As the ACA expanded Medicaid, some states decided to implement cost-sharing in the form of premium payments or monthly Medicaid contributions. These premiums generally apply to Medicaid expansion populations – those who earn between 100% and 400% of the federal poverty level.
In most cases, these Medicaid premiums are small amounts. For example, in Arizona, the premiums don’t exceed $25. In Arkansas, premiums can’t exceed 2% of income and in Iowa premiums for some can’t exceed $10 per month. As a result, Medicaid departments need to contain billing administration costs so they don’t outstrip premiums collected.
Many states have found it difficult to collect premiums or contributions from Medicaid expansion populations. For example, in 2017 Arkansas found that just 20% of beneficiaries paid their premiums. That same year, Michigan found less than half paid their premiums. In 2016/2017 in Iowa, fewer than 25% of beneficiaries paid their premiums.
So it shouldn’t be surprising that when Virginia implemented premiums in their CHIP program, they found that the billing administration cost was $1.39 for every dollar collected. That cost highlights the importance of automating the billing process as much as possible to reduce costs. But it’s also important to maximize beneficiary payment rates so revenue exceeds administrative costs.
Here are four ways to improve payment rates in Medicaid premium billing:
Though the data is a bit dated, a 2010 Forrester Research report found that 26% of shoppers would abandon a cart if their preferred method of payment wasn’t available. Add in that in 2019, 28% of payments were from debit cards, 23% were from credit cards, and 26% of payments are made by cash, and failing to offer all of those payment methods can considerably impact beneficiaries’ ability to make a payment.
Most states offer check/ACH, credit, and debit card payments. But few offer cash payments, which may be the preferred method of payment by more than 25% of beneficiaries. Even worse, cash is used heavily for the small-value payments typically made in a Medicaid environment. Studies show that 49% of payments under $10 are in cash.
How do you enable cash payments? Our Medicaid billing solution includes a nationwide cash pay network of retail locations, including popular pharmacies. Beneficiaries need only bring their invoice to the location, have the cashier scan the bar code, and make a cash payment. It is a convenient payment method that helps improve payment rates, especially for small-dollar amounts typically found in Medicaid premium billing. Considering Medicaid beneficiaries may be more likely to be underbanked or unbanked, cash may be their most available payment option.
People forget to make a payment all the time. No matter how many notifications you send, a certain percentage of the population will simply forget to make a payment. As a result, you need to offer beneficiaries the ability to create a recurring payment.
Additionally, communication is the key. If a beneficiary misses a payment, make sure your delinquency notification promotes the option to create a recurring payment. Increasing the number of recurring payment members by even a few percentage points will improve your collection rates, especially if you turn frequently delinquent accounts into recurring payment accounts.
Finally, states should provide beneficiaries options for the day of the month they will collect funds. We recommend providing multiple days during the month that a beneficiary can choose to have funds withdrawn. For example, you could offer them the first of the month, the fifteenth of the month, and the 30th of the month. As a result, beneficiaries can time the withdrawal with a paycheck or other payment event to ensure funds are in the account.
Alternative Collection Methods
Some states leverage other state departments and programs to collect delinquent payments. For example, states will leverage their Department of Revenue to collect delinquent premiums from an individual’s tax filing.
Though this serves as a collection method of last resort, it can actually improve overall payment rates. If a beneficiary knows there are little to no penalties for failing to pay a Medicaid premium, they may be less likely to make an on-time payment. But if they know that they’ll eventually be assessed the delinquent premium on their taxes, beneficiaries may be more likely to make that payment before the tax assessment occurs.
Finally, effective communication can have a significant impact on your ability to collect from Medicaid beneficiaries. Be clear and concise in your communication. Explain the payment process, their payment options, and as we mentioned earlier, promote your recurring payment option. Also, be sure beneficiaries understand why they’re paying a premium and the consequences of failing to make a payment.
Be sure to send a series of delinquency notices if they fail to make a payment, as well. Having a strong communication plan can significantly improve payment rates.
Certifi helps states with Section 1115 Medicaid waivers bill and collect payments thanks to a premium billing and collections module that earned R3 certification under the requirements of the Medicaid Enterprise Certification Toolkit (MECT).