The Medicaid expansion will affect your business this year, here’s how
A not-so-insignificant proportion of Utah residents have advocated for Medicaid expansion since the Affordable Care Act put the option on the table in the early 2010s, but Utah political leaders have opposed the concept on ideological grounds, says Matt Slonaker, executive director of the Utah Health Policy Project.
Despite opposition from political leaders, the public seemed to have won in November 2018 when a ballot initiative known as Proposition 3 made Medicaid expansion the law of the land. But the following spring, state lawmakers responded with a bill to repeal and replace Medicaid expansion with their own version.
Originally, the 2019 bill proposed to cap Utah’s expansion at 100 percent of the federal poverty level—$12,760 for an individual or $26,200 for a family of four—and tacked on a number of new conditions not included in Proposition 3. The law took effect last April.
However, in December of last year, the Centers for Medicare and Medicaid Services rejected the state’s initial proposal, triggering the legislature’s plan B. As of January 1, 2020, Utah residents making up to $17,609 for an individual, or $36,156 for a family of four are now eligible for Medicaid.
However, a handful of the special conditions from the state legislature remain in place. Though health policy analysts suspect these conditions could be abolished in due time, they remain in effect as of summer 2020.
One of the more controversial conditions—particularly now with the outbreak of COVID-19—is a mandate that most newly eligible individuals find or pursue employment in order to qualify for Medicaid. Those who do not qualify for one of 13 exemptions—disability, for example—are required to either maintain employment, or must provide proof that they have applied for 48 jobs every three months in order to maintain their benefits.
While the state contends that the work requirement will apply to only a handful of Medicaid applicants, Slonaker says a Utah Health Policy analysis suggests “there is a pretty significant number of folks who will or are affected by this notion that you have to be looking for work.”
Employer insurance mandate
Typically, Medicaid acts as stand-alone health coverage, paying for or reimbursing individuals for their medical costs. But Utah’s version of the expansion, as of January 2020, requires eligible families to enroll in an employer-provided health plan when one is available. Under these circumstances, Medicaid will reimburse eligible individuals for the cost of their monthly premium instead of paying their medical bills.
This could also make employer health insurance more accessible—and more attractive—to businesses in the service industries, including restaurants, resorts, hotels, auto service, cosmetology, and others for whom employer-provided health insurance has traditionally been out of reach.
Employers in these industries may need to make their employees aware that they could be newly eligible for health benefits, says Sloanaker. Service employees “are the type that will be in the gap population” and newly covered by this rule he said, which “isn’t limited to people who are pregnant and disabled. Everyone can possibly be eligible.”
Sales tax increase
A sales tax increase is one aspect of the original Proposition 3 that survived the legislature’s 2019 rewrite. Under normal circumstances, the federal government provides 90 percent of the funding for Utah’s Medicaid expansion and the state is responsible for the remaining 10 percent of the budget.
The cost of that remaining 10 percent has been a topic of hot debate in recent years. Medicaid accounted for 18.7 percent of the state’s overall budget in 2016, and the state estimates that the December 2020 expansion will make up to 120,000 residents eligible for health coverage under Medicaid. To cover the increase in cost the state instituted a 0.015 percent sales tax, with further increases likely in the near future, according to Slonaker.
Prior to the COVID outbreak, the tax increase had generated a significant surplus, some of which were ultimately redistributed. It’s not clear just how long that surplus will last, given the potential for additional Medicaid enrollment beyond what was originally anticipated due to the pandemic and program expansion.
An analysis by the Utah Foundation suggests that Medicaid costs do not increase linearly with enrollment. Historically, the most expensive Medicaid recipients have been those with disabilities or other conditions that prevent them from working, says Shawn Teigen, research director at the Utah Foundation.
Disabled individuals represent less than 15 percent of the population enrolled in Utah’s Medicaid program, yet they account for nearly half the program’s spending. And because disability was already a condition for Medicaid eligibility prior to Utah’s expansion, Teigen says, those who are newly eligible will likely incur fewer costs per individual than those already covered by the program.
Regardless of what happens to the surplus, public opinion is unlikely to support another tax increase any time soon, but it may not be necessary thanks to an increase in federal Medicaid funding. To discourage states from cutting Medicaid, Congress increased the federal match offered for state funding early in the pandemic. Further increases in federal matching dollars could become available if the crisis persists, Slonaker says.
New resources for employee support
With employee terminations and pay cuts becoming more common on account of the virus’ economic impacts, Slonaker says it’s important for employers to add information about applying for Medicaid to the materials they distribute in the event an employee termination.
If an individual’s household income falls below the 138 percent threshold due to job loss or a reduction in hours or pay, Medicaid may be a more affordable alternative to COBRA. Individuals who lose work, even temporarily, due to a crisis like COVID are potentially eligible for coverage, and those who are approved may receive retroactive reimbursement for medical bills occurring up to three months prior to the date of their application.
Unemployment payments received while an individual is between jobs may count toward their income and reduce their chances of becoming eligible for Medicaid. However, the CARES Act stimulus payment and the $600-per-week additional benefit available this spring and summer to offset stay-home orders do not appear to count toward Medicaid eligibility, so unemployed individuals should still consider applying if they find themselves close to the cutoff, Slonaker says.
Once approved, Slonaker says, the federal government has made it more difficult for states to remove persons receiving Medicaid benefits from the program by implementing a moratorium on Medicaid rejections due to missed deadlines or missing paperwork.
“I think the main storyline with Medicaid is it’s a very essential tool in addressing the COVID crisis,” Slonaker says. “It really becomes one of the primary safety net mechanisms to address people’s needs because it protects you from financial ruin if you contract the virus and become hospitalized. Without Medicaid expansion, we would be in much different shape.”