Private Insurance Coverage Of Arkansans Could Cost Feds Less Than First Thought

Mar 18, 2013

Expansion of health coverage under the so-called “private option” for insuring more Arkansans under the federal health care law may be less expensive than originally thought according to a new estimate.

John Selig, director of the state’s Department of Human Services says the study done with the Arkansas Insurance Department and consulting groups found that in Arkansas specifically, the cost of private insurance coverage would not be nearly as high when compared to Medicaid, as originally expected.

“Instead of a 50 percent increase [over cost of coverage through Medicaid], it looks like it’s short of 15 percent and could be as little as zero – the added cost to the federal government – if we take this approach,” Selig told reporters in a meeting at the state’s Department of Human services headquarters Monday afternoon.

Arkansas DHS Director John Selig and the state's Medicaid Director Andy Allison told reporters Monday that private insurance would cost only up to 15 percent more than Medicaid coverage for about 250,000 Arkansans earning 100-138 percent of the federal poverty level.
Credit Nathan Vandiver / KUAR

Selig and state Medicaid director Andy Allison told reporters that part of the reason for the lower cost estimate has to do with Arkansas Medicaid coverage rates not being as different from private rates as in other states.

“Our rate differential – private versus public – is much smaller apparently in Arkansas than it is on average around the country. It’s really less than 25 percent as opposed to the 50 percent or greater differential that you’ll see in other states,” Allison said.
An estimate from the Congressional Budget Office was all anyone had to go on until now, and that pegged Arkansas’s private coverage option for the Medicaid expansion pool at about 50 percent higher.  The new estimate is that private coverage could be up to 15 percent higher. Allison says increased competition between insurance companies for the new population of people with insurance coverage contributes. “Adding as many as a quarter million adults under 138 [percent] of [the federal] poverty [level] to the exchange has a radical and really very positive impact on that marketplace. It makes that market far more attractive to private carriers. We’ll likely see more competition,” Allison said.  He added that it’s speculation, but it’s based on what has happened elsewhere.  Arkansas Insurance Commissioner Jay Bradford, who was also on hand confirmed there are many insurance companies applying to become part of the exchange that could drive that competition. These new numbers could help convince many lawmakers who are on the fence about accepting federal dollars to expand health coverage in the state.  Selig said Republicans in the State legislature and the Governor have both had good reactions to the new estimates.

Selig says he's been getting positive comments from lawmakers regarding the state's new estimate of the cost of covering newly Medicaid eligible Arkansans on private insurance plans with federal dollars.
Credit Nathan Vandiver / KUAR

“I think this gives us clearance to continue working and developing an option that is best for Arkansas,” Little Rock Republican Senator David Sanders said. He added that it’s not too long ago that Republican lawmakers were told private coverage of those who would benefit from the Affordable Care Act’s expansion of Medicaid coverage was not an option.

To expand Medicaid in the state is a “non-starter,” Sanders said. But Republican lawmakers see using federal money for private insurance is more feasible.

The Governor’s spokesman Matt DeCample said Governor Mike Beebe is pleased with the results as well.

Up to 250,000 Arkansans could benefit from federal money that would go to purchase health insurance for this making between 100 and 138 percent of the federal poverty level.