. Unlike Medicaid state plan benefits, ABPs must cover the 10 categories of essential health benefits (EHBs) set out in the ACA. ABPs also must provide parity in coverage of physical and mental health benefits and include certain traditional Medicaid services, such as non-emergency medical transportation and federally qualified health center services.
Beyond these minimum requirements, states can choose the underlying benchmark plan on which an ABP is based and decide whether to align the contents of their new adult ABP with their Medicaid state plan benefit package. If the state plan and new adult ABP benefits are fully aligned, all Medicaid beneficiaries in the state have access to the same set of benefits. If states do not align the two benefit packages, then beneficiaries may have access to different sets of services if they shift from the new adult group to a pre-ACA coverage group or vice versa when their income changes. For example, certain LTSS may be available through the Medicaid state plan benefit package but not included in the new adult ABP, depending on the state’s choices. At the same time, even if states base their new adult ABP on their state plan benefit package, the new adult ABP may include more benefits, such as additional behavioral health and preventive services, unless states also add these services to their state plan benefit packages. This result could arise because the ACA’s EHB and mental health parity requirements apply to ABPs but not to Medicaid state plan benefits. (However, if a state opts to deliver Medicaid state plan benefits through managed care organizations (MCOs), mental health parity is required for Medicaid MCOs, to the extent that the MCO’s benefit package includes both physical and mental health services.)
Marketplace QHP and Medicaid new adult ABP benefit packages both must include the 10 categories of EHBs. However, the specific services that QHPs cover within an EHB category may differ from those covered under the new adult ABP because the ACA allows states to base their QHPs and new adult ABP on different underlying benchmark plans. The ACA also allows for benefit substitution within an EHB category as long as the substitute benefits are actuarially equivalent to those they replaced. Thus, there are likely to be differences in the coverage of specific services among different QHPs, and also between QHPs and Medicaid. Key differences between Medicaid state plans, ABPs, and Marketplace QHPs in coverage of benefits that are important to people with disabilities are summarized in Table 1 below.
| Table 1: Key Differences in Required Benefits in Medicaid State Plans, ABPs, and Marketplace QHPs | |||
| Benefit Type | Medicaid State Plan | Medicaid New Adult ABP | Marketplace QHP |
| Mental health and substance use treatment services | Available through some required categories (e.g., physician services); also provided through optional categories (e.g., other rehabilitative services); Medicaid only covers inpatient mental health services in an IMD up to age 21 or over age 65 | Required as part of EHB; Medicaid only covers inpatient mental health services in an IMD up to age 21 or over age 65 | Required as part of EHB |
| Mental health parity | Optional (states may cover mental health benefits in a different amount, duration and scope than physical health benefits); however, if state delivers benefits through a managed care organization (MCO), mental health parity is required for MCOs (to the extent that both physical and mental health services are included in the MCO’s benefit package) | Required (however, Medicaid IMD payment exclusion still applies) | Required |
| Prescription drugs | Optional (all states presently cover; must cover all FDA-approved drugs whose manufacturers have entered into rebate agreement) | Required as part of EHB (must cover at least 1 drug per class) | Required as part of EHB (must cover at least 1 drug per class) |
| Rehabilitative services and devices | Medical equipment, supplies, and appliances are part of the required home health services for people who qualify for nursing facility services; otherwise optional (e.g., physical therapy and related services, prosthetic devices) | Required as part of EHB | Required as part of EHB |
| Habilitative services | Optional (e.g., § 1915(i) state plan HCBS) | Required as part of EHB (may be defined by state if not included in EHB benchmark) | Required as part of EHB (may be defined by health plan or state if not included in EHB benchmark) |
| Long-term services and supports | Nursing facility services and home health services for people who qualify for nursing facility services are required; other LTSS are optional (e.g., personal care, case management, etc.) | Optional (unless included in ABP or EHB benchmark plan coverage) | Optional (unless included in EHB benchmark plan coverage) |
Medicaid and Marketplace Cost-Sharing
Federal law permits states to impose premiums and cost-sharing on certain Medicaid beneficiaries subject to specified limits and exemptions.3 Medicaid premiums and cost-sharing are limited to 5% of family income, calculated on a quarterly or monthly basis, at state option. Premiums generally are not permitted for Medicaid beneficiaries with incomes below 150% FPL ($17,505 for an individual in 2014), but can be imposed at state option on some populations with incomes above that level. There also are several optional Medicaid eligibility groups for working people with disabilities that enable such individuals to “buy in” to Medicaid coverage by paying a sliding-scale premium based on income.
Medicaid co-payments also are permitted for some populations at state option. Co-payments must be “nominal” for beneficiaries with incomes below the federal poverty level and are subject to federal maximums for beneficiaries with higher incomes. For example, in 2014, the maximum co-payment for an outpatient service for people with income at or below poverty is $4, and co-payments for outpatient services are limited to 10% of the agency’s cost for those with incomes between 101-150% FPL, and to 20% of the agency’s cost for those with more income. The maximum co-payment for preferred prescription drugs for all beneficiaries in 2014 is $4; for non-preferred drugs, the maximum co-payment is $8 for people with incomes at or below 150% FPL, and 20% of the agency’s cost for those with more income. State Medicaid programs must cover preventive services without cost-sharing, and providers cannot deny services for Medicaid beneficiaries’ failure to pay a co-payment for people with incomes below poverty.
In the Marketplace, the ACA limits QHP premium costs, ranging from 2% of enrollee income for those up to 133% FPL to 9.5% of income for those from 300-400% FPL in 2014. Marketplace enrollees with incomes between 100% and 400% FPL qualify for advance payment of tax credits to subsidize premium costs that exceed this limit. In addition to premiums, QHPs can charge deductibles and co-payments. Enrollees with incomes between 100% and 250% FPL qualify for cost-sharing reductions to limit their out-of-pocket costs. As in Medicaid, Marketplace QHPs must cover preventive services without cost-sharing. Key differences in cost-sharing between Medicaid state plans, ABPs, and Marketplace QHPs are summarized in Table 2 below.
| Table 2: Key Differences in Cost-Sharing in Medicaid State Plan, ABPs, and Marketplace QHPs | |||
| Medicaid State Plan | Medicaid New Adult ABP | Marketplace QHP | |
| Premiums | Not permitted for people with incomes below 150% FPL; permitted for certain coverage groups above 150% FPL; total premiums and cost-sharing limited to 5% beneficiary income | Same as state plan | Limited based on enrollee income: ranging from 2% of income for those up to 133% FPL to 9.5% of income for those from 300-400% FPL in 2014; advance payment of premium tax credits available for people between 100-400% FPL |
| Cost-Sharing | Permitted for certain coverage groups and services; must be nominal for people with incomes below poverty and subject to federal maximums for people above poverty | Same as state plan | Enrollee cost-sharing is limited to 6% of allowable costs of benefits for people with incomes between 100-150% FPL, 13% for people between 150-200% FPL, and 27% for people between 200-250% FPL |
Marketplace Structure and Administration
The ACA gives states the option to establish their own Marketplace. State-based Marketplaces can be active purchasers of QHPs, regulating which plans can be offered for purchase. Alternatively, state-based Marketplaces can act simply as clearinghouses, allowing any issuer that wishes to offer a plan on the Marketplace to do so.
The ACA provides for a federally facilitated Marketplace (FFM) as a default in states that elect not to establish their own Marketplace. States also may choose to administer a Marketplace in partnership with the federal government by assuming control over the QHP administration and/or consumer assistance functions.
