Here’s the question on the mind of almost every Medicaid plan leader: Will our organization be ready once community engagement (work) requirements become mandatory? The answer could determine whether that plan succeeds or fails in the next few years.
The rules target individuals in the Medicaid expansion population, which affects 41 states plus DC. Many people within this population are able-bodied, working adults, subjecting them to the reporting requirements. And if those members churn, the effect on a Medicaid Managed Care Organization (MCO) could be devastating.
AArete analysis shows that MCOs could face hundreds of millions of dollars in losses if they fail to act now. That’s because an estimated 10% to 20% of Medicaid members could be at risk of losing coverage due to the new requirements, per both AArete data and findings from groups like the Urban Institute and the Robert Wood Johnson Foundation. Fast, appropriate action will separate plans that retain members and maintain profitability from those that don’t.
CMS’s Latest Guidance on Work Requirements, Explained
The Interim Final Rule (CMS 2454-IFC) issued by the Centers for Medicare & Medicaid Services (CMS) on June 1 provided MCOs with some much-needed clarification on work requirements. Yet many questions remain unanswered, and Medicaid plans do not have the luxury of waiting for final guidance prior to acting.
The IFC specifies that work requirements will apply to non-pregnant, non-Medicare adults ages 19-64 who are enrolled in an Affordable Care Act (ACA) Medicaid expansion group or subject to certain Section 1115 demonstration waivers that provide minimum essential coverage to adult beneficiaries.
Beneficiaries falling into these categories must demonstrate at least 80 hours per month of qualifying activities, which can include work programs, community service or at least half-time enrollment in an educational program. Individuals may combine activities to meet the mandates or earn the equivalent of 80 times the Federal hourly minimum wage ($580/month).
In both the IFC and its predecessor, H.R. 1 (the Reconciliation Act), states bear the brunt of the burden. They will need to conduct Medicaid eligibility redeterminations every six months and both verify and enforce work requirements. Members, meanwhile, will need to self-attest to their work status. And while MCOs will not determine compliance, they will be relied upon to support states and members.
The Stakes for Medicaid Plans
For plans serving members in the 41 states (and Washington D.C.) that have adopted Medicaid expansion, the work requirements could trigger several operational risks. Enrollment volatility is the most significant challenge, with CMS estimating that work requirements could lead to an average 15% disenrollment rate (8.9% noncompliance disenrollment and 6.4% from procedural disenrollment).
When a member is flagged as non-compliant, an MCO will have roughly 30 days to intervene and enroll that beneficiary in a community engagement program, or else that member will drop off the rolls and plans will lose the capitated payment.
Payer risk pools will also be impacted. ACA expansion adults are generally lower acuity. Should they leave the plan due to noncompliance, the remaining membership will skew toward higher-acuity, higher-cost individuals. Unlike other high-acuity members who move into different rate cells, such as skilled nursing, work-requirement disenrollment will not result in increased payment, thereby increasing financial risks for MCOs.
Plans Should Act Now to Protect Medicaid Members
While the public comment period for the IFC won’t end until July 31, MCOs should take steps immediately to be prepared once the work requirements become mandatory on January 1, 2027. These actions offer a strong starting point.
Identify at-risk members. Use data and analytics to identify non-exempt members who may struggle with reporting. Then build personas detailing their demographics, wants, needs and pain points, and use that data to create tailored outreach strategies.
Communicate with at-risk members early and often. At a minimum, MCOs should plan for monthly outreach to determine whether members are meeting the requirements and to deploy potential interventions, such as connecting them with community service, education or other qualifying options.
Partner with states. Wage and eligibility data are fragmented and difficult for plans to access in many states. To overcome this hurdle, plans should strategize ways to surface encounter and claims data—such as proof that a member is in a long-term care facility and, therefore, unable to participate in community engagement—to help regulators determine members’ eligibility accurately.
Collaborate with providers. Enlist the help of Medicaid-dependent organizations, such as hospitals, health systems, Federally Qualified Health Centers and behavioral health providers, in H.R. 1 compliance efforts. These providers communicate with members frequently and can reinforce education, assist with documentation and direct members to appropriate compliance resources before they churn. Hospitals and health systems also have a strong incentive to help their eligible members retain coverage, as coverage losses directly translate into uncompensated care and bad debt.
Increase staffing and digital engagement. Plans should staff up now to meet the expected increase in call center volume, member communication and navigation support. Less digitally mature MCOs should also begin investing in CRM-driven journeys, text-based member communication and other outreach strategies.
Revisit utilization and financial forecasting. Semi-annual redetermination will create ongoing disruption. If a meaningful share of a plan’s expansion population churns, utilization trends will change. MCOs should model a range of disenrollment scenarios to forecast how risk pools and utilization might be impacted.
Medicaid plans may not be responsible for verifying members’ work requirements, but they are in the best position to connect with beneficiaries and help them meet the new regulations so they can stay covered. The MCOs that protect their members and their financial footing will be the ones that started planning months before the January 1, 2027, deadline arrives.
Luke Henderson
Luke Henderson is a director at AArete, a global management and technology consulting firm specializing in health plan and payer consulting solutions to increase profitability and improve quality of care. Luke brings over 15 years of healthcare consulting experience, with an extensive background in hospital performance improvement, operations management and change management solutions through analytical analyses.
