Health Care Policy Trends From the 2021 State Legislative Session | Manatt, Phelps &

The Big Picture

This month, a majority of states are beginning to adjourn their 2021 legislative sessions.1 Across the country, lawmakers considered and passed a wide range of health care legislation, including coverage expansions as well as strategies to contain prescription drug costs, address health care affordability, advance and expand telehealth, and ensure behavioral health care access.

While many states anticipated intense budget shortfalls due to lost revenue associated with the COVID-19 pandemic, most states experienced stable tax revenue during the pandemic. Coupled with an influx of federal stimulus funding from the American Rescue Plan, states have been able to invest resources in advancing health care and other programs.

This summary focuses on broad health care policy trends unrelated to the pandemic, but states are of course continuing to grapple with their response to the COVID-19 pandemic and its lasting impact. State legislatures have considered changes to state emergency power laws, appropriations for COVID-19-related tasks, economic stimulus, unemployment system reforms and expanded scope of practice for health care providers.

Outside of pandemic-related legislation, states have focused on a range of health policy issues, including expanding coverage, containing health care costs, expanding telehealth access and addressing behavioral health needs.

The following sections describe key health care policies that states have considered during the 2021 legislative session. This analysis highlights select examples of state legislation; it is not an exhaustive review of state health policy activity.

Coverage Expansion

States have explored several avenues to expand coverage this year. Recent federal policy changes also have had a significant impact on health care coverage, particularly on coverage affordability issues states have been grappling with in recent years, such as Marketplace affordability and Medicaid coverage.

Given the temporary nature of some of these federal policies, states are monitoring and anticipating future actions by the Biden administration and Congress that will further impact state coverage policies in the long term. States may reconsider or repurpose some of their coverage-related investments, depending on the outcome of federal legislation.

As a reminder, key coverage policies of the American Rescue Plan include:

  • Temporary Marketplace Premium Tax Credit Enhancements. The law increased the generosity of federal premium tax credits for Marketplace insurance plans and, for the first time, expanded eligibility for federal tax credits to individuals with income over 400% of the federal poverty line (FPL). The enhancements are in effect for 2021 and 2022. The Biden administration has proposed making these changes permanent, and Congress could consider legislation to do so later this year.
  • Enhanced Federal Medical Assistance Percentage (FMAP) for Medicaid Expansion. The law provides enhanced federal match to incentivize the 12 states that have not expanded Medicaid to expand coverage to the adult population with incomes up to 138% of the FPL.

State Public Options. Since 2017, nearly a dozen states have considered legislation to study or implement a state-based public option. This year, legislators in multiple states—many that have studied public option models in the past2—introduced updated proposals. These states include Colorado, Oregon, Minnesota, Nevada and Connecticut. The specific program designs vary, but each proposal would use government purchasing power to offer new coverage plans to state consumers, either on the Marketplace or through existing state programs (for example, Connecticut’s plan—which failed to pass this year—would leverage the state’s employee plan). Nevada is the only state, as of this writing, to have passed its public option proposal this year.3 Washington State also passed changes to its first-in-the-nation Cascade Care public option program, which was implemented this year.

Enhanced federal premium tax credits provided by the American Rescue Plan have impacted consideration of these bills in state legislatures, since the enhancements reduce the urgency for policies to improve premium affordability for consumers. Several states have pulled back or rewritten their bills4 in response to changes to the federal Marketplace structure and stakeholder responses. To date, advocates for state public option proposals have focused on increasing consumer affordability. The enhanced premium tax credits under the American Rescue Plan remove some of the consumer affordability burdens public options were designed to alleviate, leaving future program design and the prospect of passage uncertain if the enhanced subsidies are made permanent.

State-Based Premium Subsidies and Cost-Sharing Reductions. Several states joined the growing trend of providing state-based premium and/or cost-sharing subsidies for Marketplace plans, building on federal advance premium tax credits to further lower premiums for consumers and/or expand subsidy eligibility to new groups. Washington and New Mexico enacted laws establishing such programs, including options to provide both premiums and cost-sharing reductions. The American Rescue Plan has a direct impact on these state-based affordability programs by temporarily enhancing federal premium subsidies, and as a result, the laws in New Mexico and Washington leave details about the premium and cost-sharing amounts and eligibility parameters to appropriations and rulemaking processes in response to uncertainty about the permanence of enhanced federal tax credits. Maryland also passed a more targeted program to provide premium assistance to young adults to purchase individual market coverage.

States with existing premium subsidy programs—California, Colorado, Massachusetts, New Jersey and Vermont—are also considering and taking executive action to shift dollars from premium assistance to additional cost-sharing reductions, offering subsidies to populations ineligible for federal assistance (for example, those affected by the family glitch rule or those ineligible because of immigration status), focusing on addressing the underlying costs of health care and/or possibly delaying health care reform pending further federal action. New Jersey and Colorado, for example, have already announced these changes.

Medicaid Expansion. The American Rescue Plan provides states that newly implement Medicaid expansion with significant new funding, prompting Medicaid expansion discussions among state policymakers and advocates in some of the 12 states that have yet to expand Medicaid coverage (for more information on the new federal dollars available to each state, see this Manatt Health- authored issue brief). While Medicaid expansion legislation gained traction in several states after the passage of the American Rescue Plan, legislation was not passed during any state legislative session where it was being considered (Kansas, Wyoming,5 Alabama). In Missouri, lawmakers struck funding necessary to implement a 2020 ballot initiative that amended the state’s constitution to extend coverage; litigation6 is now pending in Missouri challenging the state’s decision not to move forward with the expansion.

Addressing the coverage gap will continue to be a key point of discussion at the state level and will be informed by ongoing federal efforts to incentivize state expansion or provide an alternative coverage option.

Expanding Medicaid Coverage for Postpartum Women. States across the country have used this legislative session to pursue strategies to strengthen and expand Medicaid coverage for target populations, including authorizing their states to seek federal approval to expand postpartum coverage beyond the current 60-day period required by federal law. Some of this activity was prompted by the American Rescue Plan, which gives states the option to extend Medicaid/CHIP eligibility for pregnant people enrolled in Medicaid/CHIP for 12 months postpartum. Previously, several states sought—and the Centers for Medicare & Medicaid Services (CMS) has now approved—Section 1115 demonstrations to extend such coverage.

In April, West Virginia passed a bipartisan bill to extend postpartum Medicaid coverage from 60 days to 12 months postpartum. Texas passed a bill in the House to extend postpartum coverage to 12 months, but the bill was left pending in Senate committee at the close of session.7 Similar bills in Mississippi and Florida also failed to pass Senate committees.

Prescription Drugs

States continue to be concerned about the cost of prescription drugs and have proposed a wide variety of policies to address costs and the prescription drug supply chain in 2021.

Drug Affordability Boards. A growing number of states are implementing or considering prescription drug affordability review boards or commissions to reduce drug spending,…

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