Client Alerts
June 29, 2016

Governor Proposes New State Medicaid Program Through Waiver

Stites & Harbison Legal Update

On June 22, 2016, Governor Matt Bevin introduced Kentucky HEALTH, a new comprehensive health care program designed to transform the Commonwealth’s existing Medicaid program. Governor Bevin announced that Kentucky HEALTH, or “Helping to Engage and Achieve Long Term Health,” will simultaneously empower individuals to take control of their health and ensure the future financial sustainability of Kentucky Medicaid. Governor Bevin intends to implement Kentucky HEALTH through a Section 1115 waiver.

Section 1115 of the Social Security Act1 allows states to make requests to the U.S. Department of Health and Human Services’ Centers for Medicare & Medicaid Services concerning changes and revisions to a state’s Medicaid program. While such waivers require approval from the Secretary of Health and Human Services, the waivers, if approved, provide states additional flexibility to design and improve their own health programs. Each 1115 waiver must satisfy the following requirements in order to be approved: (1) the waiver must increase and strengthen overall coverage of low income individuals; (2) it must increase access to, stabilize, and strengthen providers and provider networks available to serve Medicaid and low-income populations in the state; (3) it must improve health outcomes for Medicaid and other low income populations, and (4) it must increase efficiency and quality of care for Medicaid and other low income populations through initiatives to transform service delivery networks. These waivers must also be budget neutral, meaning the expenditures of the proposed projects must not be more than federal spending. Once approved, a waiver remains for a five-year period although it can be extended another three years if the state requests such an extension.

According to Governor Bevin, Kentucky HEALTH satisfies each of these requirements and will result in increased financial stability for the Commonwealth. Kentucky HEALTH is estimated to save Kentucky taxpayers $2.2 billion over the proposed five-year period. The new program targets and covers adults up to 138% of the federal poverty level, which includes non-disabled adults already covered by traditional Medicaid, low-income parents and caretakers, individuals eligible for transitional assistance, and pregnant women.

Kentucky HEALTH offers two pathways to coverage for Medicaid members: either an employer premium assistance program or a high-deductible consumer-driven health plan. Under the employer premium assistance program, members are allowed to enroll their families into Kentucky HEALTH through their employer-sponsored health insurance. The premiums for this program are usually taken out through payroll, and are later reimbursed, ranging from of $1-$15 a month, less the member’s required contribution. The members will receive all of the benefits of the employer’s plan as well as aspects covered by Kentucky HEALTH that the employer’s plan does not cover. Kentucky HEALTH will also cover out-of-pocket expenses.

For the high-deductible consumer-driven health plan, a member will pay a premium based on family income from a range of $1-$15 a month, however, pregnant women and children are exempt from the cost-sharing. If a member does not pay his or her premium within 60 days, he or she will be locked out of their insurance coverage for a six-month period. The member can return to the program if he or she pays two months of missed premiums plus an additional premium payment. The member must also complete a financial or health literacy class in addition to the payments to regain their insurance.

This plan also creates a rewards account, which allows members to purchase additional, enhanced health benefits. In order to accrue funds in the rewards account, members must complete health related activities, such as taking a disease management class, or participate in community engagement activities, such as community service or job training. However, funds can be taken out of the account every time a member goes to a hospital emergency room for a nonemergency condition. These additional benefits include dental, vision, and over-the-counter medications. The decision to remove dental and vision benefits from regular benefits packages has been the source of much of the criticism directed toward the new program. Kentucky HEALTH does not cover non-emergency medical transportation for members, but state representatives have indicated that alternative transportation has been contemplated. The plan will also include all current mental health and substance use disorder benefits in their existing packages to help combat the rising number of overdoses in the state.

Before the Section 1115 waiver can be approved by the federal government, the state must open the proposal to public comment, as per the rules of the Affordable Care Act. The period for public comment must be open for 30 days to allow the public to offer their opinions on the proposed program and offer any critiques they may have. Three public hearings have been scheduled for public comment, with the first two having taken place on June 28th in Bowling Green and June 29th in Frankfort. The third and final public hearing will occur on Wednesday, July 6th from 11 a.m. to 1 p.m. at the Hazard Community and Technical College Campus in Hazard, Kentucky. Once the public comment period closes, the comments will be reviewed and summarized, and the Commonwealth will incorporate any necessary revisions. All comments must be received by July 22nd at 5 p.m. After the revisions are made, Governor Bevin has stated that he intends to send his proposal to Washington by the beginning of August, in the hopes of getting a response from the federal government by September. For additional details surrounding Kentucky HEALTH and the time and location of the final public hearing on the state’s proposed plan, visit
1 42 U.S.C. 1315

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Health Care - Regulatory & Compliance