HCA Holdings 2012 Annual Report Download - page 31

Expanded Coverage
Based on CBO’s February 2013 projection, by 2022, the Health Reform Law will expand coverage to
27 million additional individuals. This increased coverage will occur through a combination of public program
expansion and private sector health insurance and other reforms.
Medicaid Expansion
The primary public program coverage expansion will occur through changes in Medicaid, and to a lesser
extent, expansion of the Children’s Health Insurance Program (“CHIP”). The most significant changes will
expand the categories of individuals eligible for Medicaid coverage and permit individuals with relatively higher
incomes to qualify. The federal government reimburses the majority of a state’s Medicaid expenses, and it
conditions its payment on the state meeting certain requirements. The federal government currently requires that
states provide coverage for only limited categories of low-income adults under 65 years old (e.g., women who
are pregnant, and the blind or disabled). In addition, the income level required for individuals and families to
qualify for Medicaid varies widely from state to state.
As enacted, the Health Reform Law requires, commencing January 1, 2014, all state Medicaid programs to
provide, and the federal government to subsidize, Medicaid coverage to virtually all adults under 65 years old
with incomes at or under 133% of the federal poverty level (“FPL”). Further, the Health Reform Law also
requires states to apply a “5% income disregard” to the Medicaid eligibility standard, so that Medicaid eligibility
will effectively be extended to those with incomes up to 138% of the FPL. As a result of the June 2012 United
States Supreme Court ruling, some states may choose not to implement the Medicaid expansion. States that
choose not to implement the Medicaid expansion will forego funding established by the Health Reform Law to
cover most of the expansion costs. According to the CBO’s February 2013 projection, the new eligibility
requirements will expand Medicaid and CHIP coverage by an estimated 12 million persons nationwide by 2022.
As Medicaid is a joint federal and state program, the federal government provides states with “matching
funds” in a defined percentage, known as the federal medical assistance percentage (“FMAP”). Beginning in
2014, states will receive an enhanced FMAP for the individuals enrolled in Medicaid pursuant to the Health
Reform Law. The FMAP percentage is as follows: 100% for calendar years 2014 through 2016; 95% for 2017;
94% in 2018; 93% in 2019; and 90% in 2020 and thereafter. CMS has indicated that states that only partially
expand their Medicaid programs will not receive an enhanced FMAP.
The Health Reform Law also provides that the federal government will subsidize states that create non-
Medicaid plans for residents whose incomes are greater than 133% of the FPL but do not exceed 200% of the
FPL. Approved state plans will be eligible to receive federal funding. The amount of that funding per individual
will be equal to 95% of subsidies that would have been provided for that individual had he or she enrolled in a
health plan offered through one of the Exchanges, as discussed below.
Historically, states often have attempted to reduce Medicaid spending by limiting benefits and tightening
Medicaid eligibility requirements. However, the Health Reform Law requires states to at least maintain Medicaid
eligibility standards established prior to the enactment of the law for adults until January 1, 2014 and for children
until October 1, 2019. States with budget deficits may seek a waiver from this requirement, but only to address
eligibility standards that apply to adults making more than 133% of the FPL.
Private Sector Expansion
The expansion of health coverage through the private sector as a result of the Health Reform Law will occur
through new requirements applicable to health insurers, employers and individuals. Health insurers must keep
their annual nonmedical costs lower than 15% of premium revenue for the group market and lower than 20% in
the small group and individual markets or rebate to enrollees the amount spent in excess of the percentage. In
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