Tuesday, August 18, 2015

The Urban Institute's Medicaid expansion proposal could help the ACA private plan market

The Urban Institute has released a report* proposing that the federal government spend an extra half-trillion dollars over ten years to boost the affordability and uptake of the Affordable Care Act's health insurance offerings. The core premise is that for far too many uninsured Americans, private plans offered on ACA exchanges are either unaffordable or offer too-skimpy coverage.

The headline proposal is to boost premium and cost-sharing subsidies for the private plans offered on ACA exchanges.  I'd like to spotlight a side effect of a secondary proposal, designed to entice some of the 21 states that have thus far refused the ACA Medicaid expansion to embrace it. It's this:
Although some of the currently nonexpanding states may choose to participate in the future, many others may continue to refuse to do so, maintaining the tremendous inequity that provides federal financial assistance to some people with incomes at or above the federal poverty level but denies assistance to many adults who are actually poor. One option to address this hole in the ACA’s reach is to give states the option of expanding Medicaid coverage up to 100 percent of FPL rather than requiring them to expand to 138 percent of FPL if they expand at all.
Urban estimates the cost of this change at $100-200 billion over ten years. The financial enticement to states is that while they'll ultimately be on the hook for 10% of Medicaid expansion costs, the federal government pays 100% of private plan premium subsidies. Extending Medicaid eligibility up to just 100% FPL rather than to 138% FPL will reduce the number of new enrollees.

The side effect I want to stress is this: in nonexpansion states, residents with incomes in the 100-138% FPL are currently propping up the private plan market. While we don't know precisely how many exchange customers are in that range, HHS did report in March that in the 20 nonexpansion states using Healthcare.gov, fully 44% of buyers** -- about 2.8 million as of the March report -- had income between 100% and 150% FPL.  My own estimate is that about two thirds of them have incomes below 139% FPL and so would be eligible for Medicaid if the their state embraced the expansion as it's currently constructed. Adjusting for the attrition recorded in a June CMS update (mainly reflecting those who had never paid a premium) , that suggests about 1.6 million current enrollees who would be eligible for Medicaid if their states accept the expansion -- or not, if Urban's proposal were put into effect and some states embraced it. That's about a third of private plan enrollment in nonexpansion states, and about 15% of total private plan enrollment on ACA marketplaces nationally.

In Florida alone, approximately 750,000 private plan enrollees have incomes in the 100-150% FPL range, and probably 500,000 of them would be Medicaid-eligible if the state were to accept the expansion. In Texas, about 390,000 enrollees are between 100-150% FPL,and so perhaps 260,000 would be Medicaid-eligible.*** Generally, somewhere north of 80% of private plan buyers in this income range select silver plans and so access Cost Sharing Reduction subsidies that raise the actuarial value of their plans to 94%. That leaves them paying more out of pocket than they would if enrolled in Medicaid but paying far less than most people with private insurance. Some states with high percentages of low-income private plan customers also had high no-pay rates -- e.g., Mississippi, which lost 23% of its enrollees between the end of open season in mid-February and March 31. Attrition in Texas was also high, 20%, versus 13% nationally. In Florida, it was a moderate 11%.

As Urban points out, private plan enrollment on ACA exchanges has significantly lagged ACA projections, and many people who are engaged in or studying the law's implementation worry that "actual enrollment time path for marketplace plans may already be leveling off."  Slowing what will probably be a gradual migration of low-income private plan enrollees into Medicaid would give the private marketplaces some breathing room.

* "After King v. Burwell: Next Steps for the Affordable Care Act." By Linda J. Blumberg and John Holahan. August 2015

** HHS reported that 47% of buyers in nonexpansion states for whom income data was available were in the 100-150% FPL range. Since almost all of the 500,000-odd hc.gov customers  for whom income data was unavailable presumably earned too much to qualify for subsidies, I'm citing the percentage of all customers (including those who did not report income) who re in the 100-150% FPL income band.

*** These estimates account for the attrition recorded in March, assuming the same percentages of buyers in this income range post-attrition.

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