June 10—As states continue to wrestle with the decision of whether to pursue Medicaid expansion, one emerging alternative involves using federal funds to purchase private coverage for Medicaid beneficiaries via health insurance marketplaces—an option proposed by the state of Arkansas. A policy brief from Health Affairs and the Robert Wood Johnson Foundation takes a detailed look at this premium assistance option, examining policy issues and discussing next steps for states. 

According to the brief, some states are finding the premium assistance option more appealing than expanding Medicaid because they believe the premium option will transition a larger number of people to the private health insurance market while possibly lowering Medicaid spending and driving down private exchange costs over time. 

On the other hand, the brief indicates that skeptics of the premium option believe it has significant drawbacks, including potential challenges in proving cost efficiency and Medicaid-equivalent coverage, scope of benefits, and cost sharing. Another potential hurdle is that both state legislatures and the federal government must approve a state’s use of a premium assistance option. 

Read the issue brief.

Publication Date: Tuesday, June 11, 2013