With 2014 around the corner, about half of states are expected to forgo Medicaid expansion. This will leave millions below the poverty line without access to affordable coverage. It will also divert the population between 100-138% FPL into the exchanges. According to a recent study by RAND, this is likely to result in sicker patient populations—and higher premiums.
From the report (emphasis added):
For three states (Texas, Louisiana, and Florida), we considered the effect of Medicaid expansion on nongroup premiums. If states fail to expand Medicaid, individuals with incomes in the range of 100 to 138 percent of the FPL will become newly eligible for exchange tax credits. We find that, for these three states, these newly eligible individuals could cause premiums standardized for age, actuarial value, and tobacco use on the nongroup market to rise by 8 to 10 percent, relative to scenarios that include Medicaid expansion. The increase in premiums reflects an influx of slightly lower-income and less- healthy enrollees onto the exchanges.
Lower-income individuals tend to have poorer health and, when they have coverage, higher health spending. The researchers also anticipate some adverse selection (among the 100-138% FPL group, sicker populations will be more likely to enroll). With these folks added to risk pools, the pools’ average health will decline, driving up premiums. People who qualify for subsidies (most people who will enter the exchanges) will be insulated from these price bumps, because the tax credits are conditioned on a maximum expected contribution.
But this still matters: ACA implementation faces a rockier road in states that aren’t embracing reform. They have less consumer outreach, less facilitation of competition on the exchanges, and less buy-in from local officials. RAND’s results suggest that states forgoing Medicaid expansion might add higher-than-anticipated exchange premiums—and exacerbated adverse selection effects—to that list.
Adrianna (@onceuponA)
