Thursday, July 2, 2015

Private option's per capita costs are still flat for 2015; number of beneficiaries still rising

Posted By on Thu, Jul 2, 2015 at 5:54 PM

click to enlarge dhs.jpg

For fans of the private option, the good news on cost just keeps on coming.

The Department of Human Services released figures today that show the per capita cost of providing health insurance to low-income Arkansans stayed flat throughout the first half of 2015. That figure has hovered right around $481 since the beginning of the year and ticked slightly downward this month to $480.67.

This is fairly remarkable, considering the federal authorities placed the price cap on per-person costs for the Arkansas private option at $500.08 for 2015. In other words, for the first half of the year, we've come in under budget on per-person costs each month by about $15, when one takes into account an additional small amount of costs in wraparound services (about $5 per person, as shown in the figure above).

Remember a year ago, when state Sen. Bryan King and Rep. Joe Farrer were waving around alarming nine-digit figures and shouting about how the private option was running vastly over budget, based on these same per-person costs?

Throughout 2014 — the first year of the program's implementation — the per-person cost of the private option was indeed above the federal allotted cap for that year, which was $477.63. This graph shows how much — and it also shows the point in 2014 at which costs began to drop, as more and more relatively healthy people signed up for the program. That compensated for the sicker and more costly folks who (big surprise) were first in line to buy insurance when the private option was introduced. (David Ramsey also pointed out all along that the terms of the Medicaid waiver allowing Arkansas to experiment with the private option allowed for a good deal of wiggle room with respect to costs in a given year, as he explained in this post.)

And then, in 2015, the federal cap jumped up to $500.08. Why? Because expected premium increases were built into the private option's projections. Typically, the cost of providing health care to any given population rises significantly year over year, as it has for decades. That's what we expect, especially in the U.S.

Instead, at least for the first half of 2015, costs have remained flat. It's further evidence that the private option is working not just in terms of getting people insured (although that's the most important metric) but also in terms of providing health insurance at a reasonable cost to the public.

Meanwhile, talk continues apace in the legislature of "replacing" the private option with ... something else.

The DHS figures also show another trend that's held steady since the beginning of the year: Enrollment in the program keeps growing, slowly and steadily. It's now at 218,376 enrolled, with thousands more deemed eligible. This is as predicted as well, since there are still a good number of low-income Arkansans out there who qualify for the program but have yet to sign up.

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