As Congress grapples with whether and how to cut Medicaid and also whether to allow current ACA premium tax credit levels to revert to 2016 levels, States are looking at ways to fill the gap.

Several states are looking at ways to avoid the fallout from potential Congressional action (or inaction) on federal funding for Medicaid and Affordable Care Act (ACA) premium tax credit levels. California, Colorado, Maryland, Washington, and potentially other states say they are trying to avoid a “fiscal cliff” and a possible big increase in their citizens’ out-of-pocket health care costs.

“It is such a large chasm, we can’t quite fill it from a state-level perspective, but it doesn’t mean we’re not trying,” opined the CEO of Colorado’s state-run health insurance exchange. Likewise, other states are proactively considering ways to blunt the impact if Congress does let enhanced ACA premium subsidies expire and/or approves cuts to Medicaid that roll back the ACA’s Medicaid expansion provisions (or other cuts to the Medicaid program). State concerns center on the possibility that up to four million people could lose their health care coverage if premium tax credit subsidies shrink.

Among state actions under current consideration are a proposal in Washington for $55 million in state premium assistance—an amount that will not fully cover the impact if the ACA premium tax subsidies revert to 2016 levels. In Colorado, the state exchange is working with its health insurance advisory board to see if funds can be shifted from the state’s reinsurance program to help subsidize health insurance premiums. Maryland lawmakers have introduced legislation to allow its health care exchange to use some of its reinsurance funding to replace the federal subsidy with a state subsidy. “We may not be able to fill 100 percent of that expanded tax credit was,” said the executive director of the Maryland Health Benefit Exchange, “but we probably could get pretty close to it for a year, for sure, and perhaps even a second year.”

Prospects: Republicans vow to avoid Medicaid cuts that impact beneficiaries of the program, but the math suggests that the cuts the House of Representatives may require will have to go beyond eliminating “waste, fraud and abuse.” Plus, most Washington observers believe that at a minimum the looming cuts would impact state health care spending. And there currently appears to be little chance that Congress will extend current law’s enhanced ACA premium tax credit subsidies. Further, states are bracing for budget hits resulting from new tariffs and the possibility of a recession.

NAIFA Staff Contacts: Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org; or Mike Hedge – Senior Director – Government Relations, at mhedge@naifa.org.