From AIS Health: Federal Report on HIP 2.0 Offers Lessons for Holdout States

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Reprinted with AIS Health permission from the April 15, 2021, issue of RADAR on Medicare Advantage

As holdout states consider whether to accept the Biden administration’s offer of enhanced federal funding to expand Medicaid, a recent evaluation report on Indiana’s conservative Medicaid expansion demonstration may hold some lessons learned for states that look to managed care plans to do some of the heavy lifting for such programs.

The American Rescue Plan, signed into law by President Joe Biden in March, extends a five percentage-point bump in the Medicaid Federal Medical Assistance Percentage (FMAP) to states that newly expand Medicaid eligibility for all adults with income up to 138% of the federal poverty level. Fourteen states have yet to expand Medicaid under the Affordable Care Act, although lawmakers in Tennessee have reportedly expressed an openness to exploring it while advocates in other red states like Georgia continue to push hard for expansion. Voters in Missouri and Oklahoma last year approved Medicaid expansion via a ballot measure, but Republican lawmakers in Missouri are now trying to keep expansion out of the next budget. Funding-related uncertainties also face Oklahoma, which recently submitted a request to amend its SoonerCare demonstration to begin enrolling expansion adults in the next fiscal year.

Under then-Gov. Mike Pence (R), a staunch ACA opponent, Indiana was among the first states to implement Medicaid expansion by using a section 1115 demonstration waiver. With the consulting expertise of Seema Verma, who went on to serve as CMS administrator under President Donald Trump, the state created a “2.0” version of its Healthy Indiana Plan (HIP) that famously features certain “personal responsibility” components such as copayments and requires monthly contributions to health savings-like accounts to promote healthy behaviors and health care consumerism. Established in 2008, HIP 1.0 provided insurance to low-income uninsured parents (and other caretakers) of dependent children and childless adults.

Enrollees Face Six-Month ‘Lockout’

In February 2015, HIP 2.0 began enrolling adults with incomes at or below 138% of the federal poverty level (FPL); enrollment has since grown from 246,000 to 649,000, according to recent state data. Individuals earning at or below 100% of the FPL have the choice of two plan designs, HIP Basic and HIP Plus, but if they enroll in the benefit richer HIP Plus and fail to make their monthly Personal Wellness and Responsibility (POWER) Account contribution within a 60-day grace period, they are moved to HIP Basic. Consequences are stronger for those with incomes above 100% of the FPL, who face disenrollment from HIP 2.0 altogether and a six-month “lockout” period for not making their contribution to maintain HIP Plus coverage. There is no contribution required for HIP Basic, but that plan does feature copays for drugs and certain health care services.

In a federal evaluation report released last month by CMS, researchers from Social & Scientific Systems, Inc. and the Urban Institute relied on data from the American Community Survey (ACS) and the Behavioral Risk Factor Surveillance System (BRFSS) to assess the impact of HIP 2.0 on care over time relative to the 2011-2013 (the study pre-period) and “comparison groups” (i.e., other states). Researchers compared Indiana to select states that did not expand Medicaid, some states that expanded the program without a demonstration and a couple states that expanded Medicaid via a different demonstration.

Report Found ‘No Systematic Changes’

While researchers observed significant improvements in some measures of health care access and affordability (e.g., receiving a routine checkup, no unmet need for care due to costs), they concluded that relative to other states, “there is little evidence of systematic changes in health care access and affordability, health behaviors, or health status” associated with HIP 2.0. Researchers observed “few significant differences in health behaviors or health status in Indiana relative to the comparison states that did not expand Medicaid” and said those few differences suggested poorer health outcomes in Indiana (see infographic, p. 5). “Overall, our findings suggest that the changes in health behaviors and health status in Indiana were the same or somewhat worse in Indiana than the comparison states,” they wrote.

The report acknowledged several limitations of the study, including limited income data available in the BRFSS that gave researchers more confidence in their estimates for all childless adults than for low-income childless adults.

“It is only evaluating through 2018 and Indiana has made some changes since then, but in this report the biggest things that we see are that people in Indiana have more access to insurance coverage through 2.0 and better access to care, but we’re not seeing the personal responsibility that [Indiana] had hoped to see,” which is not unexpected given that these observations were made “just a couple years into the demonstration,” says Margaret Scott, an associate principal with Avalere Health.

Outside of that impact analysis, however, researchers suggested that their qualitative assessment of the program offers some lessons learned. Through site visits and focus group interviews with state officials and other stakeholders, including the managed care organizations responsible for administering the program to enrollees, researchers in 2018 gathered various insights on the implementation and operation of HIP 2.0.

MCOs Reported Administrative Burdens

Aside from some issues with coordination among entities in the early stages of implementation, MCO executives reported that collecting enrollees’ monthly contributions to the POWER Account and tracking out-of-pocket spending was “labor intensive and administratively burdensome.” Providers, meanwhile, indicated that they did not always collect copays from enrollees, “often because of high administrative costs relative to the expected payment amount.” Researchers also found the POWER Account was not well understood by enrollees, despite attempts by the state, MCOs and other stakeholders to educate consumers.

Similar to work requirements, which were included in Indiana’s 2018 waiver amendment but have been suspended, “one of the things that we see with the POWER account is that beneficiaries know that they have to contribute something, but they don’t really understand what it’s for, they don’t understand the statements that they’re receiving and even before the public health emergency, there were quite a few appeals from beneficiaries who were removed from the program for nonpayment of their POWER account contributions,” observes Scott.

In many cases, including Indiana, states that use managed care for their expansion rely on the MCOs to “make sure that the beneficiaries understand what’s going on and what all of these accounts are for and the reporting requirements,” she says. As a result, for states considering using managed care for their Medicaid expansion, the biggest takeaway from the report is that “the education should come from the state as much as it comes from the [MCOs], and that the state has to ensure a consistent message is being sent [and] that it is easy to understand.”

But according to Nancy Pealing, M.D., chief quality officer with ConsejoSano, a North Hollywood, Calif.-based firm specializing in multicultural patient engagement, HIP 2.0 is simply a case study on what not to do when expanding Medicaid. “HIP 2.0 is known to be incredibly complex and this ‘skin in the game’ theory puts an undue burden on a disadvantaged population that is already dealing with myriad issues — multiple chronic comorbidities, underlying social determinants of health, systemic health disparities — that make navigating its administrative requirements extremely difficult,” Pealing tells AIS Health.

“Non-expansion states don’t need to apply these conservative principles that impose unnecessary burdens on the enrollee in order to expand,” she adds. “The financial incentives offered by the American Rescue Plan should be enough. And for those that still decide to leave the federal funds on the table, they run the risk of going against the will of the voters who overwhelmingly want expansion.”

Some consumer advocates noted in the evaluation that Indiana’s 2018 move to a tiered contribution structure created more predictability for enrollees, while state officials and MCOs said the change led to “sustained” program enrollment and less administrative burden for plans. And as of researchers’ site visit in June 2018, the state was taking steps to further educate HIP 2.0 enrollees, though nearly all of the contact with enrollees would be done by the MCOs, the report noted.

That flexibility to make program changes is important, says Scott, and illustrates that any expansion demonstration must be improved as states observe “how beneficiaries are reacting…that they’re continually reviewing what they’re doing and that they’re making appropriate changes going forward.”

Oklahoma Will Lean on Medicaid MCOs

Like Indiana, Oklahoma plans to rely on MCOs for its Medicaid expansion, although some Republican lawmakers are seeking to stop the transition to managed care. Through the SoonerSelect model, MCOs would coordinate physical health, behavioral health and pharmacy benefits for Medicaid enrollees. The Oklahoma Health Care Authority intends to enroll qualified members into one of four managed care plans on a mandatory basis.

MCOs will be expected to, among other things, work with community-based organizations to address social determinants of health, and track and refer outcomes of SDOH referrals. The waiver request notably did not include work requirements. Although it does not allow MCOs to impose premiums on any health plan enrollees, the program does allow them to impose cost sharing on certain services for nonexempt enrollees, as long as an enrollee’s total cost sharing does not exceed 5% of their monthly household income. MCOs will notify enrollees when that 5% aggregate limit has been met.

View the SoonerSelect application at View the Indiana report at Contact Pealing via Joe Reblando at and Scott at

By Lauren Flynn Kelly