Arkansas has proposed using Medicaid expansion dollars to provide subsidies so that eligible individuals can purchase health insurance through the exchange. The U.S. Department of Health and Human Services has indicated that it will consider approving such proposals.

The Arkansas proposal has various financial implications, especially with regard to provider reimbursement levels and various aspects of the Patient Protection and Affordable Care Act, including the medical loss ratio requirement and the “Three Rs” (reinsurance, risk corridors, and risk adjustment). This healthcare reform briefing paper examines these key considerations for a state contemplating this approach.