House Bill 1 (HB 1) would make sweeping changes to the way we provide medical, food and income assistance to Kentuckians with very low incomes. The bill as introduced adds unnecessary, unworkable and potentially unlawful measures that would harm Kentuckians who are struggling to get by, and adds enormous cost to the state. Instead, Kentucky could pursue evidence-based policies that have the potential to remove barriers and improve quality of life.
HB 1 Adds Barriers to Health, Food, Child Care and Other Kinds of Assistance
The bill sponsors have described the 14-part proposal as a way to ease the transition for those who earn more and therefore become ineligible for public assistance based on their income. This important goal can be addressed in many ways (some of which are laid out at the end of this blog). But HB 1 would erect unnecessary barriers to how benefits are used and limit access through program changes and harsh penalties. It does this in several ways:
Prevents use of needed cash. HB 1 bans Kentucky Transitional Assistance Program (K-TAP) participants who receive cash assistance from using their Electronic Benefits Transfer (EBT) card to withdraw cash at an ATM or a grocery store. Yet access to cash is essential to pay for things like rent or babysitting. And in Kentucky, 12.1% of those who earn below $30,000 per year are unbanked or underbanked, making cash even more important. It creates a “three strikes” rule for violators, who are banned indefinitely from receiving any form of cash assistance or an EBT card which is how assistance is provided for programs like Kinship Care and food assistance.
Creates complex new food monitoring program. No more than 25% of an individual’s SNAP benefit could be used on energy drinks or sodas. The average SNAP-participating household spends 9% of its food budget on sweetened beverages, and doesn’t significantly differ from how much non-SNAP participating households spend on sweetened beverages (Data shows that, in general, SNAP participants buy the same kinds of groceries as everyone else). This rule would also be incredibly cumbersome to enforce. It would require all SNAP-accepting grocery stores to share their purchase data with the state, and stores would need to track how much of each person’s share of the SNAP benefit was spent on these banned items. As of 2000, there were 300,000 different food products available in grocery stores and 12,000 new items were introduced that year – all of them would need to be categorized and tracked by the state.
Opens up risk of lifetime bans. It creates a lifetime ban on receiving all forms of public assistance (including Medicaid, child care assistance, and many others) if a Supplemental Nutrition Assistance Program (SNAP) participant sells an EBT card. This could set up a scenario, for example, in which someone sells an EBT card at age 18 in order to make rent that month, gets caught and becomes ineligible for help with their nursing home bills through Medicaid when they’re 70.
Also, Medicaid-eligible adults who have been convicted of a drug-related felony would face a lifetime ban from Medicaid if they failed to enroll in a treatment program within 90 days of incarceration. This section is written in such a way that if someone enrolled in substance use disorder treatment 91 days after being released from incarceration, they would never be eligible for Medicaid again for the rest of their lives. A similar but less-strict ban in SNAP has resulted in thousands of Kentuckians losing food assistance, and many more who may never have even applied because the ban makes them ineligible.
Potentially brings back Medicaid barriers. It reopens the possibility of taking Medicaid coverage away from those who don’t meet a work reporting requirement. This requirement would apply to people enrolled in Medicaid expansion for more than a year if the state General Fund appropriation for Medicaid expansion reaches 75% of General Fund spending on Medicaid overall (it is currently only 10.7%). It is well documented that a Medicaid work requirement would serve to reduce enrollment without improving the employment or well-being of those who lost their coverage, and Kentucky’s plan was twice thrown out by a federal court.
Reduces SNAP benefits in homes with kids. Non-parental adults living in a home with children would lose SNAP benefits if they are unable to meet a work reporting requirement more than 3 months in a 36 month timeframe, regardless of the barriers they face to reporting consistent work hours. When anyone in a household loses food assistance, it reduces the overall food budget for everyone in the household, and this provision is specific to people who live in a home with children.
Increases out of pocket cost of healthcare for low wage workers. HB 1 requires all Medicaid enrollees (traditionally eligible or eligible under Medicaid expansion) to enroll in their employer’s plan through the Kentucky Integrated Health Insurance Premium Payment Program (KI-HIPP), if their employer offers coverage. This would open up Kentuckians with low incomes to significant financial risk. While Medicaid would reimburse the employee portion of the premiums (after the employee paid up front in nearly all cases), they may not be shielded from other forms of cost sharing like an employee plan deductible, co-pays or co-insurance if they see a provider in their employer’s network but not in the Medicaid network.
It also creates a new Medicaid program that requires employed people between 138% of the federal poverty level (FPL) and 200% FPL ($17,600 and $25,520 respectively) to enroll in KI-HIPP if their employer offers a health insurance option. It would also cover those who are not offered a health insurance option by their employer through paying for their premiums on the health insurance exchange. However, this could make coverage for these individuals less affordable, because making them eligible for Medicaid under this new program would prohibit them from receiving cost sharing subsidies under federal marketplace rules.
Changes Would Be Extremely Costly for the State
New administrative needs would increase state costs. Several provisions of the bill would require the Cabinet for Health and Family Services (CHFS) to develop and maintain new tracking systems and dedicate more staff to implementing the proposed mandates. For example, requiring all employed Medicaid enrollees to participate in KI-HIPP (participation is currently voluntary) in a way that is cost effective to the state at the level of individual coverage would actually require an increase in staffing to verify current employment and compare the cost of paying for employee premiums to current per-person costs under Medicaid. It would also cost the state in terms of added administration to provide certain benefits that are not covered by employers but required by Medicaid.
CHFS would also be required to track a cross-program list of banned individuals and alternate designees for benefits in the event that a parent is banned but wants their children to continue to receive benefits. It would also require universal retail tracking systems that coordinate with the U.S. Department of Agriculture and all SNAP-receiving grocery and convenience stores for the 25% soda and energy drink cap and the share of the overall cost of those beverages compared to each person’s SNAP benefit amount.
New health provision would be very costly even as it adds new financial risk to individuals. For Kentuckians eligible for Medicaid under the 2014 expansion, coverage is 90% funded by the federal government. Any further expansion of eligibility would fall under the traditional funding structure, wherein the federal government only pays 72%. HB 1 expands eligibility from 138% of the poverty line to 200% according to 2018 census data, resulting in as many as 174,000 more individuals qualifying based on their income and employment status. The state would have to pay the other 28% of their medical costs, at least.
As previously mentioned, the first group within this new eligibility category is people whose employers offer health insurance. The average annual employee premium contribution in Kentucky was $1,633 for an individual in 2018. If half of them received health insurance through work, this program could cost up to $142 million, with a required state contribution of $40 million. That estimate is conservative because it is based on the annual employee share of premiums for an individual, and if a whole family qualified for Medicaid under this section, premiums would be much higher and the cost to provide Medicaid for those premiums would be much higher as well.
The second group that would be ostensibly eligible for Medicaid dollars to purchase coverage in the Health Insurance Marketplace consists of workers with income up to 200% of FPL whose employers do not offer coverage. The average unsubsidized silver plan purchased in Kentucky in 2019 (the benchmark plan for the marketplace and the most commonly selected option) costed an annualized $8,280. If the remaining half of the 174,000 newly eligible Kentuckians were to take up this option, it would cost as much as $720 million, of which the state share would be roughly $201 million. It is likely the case that a larger share of people who work low-wage jobs are not offered insurance at work than the average Kentucky worker, so many would take up the more expensive marketplace option.
Altogether, this constitutes an estimated $241 million state General Fund program. However, as the bill is currently written, it is likely not allowable under Medicaid rules (discussed further in the next section). In that case, the state would be on the hook for the entire cost – potentially more than $862 million. And this estimate does not include cost of state employees who would qualify for coverage under this provision, for whom the state would need to pay its portion of health insurance as well. While mandatory KI-HIPP participation for those below 138% of FPL would likely generate some state savings and offset the cost of this newly eligible population, it is not clear how much, and the end cost would still be considerable.
This new coverage option would still leave many people less financially secure than what the health insurance exchange currently offers for people who fall between 138-200% FPL. As mentioned previously, because these individuals would no longer be eligible for subsidies on the health insurance marketplace, their cost-sharing requirements would increase (deductibles, co-pays and co-insurance). Ultimately, enrollees in this new program who are covered through plans from the health insurance exchange would be responsible for paying an average of 30% of their medical costs, as opposed to the 6% (138% – 150% FPL) and 13% (150% – 200% FPL) this group currently is responsible for (known as actuarial value).
Many Components Violate Federal Guidance, Rules and Law
While states have considerable flexibility in how they implement TANF, SNAP and Medicaid, there are still federal guardrails that limit the extent to which states can deviate from the core purpose of safety net programs – to provide people facing barriers to sufficient employment and job quality with assistance to make ends meet. HB 1 violates those limits in each of the public assistance programs it changes:
- Limiting SNAP benefits spent on certain kinds of food (in addition to current restrictions) has been repeatedly rejected by the U.S. Department of Agriculture.
- Cutting off TANF recipients from withdrawing cash violates both federal instruction from the Department for Health and Human Services and federal statutes which require participants have access to cash withdrawal.
- Medicaid law doesn’t allow bans for people with a drug-related felony conviction.
- It’s not clear that federal laws allow for someone to be denied benefits in one program (such as the Child Care Assistance Program or Medicaid) because they were banned from another.
And because laws around optional eligibility categories in Medicaid do not include employment status or an employer‘s health coverage, the entire coverage expansion section would likely fail to pass muster with Centers for Medicare and Medicaid Services. States are allowed to, and have in the past, provided coverage to new groups based on a percent of the federal poverty level. If the proposal were to eliminate the employment requirement to comply with federal eligibility categories, the total eligible population for the new category would climb from 174,000 to 255,000 Kentuckians. While covering more people is good, this expansion would also increase the overall state cost of the plan from an estimated $862 million to as much as $1.5 billion (assuming 100% participation).
There Are Better Ways to Improve the Safety Net
Several sections of the bill enshrine current practices into statute, and could help sustain policies like using a single EBT card for multiple programs and requesting information on parents who pay child support. Two other provisions would require the state to join the SNAP National Accuracy Clearinghouse, which Kentucky is already required to do by 2021, and would require Kentucky prisons and jails to report to CHFS when people are released from incarceration.
In addition to these provisions, there are ways to truly assist people who are struggling to make ends meet and working to improve their lives – measures that aren’t punitive but supportive. Allowing K-TAP participants to earn more while still receiving benefits through an “earned income disregard,” for example, gives them room to build economic security gradually and stably. There is a similar option for SNAP participants through “income broad based categorical eligibility.” Child care is a major expense that often creates a barrier for parents who work; lowering co-pays, increasing reimbursements and lifting the eligibility limit would all go a long way toward supporting working parents so that child care costs phase in as their income rises. Concerns about the nutritional value of SNAP-purchased foods could be addressed through further incentivizing the purchase of local produce through programs like the Kentucky Double Dollars program, which matches purchases at farmers’ markets, or the SNAP Nutrition Education program, both of which are partially federally funded opportunities.
When it comes to health care, coverage is a major concern for all Kentuckians, and those who earn just over the limit for Medicaid often struggle to afford it and some still go uninsured. While HB 1 purports to address this issue, in practice it worsens the financial burden on individuals and also the state. Other options that cost less and show promise in better covering people at this income level are available. For instance, a Basic Health Program bridges health coverage between Medicaid and the health insurance marketplace and also serves people between 138% and 200% FPL. The federal government will chip in 95% of what they would have paid in subsidies on the health insurance exchange for that population. Another option would be to implement a 1332 waiver that creates a reinsurance program, which could lower premiums for all marketplace enrollees and would be largely paid for by the federal government. A third option that would not require state funding is to create a Medicaid bridge plan by contractually requiring MCOs to provide marketplace plans as well for those whose earnings make them ineligible for Medicaid, but want to keep their provider network, formulary and keep a similar benefits package.
These and other options need greater exploration, but could be ways of moving forward to serve and support Kentuckians as they pursue a better life for themselves and their families.
