State agency seeks waiver to reinstate HIP cost-sharing

Able-bodied adults insured through the Healthy Indiana Plan may soon be required to make copayments.

The Indiana Family and Social Services Administration intends to seek a five-year waiver through the Centers for Medicare and Medicaid to revive a modified version of the agency's cost-sharing model under a new iteration of HIP, known as HIP 3.0.

The program currently serves Indiana's Medicaid expansion population.

If approved, the waiver would reintroduce cost-sharing - not to exceed 5% of a member's family income - and implement flexible enrollment caps for HIP as needed.

"While Indiana is committed to helping vulnerable residents access healthcare, it also has a responsibility to the taxpayers who finance the program," FSSA officials wrote in a draft of the application.

"Medicaid expansion was never intended to become an unlimited financial commitment disconnected from the State's ability to pay. Every dollar spent on unsustainable program growth is a dollar unavailable for education, public safety, infrastructure and services for Hoosiers with the greatest needs."

No state General Fund dollars currently go to the program.

Copayment setup

Copayments would be made at point of service, rather than monthly premiums.

"When services appear 'free,' there is little incentive to consider whether a visit is necessary, whether a lower-cost setting is appropriate, or whether preventative steps could have avoided the need for care altogether," agency officials wrote in the draft application.

The plan would allow members to reduce their copayments if they partake in preventative services like yearly wellness exams, flu vaccinations, breast cancer screenings or cholesterol tests.

This would lower the out-of-pocket cost of an outpatient visit, dental exam or prescription glasses from $15 to $5, for example.

Non-emergency use of the emergency department would cost a flat $35 per visit, regardless of whether members participate in preventative care.

Services provided by federally qualified health centers, comprehensive community behavioral health clinics or rural health centers would not be subject to copayments.

Cost-sharing requirements would not apply to pregnant women, as the state would transfer their coverage to Hoosier Healthwise.

Likewise, children, disabled adults and elderly Hoosiers insured through other Medicaid programs would not be subject to copayments.

Why this model

HIP started under then-Gov. Mitch Daniels in 2008 to extend coverage to the working poor who didn't qualify for traditional Medicaid, and was later expanded under Gov. Mike Pence.

The plan once modeled private health insurance plans through cost sharing and POWER Accounts - the plan's version of a premium - rather than an open-ended entitlement like traditional Medicaid.

The state paused cost sharing at the start of the coronavirus pandemic.

A federal judge then struck down Indiana's attempt to revive the cost-share model in a 2024 ruling that found thousands of Hoosiers had been kicked off the plan for failure to pay premiums. The Biden administration also blocked work requirements.

That will soon change under President Donald Trump's tax and spending law, which requires states to introduce work requirements and cost sharing for Medicaid expansion plans like HIP.

But the law also imposes restrictions on provider taxes like Indiana's hospital assessment fee.

While the federal government covers 90% of HIP's costs, Indiana pays the remaining 10% through cigarette taxes and a hospital assessment fee.

FSSA contends copayments and flexible enrollment caps are necessary to keep HIP solvent amidst declining cigarette tax revenue and uncertainty surrounding the hospital assessment fee, as Indiana law does not allow the agency to spend beyond appropriated funds for HIP.

"(I)f HIP costs continue to increase, the gap between available funding from the hospital assessment fee and program costs will begin to widen and Indiana may no longer be able to operate a HIP program in compliance with state law, as projected costs may soon outpace available program funding," the draft application reads.

Enrollment caps would only kick in if available funding is insufficient to support program costs, according to the draft.

"Such authority is not about limiting access, but rather it is about ensuring that promises made today can be honored tomorrow," FSSA officials wrote. "A program that grows beyond its financial capacity ultimately fails the very people it is intended to serve."

FSSA intends to seek permission to start HIP 3.0 on Oct. 1, 2027, though copayments could begin sooner.

The agency is accepting public comment through Sept. 4.

Indiana Capital Chronicle is part of States Newsroom, a nonprofit news network supported by grants and a coalition of donors as a 501(c)(3) public charity. Indiana Capital Chronicle maintains editorial independence. Contact Editor Niki Kelly for questions: info@indianacapitalchronicle.com.