Following a five-year demonstration, a new report examines the Health Opportunity Accounts Demonstration Program created by the Deficit Reduction Act (DRA).  The law allowed up to 10 states to test the use of Health Opportunity Accounts as an alternative health benefit design in Medicaid.

Participating states were allowed to establish Health Opportunity Accounts (HOA) funded by state and federal government and offered together with a high-deductible health plan. Enrollment was voluntary for Medicaid-eligible healthy adults under the age of 65 and children. Beneficiaries used the HOA to pay out-of-pocket medical expenses.

The study found that South Carolina was the only state applying for and approved to participate. In May 2008, the state began implementation in Richland County. While South Carolina’s DHHS projected 1,000 enrolled individuals, only two adults and three children registered. Enrollment was down to just one child by December 2, 2011. Enrolled children received preventative services, of which were not charged to their HOA accounts. Though some services were paid by HOA account funds, balances remained high.

The study identified the following barriers for enrollment:

  • South Carolina’s Medicaid income eligibility requirement for children was 200 percent of the federal poverty level;
  • South Carolina’s Medicaid income eligibility requirement for adults who are not disabled or pregnant was 50 percent of the federal poverty level;
  • Beneficiaries did not gain immediate access to HOA account cash;
  • South Carolina launched its Medicaid managed care program at the same time with extensive marketing, while little marketing was offered for the HOA program; and,
  • Beneficiaries enrolled in a Medicaid managed care plan were reluctant to switch back to a fee-for-service for the purpose of demonstration participation.

To read or download the full study, click here (PDF).