Building a Relationship between Medicaid, the Exchange and the Individual Insurance Market

January 9, 2012

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The alignment of Medicaid and State Health Insurance Exchange (Exchange) policy and
practice is a basic tenet of the Patient Protection and Affordable Care Act (ACA). Through
both legislative provisions and implementing regulations, the ACA addresses this
relationship.1 At the same time, the federal framework provides states with considerable
discretion to flesh out the fuller dimensions of system interaction.

Even as the federal framework is still evolving, this report examines the practical and
conceptual factors that underlie the federal/state relationship. It describes dimensions of
collaboration that could help establish a seamless continuum of coverage for those who
may move between eligibility for Medicaid or for tax subsidies in the Exchange. Proposed
regulations outlining eligibility determination obligations of state Medicaid agencies and
Exchanges have been issued. Still to appear are regulations defining essential health
benefits, but sub-regulatory policies were issued in a special federal bulletin on December
16, 2011. These will define the scope of essential health benefits to be offered by
Qualified Health Plans (QHPs)2, which in turn also will define the coverage obligations of
Medicaid "benchmark" coverage for newly eligible persons as well as the extent of
coverage under the state Basic Health Program option.