In This Week’s Update:
- New Flexibilities for Medicaid Demonstration Programs
- State Health Innovations Address Debt and Access Issues
- State Medicaid Director Letter: Budget Neutrality
- Current Considerations for State Reinsurance Programs
- Delays in Extending Enhanced Marketplace Subsidies Would Raise Premiums and Reduce Coverage
- State updates: AR, CA, CO, DC, IL, MA, NY, OR, RI & WY
New Flexibilities for Medicaid Demonstration Programs
CMS recently released a State Medicaid Director letter (SMDL) describing its policy and approach to budget neutrality for Medicaid section 1115 demonstration projects, which offers states more flexibility to undertake such innovations under section 1115 demonstration authority. For a more detailed description of the SMDL, see the first resource following the state updates.
State Health Innovations Address Debt and Access Issues
State Health and Value Strategies (SHVS) published the latest post in our States of Innovation series. As a reminder, the series highlights what states are working on to achieve better, more affordable, and more equitable health for all. This States of Innovation profiles state activity in August, which included states taking action on maternal health and medical debt, as well as increasing access to mental and behavioral health and services for children and youth. Updates follow.
State Medicaid Director Letter: Budget Neutrality
On August 22, 2024, the Centers for Medicare & Medicaid Services (CMS) released a State Medicaid Director letter (SMDL) describing its policy and approach to budget neutrality for Medicaid section 1115 demonstration projects, thereby superseding previous guidance issued in 2018. CMS’ updated budget neutrality policy, which has been applied in states’ special terms and conditions from September 2022 onward, makes changes related to the following key policies: historical expenditures, trend rates, budget neutrality limits, hypothetical expenditures (including capped hypothetical treatment for health-related social needs services), savings roll-over, savings cap, transferring savings between demonstrations, rebasing without waiver baselines, and mid-course corrections. The updated policy reflects CMS’ recognition that the approach articulated in the 2018 SMDL could limit states’ ability to test and sustain innovations that promote the goals of the Medicaid program (e.g., expanding access to coverage, improving quality). The policy in the new SMDL offers states more flexibility to undertake such innovations under section 1115 demonstration authority. A previous summary of CMS’ updates to section 1115 waiver budget neutrality policy and implications for states can be found in the SHVS issue brief, Recent Updates to Section 1115 Waiver Budget Neutrality Policy: Overview and Implications for States.
Current Considerations for State Reinsurance Programs
A new SHVS expert perspective summarizes recent research which raises questions about state reinsurance programs, and highlights related considerations for policymakers. Reinsurance is a long-standing tool for stabilizing health insurance markets and reducing premiums, and has played an important role in the success of the Affordable Care Act’s individual market as part of section 1332 state innovation waivers. Reinsurance increases affordability for consumers ineligible for the premium tax credit (PTC). However, the effects on PTC recipients are smaller, mixed, and have received little attention. This expert perspective describes the factors that states must consider when determining whether to extend or establish a reinsurance program.
Delays in Extending Enhanced Marketplace Subsidies Would Raise Premiums and Reduce Coverage
The ACA Marketplaces have seen unprecedented enrollment growth in recent years, reaching 21.4 million in 2024—nearly double the 2020 total. A key reason is the enhancements to PTCs that are currently set to expire after 2025. A new Health Affairs Forefront article describes how it has been widely reported that the expiration of the enhanced PTCs jeopardizes health coverage for millions of people living in America, but there has been less discussion of when the enhancements must be extended to avert these losses. Congress’ real deadline to avert 2026 premium increases and coverage losses is in the spring of 2025, as most consumers will make 2026 coverage decisions in the fall of 2025, with their options determined by steps that come months earlier: insurance rate-setting, eligibility system updates, and Marketplace communications with enrollees.
State updates: AR, CA, CO, DC, IL, MA, NY, OR, RI & WY
- Arkansas – The Strategic Committee for Maternal Health published a report outlining recommended new policies, programs, and approaches aimed at improving health outcomes for pregnant people, new parents, and babies. Stakeholders representing organizations across the state informed the recommendations contained in the report.
- California – Governor Gavin Newsom unveiled a new slate of accountability tools on mentalhealth.ca.gov to track progress on the implementation of Proposition 1 and other mental health and substance-use initiatives. The website now features visual thermometers that will be updated to show how many treatment slots are being built for outpatient visits, residential beds for inpatient treatment, permanent supportive housing units, and housing units for veterans. The website also features new maps that show which counties have started Community Assistance, Recovery and Empowerment Court, a program aimed at helping Californians with psychosis and schizophrenia.
- Colorado – The U.S. Department of Health and Human Services and the Department of Treasury announced that the Colorado Division of Insurance will receive $361 million in pass-through funding for its reinsurance and Colorado Option programs under section 1332 of the Affordable Care Act. The funding is an increase from the $245 million the state received in pass-through in 2023.
- District of Columbia – The District of Columbia is canceling nearly $42 million in medical debt for over 62,500 residents. Approximately $26 million of the total debt relief will go to 36,000 residents who make $25,000 or less per year, and 80% of the recipients live in D.C. zip codes that are majority Black or Latino/a. The initiative leverages year-end surplus funds from the fiscal year 2023 budget, of which the District appropriated $900,000 to partner with a non-profit organization for this work. SHVS has updated our expert perspective that includes an interactive map tracking state efforts to eliminate medical debt.
- Illinois – CMS granted approval to Illinois to operate as a State-Based Marketplace on the Federal Platform (SBM-FP) for the plan year 2025 open enrollment period.
- Massachusetts – Governor Maura Healey signed comprehensive maternal health legislation to expand physical and mental healthcare for pregnant individuals. The legislation will require MassHealth to cover doula services up to 12 months postpartum; mandates coverage for postpartum depression screenings; creates a new grant program to address mental and behavioral health or substance-use disorders for perinatal individuals; and establishes a task force to report on maternal health access and birthing safety, among other initiatives.
- New York
- Governor Kathy Hochul announced that the state received $10 billion in pass-through funding from the federal government for the state’s section 1332 waiver program, the Essential Plan. As a reminder, SHVS published a state spotlight highlighting New York’s novel use of section 1332 waiver authority to provide coverage for low-income residents up to 250% of the poverty level, including DACA recipients, with no premiums and minimal cost-sharing requirements.
- The New York State Department of Financial Services approved health insurers’ premium rate increases for 2025. The approved average rate increase is 12.7% for the individual market and 8.4% in the small group market.
- Oregon – The Oregon Division of Financial Regulation finalized the rate decisions for 2025 health insurance for the individual and small group markets. Oregonians will see an average rate increase of 8.3% in the individual market and a 12.2% increase in the small group markets.
- Rhode Island – The Office of the Health Insurance Commissioner announced the approved rates for health insurance premiums for 2025. The approved weighted average rate changes are 7.8% for the individual market, 12.4% for the small group market, and 11.2% for the large group market.
- Wyoming – The Wyoming Department of Health announced improvements to the state’s 988 Suicide and Crisis Lifeline. When individuals call or text 988 from a 307 area code number they are now sent first to a Wyoming-based center. Previously, texts were routed to national resources.