Interim Joint Committee on Appropriations and Revenue


Minutes of the<MeetNo1> 5th Meeting

of the 2012 Interim


<MeetMDY1> October 25, 2012


Call to Order and Roll Call

The<MeetNo2> 5th meeting of the Interim Joint Committee on Appropriations and Revenue was held on<Day> Thursday,<MeetMDY2> October 25, 2012, at<MeetTime> 1:00 PM, in<Room> Room 154 of the Capitol Annex. Senator Bob Leeper, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Bob Leeper, Co-Chair; Representative Rick Rand, Co-Chair; Senators Walter Blevins Jr., Joe Bowen, Tom Buford, Jared Carpenter, Denise Harper Angel, Ernie Harris, Jimmy Higdon, Paul Hornback, Ray S. Jones II, Alice Forgy Kerr, Vernie McGaha, Gerald A. Neal, R.J. Palmer II, Brandon Smith, Jack Westwood, and Mike Wilson; Representatives Royce W. Adams, Dwight D. Butler, John "Bam" Carney, Ron Crimm, Mike Denham, Bob M. DeWeese, Kelly Flood, Danny Ford, Derrick Graham, Jimmie Lee, Reginald Meeks, Lonnie Napier, Sannie Overly, Marie Rader, Steven Rudy, Sal Santoro, Arnold Simpson, Tommy Turner, Jim Wayne, Alecia Webb-Edgington, and Susan Westrom.


Guests: Ms. Carrie Banahan, Executive Director, Kentucky Health Benefit Exchange; and Mr. Larry Kissner, Commissioner, Department for Medicaid Services.


LRC Staff: Pam Thomas, John Scott, Charlotte Quarles, Eric Kennedy, Jennifer Hays, and Sheri Mahan


Representative Rudy moved to approve the minutes from the previous meeting as written. The motion was seconded by Representative Santoro. The motion carried by voice vote.


Kentucky Health Benefit Exchange

Ms. Carrie Banahan, Executive Director, Kentucky Health Benefit Exchange provided a history and general overview of the Exchange. A health benefit exchange is an organized marketplace for individuals and employees of small businesses to shop for health insurance offered by insurers based on price and quality. Individuals will also be able to apply for Medicaid coverage through the Exchange. The Exchange was created by Executive Order 2012-587 and is organized under the Cabinet for Health and Family Services. The Exchange consists of four divisions and a separate Advisory Board which has six subcommittees. The Exchange will hold its first open enrollment from October 1, 2013 through March 31, 2014, and will be fully operational on January 1, 2014. Kentucky will be able to guide the Exchange based on the state’s unique regional and economic needs.


Kentucky has decided to pursue a state-based exchange to prevent federal government intervention and to address concerns with dual regulation of the health insurance market. This will allow Kentucky to determine the benefits that will be provided and give the state flexibility in determining Medicaid eligibility.


Ms. Banahan gave a basic overview of the benefits required for the program, including the minimum package of services allowed, the navigator program, and the Small Business Health Option Program (SHOP). She also discussed the eligibility standards for employers wanting to purchase health insurance coverage through the SHOP program.


Ms. Banahan discussed who will qualify for insurance premium assistance and tax credits under the Exchange. Individuals with a household income between 133 percent and up to 400 percent of the federal poverty level will qualify for premium assistance. Small businesses may qualify for tax credits if the employer has fewer than 25 full-time employees, the average annual wage of employees in the group is less than $50,000 annually, and the employer pays at least 50 percent of the premium for each employee. She provided examples of premium assistance and IRS tax credit calculations.


Ms. Banahan provided an implementation timeline update, and discussed Exchange grant funds received by the state and their utilization. She discussed the application process for the Exchange, and provided information concerning the contract with Deloitte to develop the new Medicaid eligibility and Exchange application computer system.


In response to a question from Senator Bowen, Ms. Banahan said there should be no unintended consequences of developing the Exchange. She stated that the purpose of the Exchange is to provide access to affordable healthcare to underinsured and uninsured Kentuckians, and that the Exchange will be self-sustaining with federal funds.


In response to a question from Representative Rand, Ms. Banahan stated that those individuals utilizing Kentucky Access will transition into the Exchange. With the Exchange premium subsidies, individuals who previously could not afford health insurance will be able to afford coverage, causing a decline in indigent care.


In response to a question from Representative Wayne, Ms. Banahan replied under the Affordable Care Act, before one can determine eligibility for premium assistance, it must be determined if the applicant is eligible for Medicaid. The two systems will be combined to streamline the process. There are 640,000 uninsured people in the state, and indigent care costs should be reduced by utilization of the Exchange.


In response to a question from Senator Higdon, Ms. Banahan explained that the credit is not a state income tax credit, but rather a percentage rebate of insurance premiums paid by an individual.


In response to a question from Senator Wilson, Ms. Banahan replied that it is estimated that approximately 300,000 would utilize Kentucky’s Exchange.


In response to a question from Senator Westwood, Ms. Banahan stated that all funds received from the federal government are grants and will not need to be repaid by the state. She discussed how much of the grant funds have been spent, and explained that the funds are available to the state on an as needed draw down basis.


In response to a question from Senator Leeper, Ms. Banahan stated she would provide the chairman information regarding the emergency appropriation increase reported for the Health Benefit Exchange.


Managed Care Organizations

Mr. Larry Kissner, Commissioner, Department for Medicaid Services discussed the Medicaid Managed Care Organizations (MCO) in Kentucky. He provided historical data concerning rates and provided estimates for future rates with and without the utilization of the MCOs. The Medicaid MCO eligible population is expected to reach 577,490 by FY 14. The projected Medicaid expenditure over the next 3 years under managed care is $6.48 billion, as compared to $7.75 billion without managed care. The current enacted budget was based on achieving these savings. The department is on track, as the cost per individual eligible and number of eligibles is lower than projected. Managed care represents only half of the total $5.79 billion Medicaid budget, with the remainder being fee for services. Current monthly expenditures are below the enacted budgeted amounts for the first quarter of FY 13. Mr. Kissner provided details of the expenditure breakdown.


Mr. Kissner also discussed other Department of Medicaid Services priorities, which include MCO contract compliance, and network adequacy reviews. He discussed the Health Benefit Exchange and its effect on eligibility updates and changes. The single database will make managing this information easier in the future.


Mr. Kissner discussed the contract with IPRO, which won the contract to evaluate the performance of the MCOs. IPRO will monitor the overall quality and financial performance of the Medicaid and CHIP programs, maintain a database and system to enable all functions for quality review, conduct data analysis, and report analytical findings to the department. He also discussed the contract with Rector & Associates to perform market conduct and financial examinations of the MCOs.


Mr. Kissner discussed the effect that MCOs have had on various sectors of Medicaid cost. Prescription costs and emergency room visits have declined since the implementation of the MCOs.


In response to a question from Senator Smith, Mr. Kissner explained how the MCO’s reimbursement rates were calculated in all 8 regions of the state. He stated that the department does not scrutinize rate bids submitted by MCOs and discussed the bid review process.


In response to a question from Representative Wayne, Mr. Kissner stated that Kentucky Spirit would be withdrawing from its MCO services to the state in July of 2013.


In response to a question from Representative DeWeese, Mr. Kissner said that the department believes introducing other MCOs in addition to Passport will be revenue neutral for the Region 3 Louisville area.


In response to a question from Senator Wilson, Mr. Kissner said that the number of Medicaid eligibles has been increasing by less than one percent since implementation of the MCOs.


In response to questions from Senator Leeper, Mr. Kissner stated that the department has not calculated the potential cost implications to the department from the Kentucky Spirit lawsuit. He discussed the differences between the benefits offered through Medicaid as compared with the essential health benefits offered by all Health Benefit Exchange insurers.


Being no further business, the meeting was adjourned at 3:15 p.m. All meeting materials and a cassette recording of the meeting are available in the Legislative Research Commission library.