Assertions on why Private Option can’t be repealed in 2015: WRONG

assertionsPrivate Option supporters have been making two (incorrect) assertions against the repeal the Private Option at the end this year. Even some legislators who opposed the Private Option in 2013 and 2014 have been misled by the two arguments.


 The incorrect assertions are:

  1. A repeal before the waiver ends December 31, 2016 will lead to class action lawsuits by enrollees.
  2. There is no possible way to end the Private Option for 6 to 8 months after the law is effective and that means Arkansas could not repeal before March 2016.

Not only do these two arguments conflict, they are both wrong.

These two ideas have become so prevalent in the Capitol that even some conservatives are now citing them as reasons for not supporting SB114 and HB1181, and why they are supporting SB96. The purpose of this article is to show why the arguments are wrong so that informed decisions can be made, for or against repeal.

Both SB114 and HB1181 would end the Private Option this year. SB96 allows the Private Option to continue when the program ends anyway, at the end of 2016, and creates a task force that is charged with looking for ways to cover the Private Option population. Click link for an analysis of SB96.


The most prevalent rumor making the rounds is that a 2015 repeal of the Private Option would subject the state to lawsuits.

First, enrollees do not own insurance. It is purchased by the state and the agreement is between the state and the insurance company.

Second, before a person is enrolled in the Private Option the person MUST sign acknowledgment stating that they understand the Private Option is not an entitlement program and that the Private Option can end at any time.

Third, even the federal terms and conditions associated with the Private Option specifically recognize the possibility of an early end of the Private Option demonstration project.

Fourth, the likelihood of a successful lawsuit appears to be less than zero, but in the past, even when there was a substantial risk of litigation, the legislature has not been shy about standing up for what it thinks should be done.


The other argument is that procedurally the Private Option can’t be repealed until March 2016.  The argument says: The PO cannot legally end in 2015. A repeal law can’t take effect until the start of the fiscal year on July 1. Then the state must give 6 – 8 months notice to participants. This puts the end, at the earliest, in March 2016.

First, the argument assumes that the Department of Human Services would sit on its hands for four months and not do anything until the law becomes effective. There is nothing to keep DHS from starting work the day a repeal bill is signed into law.

More importantly, the argument is just wrong. According to the testimony of John Selig, Director of the Department of Human Services and Andy Allison, former Arkansas Medicaid Director Arkansas may end the Private Option quickly with a Medicaid state plan amendment. Mr. Selig and Mr. Allison’s testimony came in response to the argument that lengthy termination procedures in the federal terms and conditions conflict with the Arkansas law which envisions the ability to quickly end the Private Option. They said the terms and conditions only apply to the waiver but the state plan controls. They said despite restrictions that appear in the federal terms and conditions, the Private Option can be quickly ended by changing the state plan.

The testimony was on January 16, 2014 before the Joint meeting of the House and Senate Committees on Public Health, Welfare and Labor. A transcript of the meeting (with some comments inserted) can be read [HERE].  The following are some quotes from the meeting.

Director John Selig:  If we went to change something, then they [CMS] would say, “Well if this now is correct we need to have 6 months.”   That’s different than saying, “We’re stopping the private option; we’re getting out of this plan.”  As Dr. Allison was saying, that’s in the state-plan amendment.   The Terms and Conditions don’t apply to that state plan amendment. [Emphasis added]

Director John Selig: Putting them in to private insurance is under the scope of the waiver. The expansion is under the authority of the state plan amendment.  So it’s the combination, I think the error that the analyst made was to assume that the Healthcare Independence Act was represented in whole in the waiver.  (Rep. Ballinger:  It references it).  Yes, it references it. But, in fact, the Healthcare Dependence Act is represented as a combination of the waiver and the state plan amendment.  And in this case, it’s the state plan amendment that would dominate.  It governs the question of whether someone would be covered or not and that, of course, is where all the spending would come from. [Emphasis added]

Director John Selig: It would mean that we have the option of eliminating the whole program through the state-plan amendment. So if that circumstance would arise, or if we believe it would arise, and we have the luxury in the private option of knowing in advance whether those costs would go up because premiums are announced months in advance before they go into effect… (That will happen again here in roughly October, in the next open enrollment). So we’d have plenty of time to change the state plan amendment if that was what the will of the state was.  And in that case the state plan amendment would dominate and not Term and Condition number 7. [Emphasis added]

Dr. Andy Allison: In the end, and the reason why we had to bring a package of state-plan amendments to the committee process for review is that the expansion itself is in a state plan, not in a waiver. So when the waiver refers to changes, the waiver is referring to changes in how you might cover those individuals.  It’s not a change in whether those individuals are covered.  And so the provisions in the Terms and Conditions for what happens when the state plan amendment changes, and that process is not subject to the same amendment or certainly the demonstration closeout constraints that are being described, so there is no automatic delay by the federal government by the state plan amendment process.  In fact, when we reduced, for example in Kansas, when we reduced payment rates, we did it first; and then we submitted the state plan amendment even after that.


Bottom line

The assertions were injected late in the game, when is is hard to correct the record. The issue is likely to be decided in the House of Representatives next week (February 2-4).