• Not expanding Medicaid could lead to premium hikes on state exchanges

    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)

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    • I know there are many people who are currently (i.e., before the expansion) eligible for Medicaid, but are not enrolled. I’m curious: how does that vary by state? I’ve heard that one reason for the opposition to the Medicaid expansion is that it will increase the uptake of those already eligible (with a 50% state share). I know it’s a bit cynical of me, but I wonder whether opposition to the expansion is associated with states where implementation of current health and social programs for the poor also “faces a rockier road.”

      • Actually uptake of Medicaid by those already eligible is likely to increase somewhat in all states whether they expand Medicaid or not. This is because the ACA also institutes simplified eligibility and enrollment standards based on adjusted gross income that apply to people currently eligible as well as those who would gain eligibility with the expansion.

        http://www.cbpp.org/cms/?fa=view&id=3939

        Along the same lines it is expected that the ACA enrollment publicity will make more people aware of Medicaid and more likely to sign up, for example if they contact a navigator for help with getting insurance on the exchange and the navigator informs them about Medicaid.

    • The “automatic” enrollment of those eligible for Medicaid into Medicaid is a bit troubling – see Nicole Hopkins WSJ piece on her mother. It would be a mistake – I think – to assume that all of those eligible for Medicaid want to be enrolled.