When the state of Arkansas broached its private model for Medicaid expansion, it held up as a potential roadmap for partnerships between states hesitant to expand their Medicaid programs. But the second-state to follow that course, Iowa, is emerging as the bellwether for market innovation.

Arkansas, private model for Medicaid expansion barely escaped the state's 2014 legislative session with another year of funding. The state's model, in which the Medicaid expansion population buys fully subsidized coverage through the state's health exchange, survived the battle, but annual reauthorization battles could complicate its future.

In Iowa, the process could not have been calmer. Divided government in Iowa produced a Medicaid waiver not unlike Arkansas. Iowans earning between 101 and 138 percent of the federal poverty can buy private coverage through the exchange and Medicaid expansion dollars pay for the premiums, a compromise between Gov. Terry Branstad and the state legislature (Democrats control the Senate, Republicans control the House). They either pay a $19 monthly premium (or no more than 2 percent of their annual income). If those members complete annual wellness screenings, the premium is waived.

When CMS approved Iowa's waiver to use premiums in December, it opened the door for states mulling Medicaid expansion in 2014 (New Hampshire, Virginia or Utah) to follow suit. Iowa could be the leader in a multi-state exchange with three Great Plains neighbors. In early February, Branstad told the Quad-City Times that he planned to pitch the idea to the governors of Nebraska, Kansas and South Dakota, all Republican-dominated.

Initially, multi-state exchanges were encouraged under the Affordable Care Act. Among rural states with fewer resources, pooling exchange functions seems sensible. Exchange construction cost hundreds of millions of dollars; why not spread out those expenses over several states? As state after state defaulted to the federal exchange, the concept slipped into obscurity.

With Iowa planning to run its exchange in 2016, there would be solid technological infrastructure upon which to build a multi-state exchange. It would spread exchange costs out across four states. The growing financial sustainability worries mounting among state-run exchanges would not be as high with multiple states.

To a degree, the framework already exists. Despite defaulting to the federal exchange, Nebraska, Kansas and South Dakota all received federal permission to regulate exchange carriers, giving them a potential backdoor to a multi-state arrangement.

A multi-state marketplace could bring in new competitors. Insurers already operating in those states would benefit. Wellmark is the largest carrier in Iowa and CoOportunity Health operates as a consumer-oriented and operated plan (CO-OP) in both Nebraska and Iowa. Neither South Dakota nor Kansas has a CO-OP.

Political realities might stamp out any progress on Branstad's idea, but multi-state exchanges could be the best path for broadening state control over those markets. With little action on the ACA's biggest initiatives in most of the Heartland, Iowa stands taller all the time.

Follow Bill Melville on Twitter @BillMelvilleDRG

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