Friday, April 10, 2015

Why did outdraw the state exchanges in 2015?

Avalere Health has found, in a study of 2015 ACA private plan enrollment data, that outperformed state exchanges on two measures: retention of 2014 enrollees and enrollment of new customers.

To explain the lower retention in states that ran their own exchanges, Avalere floats the possibility* that those states (all but one of which expanded Medicaid) may have had more churn into Medicaid than states using (where over 70% of enrollees were in states that refused the Medicaid expansion). I'll cite some evidence below that many states that expanded Medicaid did not have low retention in the private plan market.  But I do think that Medicaid enrollment may partly explain the second discrepancy -- why state-based exchanges had lower private-plan enrollment growth in 2015 than states on
Avalere found that states using retained 78% of their 2014 private plan enrollees in 2015, compared to 65% on state-based exchanges (SBEs), and that states expanded private plan enrollment by 61%, versus just 12% on SBEs.  It's important to note that many state-based exchanges (D.C., Idaho, Maryland, and Massachusetts) and two hybrids using (Nevada and Oregon) did not report the relevant data and are not included.**

It would be strange if Medicaid expansion did not affect private plan enrollment rates. States that expanded Medicaid have a smaller pool of potential private-plan enrollees to draw on. In expansion states, eligibility for subsidized private plans begins at 138% of the Federal Poverty Level (FPL); in states that refused the expansion, eligibility begins at 100% FPL.

Again, Avalere suggests that much of the dis-enrollment in private plans may be attributable to some 2014 enrollees having over-estimated their income and being found eligible for Medicaid in 2015. Though Avalere did not suggest as much, it seems obvious that such transition from private plans to Medicaid would happen more in states that embraced the ACA's Medicaid expansion.

To test that hypothesis, there's an important control group: States using that expanded Medicaid.  But those states (excluding Nevada and Oregon) show slightly better retention than the overall average. Here is the performance of that group:

%  2014 enrollees retained
Enrollment growth 2015
New Hampshire
New Jersey
New Mexico
West Virginia
Avg - expansion
Avg - total
Avg - SBE

While the states that expanded Medicaid do not show low retention numbers, they do show markedly lower private plan enrollment growth than the overall average for states on the federal exchange. Private plan enrollment growth in 2015 is especially low for the three states marked in red above, all of which expanded Medicaid after the 2014 open season concluded.

The private plan enrollees in the 100-138% FPL range, eligible only in nonexpansion states, are the lowest-hanging fruit.  As I've noted previously, they massively boosted the ranks of private-plan enrollment in non-expansion states, accounting for almost a third of enrollment in those states, which in turn accounted for three quarters of total private plan enrollment on  In all, according to my estimate, just under 2 million enrollees on had incomes in the 100-138% FPL range. The loss of that group in 2015 in Michigan, New Hampshire and Pennsylvania may have affected enrollment growth in those states.

As Avalere found in a separate study, subsidized private plan takeup was much higher among the lowest-income group of eligible uninsured Americans than takeup in even modestly higher income groups. Avalere calculated that fully 76% of uninsured Americans with incomes in the 100-150% FPL range who were eligible for subsidized private plans enrolled in such plans. versus just 41% in the next-highest income band and rapidly diminishing percentages in higher income groups. In states that refused the Medicaid expansion, more than two thirds of buyers in the 100-150%  FPL range (1.9 million out of 2.8 million) would have been eligible for Medicaid if their states had accepted the expansion.

Those in the lowest eligible income band are not only probably the most desperate for coverage -- they also can get coverage on more favorable terms than those in higher income groups. For buyers under 138% FPL, premiums for the benchmark silver plan are capped at 2% of income. Those silver plans come with Cost Sharing Reduction (CSR) subsidies that raise the actuarial value to 94% -- better than the vast majority of employer-sponsored plans in the U.S., and better than the highest-level platinum plans on the exchanges.  Above 138% FPL, premiums rise steadily, while CSR weakens at 151% FPL and fades to almost nothing at 201% FPL. It's therefore not surprising that private plan enrollment growth is lower in states that offer Medicaid to those in the 100-138% FPL range.

There are doubtless other reasons why state exchanges underperformed on these measures. Severe technical dysfunction in both 2014 and 2015 rendered the results in many state exchanges anomalous -- as did existing state programs and relatively low uninsured rates in Hawaii, Massachusetts and Minnesota. The fact that four out of thirteen state-based exchanges (and two hybrids) are necessarily excluded from Avalere's results makes any conclusions all the more tentative. Still, I think it's clear that private plan enrollment growth is more difficult in states that have expanded Medicaid.

UPDATE, 4/13: I should have noted Avalere's assertion that in California, 200,000 QHP enrollees shifted into Medicaid.  California accounts for about half of all QHP enrollment in state-based exchanges, so its Medicaid churn alone is significant.  The shift into Medicaid accounts for half the state's churn: 1.4 million were enrolled in QHPs as of May 2014, and 1.0 million renewed this March.

On the other side of the equation, Pennsylvania, which expanded Medicaid effective Jan 1, 2015, apparently has had too little transition of QHPs into Medicaid. Last fall, state officials estimated that 90,000 QHP enrollees were eligible for Medicaid, but renewal totals indicate that only 30-40,000 of those enrolled in late 2014 had dis-enrolled by March.

* Avalere also implies some skepticism about this explanation. The report states:
It is unclear why state-based exchanges saw higher year-over-year attrition among their
enrollees. One possibility is that state exchanges had more enrollees who over-reported income in 2014. For instance, California shifted about 200,000 exchange enrollees into Medicaid for 2015. However, it is unclear why state-run exchanges would have disproportionately experienced such corrections.
That last caveat implies, it seems to me, the comparison I have laid out here, between Medicaid expansion states on and off

**Avalere also classifies New Mexico as an SBE despite the fact that it used the platform in 2015 while retaining administrative control.

This post has been updated, for clarity and to note Avalere's caveat above.

Related: How red states propped up

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