1
Introduction
Lawmakers across the country are considering Medicaid
buy-in programs to stabilize the Aordable Care Act (ACA)
insurance market and oer a coverage option that is more
aordable and accessible than current options in the individual
and employer markets. The concept of Medicaid buy-in is
evolving, encompassing the original Medicaid-based proposals
and extending to other programs through which the state
can leverage its government bargaining power to oer a
more aordable coverage option, like state employee health
plans (SEHPs) or a Basic Health Plan (BHP). Some refer to
this evolving model as Medicaid buy-in, while others label it a
“public option,” particularly for state-sponsored plans in the
marketplace.
So far in the 2019 legislative session, more than 10 states have
introduced legislation to study or implement a buy-in.
1
The
purpose of this issue brief is to identify the key questions that
states pursuing these initiatives will want to consider as they
seek to design and implement their proposals.
Buy-in programs vary signicantly in their design depending on a variety of factors including the policy objective(s) they
seek to achieve, target population(s), and local market dynamics. But three primary models are beginning to emerge:
Table 1: Emerging State Buy-In Models
Across these models there are common mechanisms that enable states to lower costs and achieve savings.
Buy-in products may be less costly due to administrative eciencies from leveraging existing public infrastructure; the
presumption of reduced provider payment rates compared to existing marketplace reimbursement rates; increased
competition in the insurance markets; and potential improvements to the individual market risk pool as more people
enroll in coverage. These saving opportunities are discussed in greater detail below.
April 2019
Authored by Manatt Health A grantee of the Robert Wood Johnson Foundation
State Medicaid Buy-Ins:
Key Questions to Consider
Federal Buy-in Proposals
After the 2018 midterm election, federal
policymakers are re-engaging on health care
transformation. Federal buy-in proposals are
among the policy options under discussion.
The Medicare at 50 Act was re-introduced in
February 2019 to expand Medicare eligibility by
allowing individuals ages 50 to 64 to buy-in to
the program. Additionally, Congress could pass
legislation to support state-based innovation
with additional authority or funding; for example,
the State Public Option Act would extend ACA
premiums and cost-sharing subsidies to buy-ins
and would provide federal funding for states’
costs not covered by enrollee premiums.
O-Market Buy-In
On Marketplace Buy-In Basic Health Program Buy-In
The State makes coverage available
to consumers who are not eligible for
Medicaid as a state-sponsored buy-in
plan that leverages the Medicaid
program or SEHP; oered outside the
individual market or Marketplace.
The State oers a state-sponsored
qualied health plan (QHP) on the
Marketplace leveraging Medicaid
infrastructure; potentially in partnership
with an existing managed care plan (if
applicable).
The State oers a BHP to individuals
with incomes below 200% of the
federal poverty line (FPL) who are
not Medicaid-eligible; and allows
individuals with higher incomes to
buy-in to the program.
2
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
State Goals
O-Market Buy-In
or BHP Buy-In
On Marketplace Buy-In
Increasing Aordability: Reduced Premiums
Based on design
For unsubsidized
(e.g., >400% FPL)
Possibly for subsidized
Increasing Aordability: Reduced Deductibles
Based on design
Possibly, depending on design
Providing coverage access for the uninsured
and those ineligible for tax credits
May be specically targeted Yes*
Injecting greater competition into insurance
markets
Outside of the market
If other insurers remain
Strengthening the Marketplace by improving
participation and the health risk of the market
Outside of the market By attracting new customers
Leveraging state purchasing power across
programs
Under state negotiations When linked to other programs
Promoting healthcare initiatives that improve
health outcomes and result in long-term savings
(e.g., social determinants, population health,
delivery system reform)
As a stable, long-term issuer Via contracting
What problem(s) is the state trying to solve?
Buy-in models are not one-size-ts-all, the “right” model will depend on state goals. An important rst step for selecting
a model and tailoring its features is to get very specic about and prioritize the state’s policy goals, and to dene the
population(s) to which the new coverage option will be targeted. Some models may be more eective than others in
addressing specic goals. For example, an on marketplace buy-in is more likely to encourage increased competition;
whereas an o-market plan (oered outside the individual market and the marketplace) might facilitate a state’s ability to
set specic cost-sharing levels. Table 2 below illustrates common state goals and how each model match with and can
be tailored to meet state objectives.
*However, a state may want to oer a plan outside the Marketplace for people who are ineligible for tax credits due to
immigration status
Model matches state goals Model may match state goals Model does not match state goals
Table 2: Matching Buy-In Models to State Goals
3
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
When designing a buy-in program, it is important to consider that a buy-in is not likely to meet—or may not be the
simplest way to address—all of the state’s health policy goals. States may want to consider implementing additional
reforms in tandem with a buy-in program. Examples include: outreach to or auto-enrollment of residents who are
eligible for, but not enrolled in Medicaid or very low/no-cost marketplace coverage; instituting a state reinsurance
program; providing aordability assistance programs, such as state-funded deductible wrap payments or tax subsidies;
new requirements on marketplace participating plans, like requiring plans to cover certain benets before applying a
deductible or tying insurer participation on the marketplace to participation in Medicaid or other insurance programs.
What are the potential sources of buy-in cost-savings in the state?
Potential buy-in savings—which generate lower premiums—will vary depending on the status quo in the state market.
Each state will have dierent dynamics and potential sources of savings under a buy-in program. The buy-in model
selection and design should play to the state’s strengths in terms of opportunities for savings, balanced against the
impact these sources of savings will have on other insurers’ ability to negotiate, and compete, in the individual market,
and on provider participation in the buy-in product.
Provider Payment Rates. A major contributor of savings in the buy-in program are reduced provider reimbursement
rates compared to commercial products, which are traditionally higher than in the Medicaid and Medicare programs.
Rate-setting is a critical consideration for all buy-in program designs and is likely to be heavily inuenced by local market
factors. Analysis of state-specic rate dynamics will be important to understanding possible buy-in savings since the
existing dierentials among commercial, marketplace, and government program provider rates vary considerably by
state. States with high marketplace reimbursement rates could see substantial savings under a buy-in at Medicaid or
Medicare rates, but may also expect a strong response from provider groups. Alternatively, states with marketplace
plans that are already negotiating rates close to Medicare or Medicaid may need to look for other sources of savings for
a reduced-cost buy-in. Many states are contemplating buy-in designs with rates pegged to the Medicare fee schedule.
2
Administrative Eciencies. Compared to commercial insurance, a state-sponsored buy-in can leverage existing
administrative infrastructure and eciencies. Government programs typically have reduced overhead, strong negotiating
power, and potential savings from limited or no tax obligations.
3
A state-sponsored plan oered in partnership with an
existing insurer could also have lower administrative costs if prot margins are limited, or a higher medical loss ratio is
required by the state for the buy-in plan.
State Purchasing Power. The buy-in product can be linked to other government programs (such as, Medicaid and the
SEHP) and benet from the purchasing power that comes with operating multiple plans with a large number of covered
lives. This potentially can increase the state’s leverage when negotiating with providers and drug manufacturers. If the
state chooses a public-private partnership model (by contracting with an existing insurer/managed care organization
(MCO)), the combined purchasing power can change the partnership dynamic, allowing the state to negotiate as an
active purchaser equipped to shape the benet design, premiums, and cost-sharing of the buy-in.
Long-Term Savings Through Investments in Population Health and Delivery Systems. A key assumption for a buy-in is
that the state will be a more stable purchaser and payer over time, since the state has a long-term interest in keeping
the product in the market and is less aected by uctuating market and protability decisions. If enrollees remain in
coverage year over year, the buy-in can oer a unique opportunity to invest in value-based payment programs, delivery
system reforms, and improved population health in the medium and long-term; the state can also align and leverage
these initiatives across all state-sponsored programs including the buy-in, Medicaid, CHIP, and SEHPs.
4
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
What are the potential impacts of the buy-in on other insurance markets in the state?
The precise impact of the buy-in on other markets depends on the model selected, the risk prole of enrollees who
choose to enroll in the buy-in, and existing insurer responses to the new entrant. As states design a buy-in product,
they should take consider these factors and engage with key stakeholders to understand their concerns and
perspectives.
Market Competition. Current competition in the state will impact how other insurers react to a buy-in product entrant.
If current marketplace insurer participants are limited, or cautious, and the buy-in is priced signicantly lower than
other options, existing insurers could leave the marketplace, resulting in fewer choices overall. Alternatively, if healthy
competition already exists in the market, a buy-in product may help reduce costs for all individual market products as
other insurers attempt to compete, particularly if the state is oering the product in partnership with an existing insurer
and multiple companies are interested in bidding. Whether existing insurers can compete on reimbursement rates will
largely depend on the current rate dierentials across Medicaid, Medicare, and current marketplace coverage, and
whether the insurers perceive a “level playing eld.”
Enrollee Health Status. Who chooses to enroll in the buy-in program will have signicant market impact, especially for
models oered in a separate risk pool, like the o-market buy-in. The movement of healthy or less healthy individuals
into, or out of, the individual market will inuence its stability and the cost of coverage (discussed in more detail below).
Traditionally, healthy individuals are more attracted to lower-cost products, while less healthy individuals seek broad
provider networks typically found in higher-cost products. How the buy-in competes on these issues will determine who
is attracted to the plan. Other design decisions can inuence who enrolls in the buy-in. A buy-in product that is targeted
to a specic, narrower population will be better able to predict enrollee health status, giving policymakers and analysts a
better sense of population costs, relative to the general marketplace population.
Segmenting or Expanding the Risk Pool.
A signicant distinction among buy-in
models is whether they segment or expand
the existing risk pool. This decision will
largely be dependent on the state’s goals
for the buy-in; for instance, whether a state
endeavors to oer the lowest possible cost
product (with maximum design exibility) or
to stabilize the existing ACA market.
The impact on the existing individual
market of segmenting the market, or
oering a product in a new risk pool
outside the individual market, depends
on whether healthier or less healthy
consumers enroll in the buy-in product.
Healthier individuals moving into a separate
buy-in risk pool can increase premiums for enrollees in the existing individual market pool by shifting the risk prole.
Similarly, if less healthy current enrollees decide to purchase o-market buy-in coverage, premiums for those in the
individual market may go down. In the future, there may also be an opportunity to combine state risk pools under a
waiver to stabilize the buy-in pool (such as, Medicaid, BHP, and SEHPs), but there may be additional implications for
those programs as a result of combining risk pools.
Expanding the existing pool—or oering the buy-in coverage on the marketplace—can positively impact the market
by providing a stable coverage option and attracting new consumers to the marketplace. New entrants will diversify
the risk pool and could reduce costs for all market participants if the buy-in attracts healthy, and/or currently uninsured
enrollees.
Segmenting Risk Pools Expanding the Existing Risk Pool
Oering a buy-in in a new pool and/
or outside the individual market
(O-Market Buy-In or BHP Buy-In)
Oering a buy-in inside the
individual market
(On Marketplace Buy-In)
Could result in a lower-cost buy-in
product with greater state control over
design, thereby expanding coverage
Could improve coverage and
aordability for all individual market
enrollees by attracting healthy risk
and lowering cost
Could move enrollees out of the
individual market, altering that risk pool
and potentially raising premiums for
enrollees who remain
Limits state control over design and
may not result in a signicantly more
aordable option
Table 3: Risk Pool Strategy Considerations
5
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
Does the state require, or would it be benecial to pursue, a 1332 waiver for the buy-in?
States can design a buy-in without seeking an ACA Section 1332 State Innovation Waiver (1332 waiver).
4
However, a
unique challenge of buy-in proposals is that most of the program savings for the subsidized population accrue to the
federal government, as the administrator of premium tax credits, and not the state or consumers. If a state seeks to
leverage federal dollars to achieve its coverage and aordability objectives (and reap the benets of generating savings
in the individual market), a 1332 waiver may be necessary. The o-market buy-in model certainly requires a waiver if
a state intends to allow consumers to use tax credits to purchase the product. An on marketplace buy-in does not
necessarily require a waiver if the state intends for the buy-in product to meet current marketplace rules.
Tax Credit Transfer for an O-Market Buy-In. Through a 1332 waiver, the state could receive a global payment for
the federal tax credits eligible enrollees would have received had they enrolled in coverage on the marketplace. The
payment would be used to fund the buy-in program. If the buy-in product is less costly than marketplace plans (the cost
of which is used to establish the level of available tax credits), the global payment would cover a larger share of total
buy-in costs; alternatively, if the buy-in costs more than marketplace plans (because, for example, the risk pool is less
healthy than expected) the state would be at nancial risk to cover the higher-than-expected costs.
Marketplace Savings. An on marketplace buy-in product that has a lower premium than current plans is likely to reduce
the benchmark for tax credit subsidies, thus reducing aggregate federal costs. A state could apply to access those
savings through a 1332 waiver. If approved, the state would receive “pass-through” funding for the value of the federal
savings associated with lowering the benchmark for tax credits (similar to pass-through calculations for reinsurance
programs), and could use these funds for the program.
1332 Waiver Approval Considerations. There is no precedent for 1332 waivers that include a Medicaid buy-in, and
approval of these waivers is at the discretion of the Departments of Health and Human Services (HHS) and the Treasury,
even when all waiver “guardrail” criteria are met.
5
The likelihood of waiver approval is therefore highly dependent on
the federal administration at the time of waiver submission and whether the administration is likely to view the waiver
program as advancing its health care policy objectives, in addition to meeting the guardrails.
Some buy-in models are more likely to require, or benet from, 1332 waivers than others. The need for a 1332 waiver
for program nancing stability, and the administrative and nancial investment and risk involved in 1332 negotiations
should be carefully deliberated when selecting a buy-in model.
State Should Consider A 1332 Waiver If… State Should Not Consider A 1332 Waiver If…
9
There is signicant pass-through funding
potential based on rates or administrative
eciencies; and/or the option will impact
individuals with subsidies (under 400% FPL)
9
The state would like to pursue an o-market
buy-in, but wants to allow enrollees to use
federal tax credits
9
The state is considering a buy-in option
alongside other market and aordability
initiatives that may require a waiver, for
example, a reinsurance program
×
A waiver is not required for a plan oered as a
Marketplace QHP
×
The state will administer an o-market buy-in
without tax credits (state-only funding) and
has limited capacity to negotiate a waiver for
additional pass-through funding
Table 4: 1332 Waiver Strategy Considerations
6
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
Is the state well positioned to implement a buy-in?
Experience with Medicaid expansion and marketplace administration has pressure tested many states’ capacity to
implement, and manage, complex health coverage programs, and to provide outreach to enrollees. A buy-in program
could be an appropriate extension of those operational strengths. However, states need to evaluate whether they are
positioned to implement a buy-in given other scal and administrative priorities, and which model is most appropriate
based on their ability to take on scal and administrative risk.
State Risk and Funding. A buy-in can be self-sustaining (nanced only through enrollee premium contributions),
subsidized with state dollars, funded through federal savings obtained under a 1332 waiver, or some combination of
these three funding sources. The state will need to determine the level of available funding for the buy-in, and decide
if it is prepared to take on nancial responsibility for the program if federal funding is not available through a 1332
waiver. Particularly, for o-market programs, the state will need to engage in careful planning to anticipate the buy-in
enrollee health risk prole to ensure the risk pool is viable and to accurately assess the potential costs of a buy-in. An
unanticipated (or changing) risk pool will impact program costs and should be accounted for in planning. Because
federal tax credits are not based on enrollee health status, state nancial risk is also a factor under a federal pass-
through global payment waiver.
State Administration. The selected model will likely determine which state agency is best positioned to oversee the
program—Medicaid, the marketplace, the SEHP-administering agency, or a new agency—and whether the product is
administered directly, or in partnership with a third-party administrator or existing insurer/MCO. Existing capacity and
expertise within state agencies may also inuence these decisions.
O-Market or BHP Buy-In On Marketplace Buy-in
Funding
›
Position to subsidize the program above enrollee
premium contributions
›
Dependency on federal pass-through funding
(Note: A BHP oers some guarantee of federal
funding)
›
Ability to leverage purchasing power for
negotiating rates
Risk
Tolerance
›
Ability and/or political willingness to take on risk
for enrollees with unexpected health proles
›
Limited risk if partnered with existing insurer
Administration
›
Internal expertise to directly administer the
product; or existing insurer/MCO relationships
›
Capacity within a state agency to oversee the
program
›
Type of Marketplace or ability to negotiate with
Healthcare.gov; a state-based Marketplace will
have more exibility and control
›
Capacity within a state agency to oversee the
program
High
State Risk and State Control
Low
Table 5: State Capacity for Buy-In Implementation
7
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
What key steps should a state take to design and implement a buy-in?
States across the country are taking diverse paths on buy-
in legislation, largely depending on who is leading the buy-in
charge, such as the executive branch, state legislators, or
consumer advocacy groups. Some states are taking a step-
based approach, with a study bill followed by implementation/
appropriation legislation, or, alternatively, could have one
originating bill pre-approving introduction upon conclusion of
a study.
Given the potential nancial and market impacts of a
buy-in, analysis will be needed to inform design prior to
implementation. Additionally, stakeholder engagement with
consumers, providers, and insurers will help the state rene
their goals (and therefore the buy-in design), and ensure
stakeholder participation.
After legislative approval, the state will engage in
implementation planning, including administrative
development; contracting with a partner insurer(s) or directly
with providers; coordination with the marketplace; and 1332
negotiations with HHS and the Department of the Treasury,
if applicable. Enactment of the product can take place
statewide, in a phased approach, or can be geographically targeted depending on the state’s needs and capacity. The
state may also consider a future expansion of the program (for example, to new populations) after initial implementation
and following program evaluation.
Study/option
modeling
Stakeholder
engagement
1332
negotiations
(if applicable)
Program
evaluation
Potential
program
expansion
Introduction into
the legislature
Implementation
planning
Program Enactment
Table 6: Key Buy-In Implementation Milestones
Communicating the Buy-In
Given the complexity of a buy-in program, clear communication to stakeholders and the public will be essential
throughout the process to ensure program success. Specically, states should consider:
›
Clearly articulating which problems the buy-in is trying to solve, and which it is not
›
The timing and medium of communication by audience group
›
Tailoring the terminology of the buy-in program (Medicaid buy-in, public option, etc.) to previous state reform
initiatives and to what language will resonate with state residents, policymakers, and stakeholders
›
Proactively managing stakeholder concerns about market impact and rate mitigation strategies
›
Articulating how the buy-in ts into the state’s broader landscape of health reform
8
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
Conclusion
Given the slim likelihood that health care reform initiatives that address coverage, access, and aordability will emerge
at the federal level this year or next, state policymakers are taking matters into their own hands. Medicaid buy-in
models are chief among the emerging state-based solutions. Because state markets are unique in their composition
and dynamics, state policymakers are considering and tailoring buy-in models to meet a broad array of policy goals.
It is essential that states begin the buy-in design and implementation process by being explicit about their goals since
they are critical for guiding design decisions. Beyond goal setting, states will need to consider how to fund the buy-in
through: premium contributions; state dollars; premium tax credits under current law; pursuing a 1332 waiver to access
federal funding; or some combination of these sources. States considering waivers will also need to weigh the likelihood
of 1332 waiver approval in the near term. To enact a buy-in, states will require sucient “lead time” for a broad eld
of implementation tasks, including: product design; actuarial analysis; development of legislation; and frequent and
robust communication with key stakeholders. All of these activities will position states to implement a successful buy-in
program that provides a new, aordable health coverage option to state residents.
ABOUT STATE HEALTH AND VALUE STRATEGIES — PRINCETON UNIVERSITY WOODROW WILSON SCHOOL OF PUBLIC
AND INTERNATIONAL AFFAIRS
State Health and Value Strategies (SHVS) assists states in their eorts to transform health and health care by providing targeted
technical assistance to state ocials and agencies. The program is a grantee of the Robert Wood Johnson Foundation, led by sta
at Princeton University’s Woodrow Wilson School of Public and International Aairs. The program connects states with experts and
peers to undertake health care transformation initiatives. By engaging state ocials, the program provides lessons learned, highlights
successful strategies and brings together states with experts in the eld. Learn more at www.shvs.org.
ABOUT THE ROBERT WOOD JOHNSON FOUNDATION
For more than 45 years the Robert Wood Johnson Foundation has worked to improve health and health care. We are working
alongside others to build a national Culture of Health that provides everyone in America a fair and just opportunity for health and
well-being. For more information, visit www.rwjf.org. Follow the Foundation on Twitter at www.rwjf.org/twitter or on Facebook at
www.rwjf.org/facebook.
Support for this research was provided by the Robert Wood Johnson Foundation. The views expressed here do not necessarily
reect the views of the Foundation.
ABOUT MANATT HEALTH
This brief was prepared by Patricia Boozang, Chiquita Brooks-LaSure, and Kyla Ellis. Manatt Health is an interdisciplinary policy and
business advisory division of Manatt, Phelps & Phillips, LLP, one of the nation’s premier law and consulting rms. Manatt Health helps
clients develop and implement strategies to address their greatest challenges, improve performance, and position themselves for long-
term sustainability and growth. For more information, visit www.manatt.com/Health.
9
STATE MEDICAID BUY-INS: KEY QUESTIONS TO CONSIDER
Endnotes
1. Four states—Delaware, Massachusetts, New Mexico, and Oregon—have recently completed studies evaluating buy-in coverage options.
2. As of this writing, Washington’s public option bill, SB 5526, requires reimbursement as a percentage of Medicare fee-for-service rates.
3. Medicaid administrative expenses average 5% of total program cost in 2017, compared to 15-20% administrative costs in commercial plans depending on the market. Prot
margins will vary by buy-in design and tax obligations will dier by state. The ACA health insurance provider fee could apply to a buy-in, depending on how it is administered (a
government entity would be exempt for example).
Medicaid and CHIP Payment and Access Commission. (2018). MACStats: Medicaid and CHIP Data Book. https://www.macpac.gov/wp-content/uploads/2018/12/December-
2018-MACStats-Data-Book.pdf
Congressional Budget Oce. (2016). Private Health Insurance Premiums and Federal Policy. https://www.cbo.gov/sites/default/les/114th-congress-2015-2016/reports/51130-
Health_Insurance_Premiums.pdf
4. Section 1332 waivers gives states the exibility to experiment with key components of the ACA insurance markets—coverage mandates, benets, subsidies, the Marketplace and
QHPs—within specied constraints.
The Patient Protection and Aordable Care Act, H.R. 3590. § 1332 (2010). https://www.govinfo.gov/content/pkg/BILLS-111hr3590enr/pdf/BILLS-111hr3590enr.pdf
For more information see: Boozang, B., Brooks-LaSure, C. (2018). Medicaid Buy-In: State Options, Design Considerations and 1332 Implications. https://www.shvs.org/
resource/medicaid-buy-in-state-options-design-considerations-and-section-1332-waiver-implications/
5. Coverage provided under a 1332 waiver must (1) Be at least as comprehensive as coverage provided absent the waiver; (2) Provide coverage and cost-sharing protections so
that coverage is at least as aordable as coverage absent a waiver; (3) Provide coverage to a number of residents of the state comparable to the number of residents that would
be provided coverage absent a waiver; and (4) not increase the federal decit. These are often referred to as “guardrails.”