Wednesday, December 09, 2015

Ripples in the ACA risk pool

When a state that initially refused to implement the ACA Medicaid expansion embraces it, that's great news for state residents who were in the so-called "coverage gap" -- earning too little to qualify for subsidized private plans in the ACA marketplace, but denied the Medicaid coverage which the ACA had originally mandated for them, before the Supreme Court rendered the expansion optional for the states.

For another income group, those with household incomes between 100% and 138% of the Federal Poverty Level (FPL), the expansion may be a blessing for some but not all. People in this income range are eligible for subsidized private plans in states that have refused the Medicaid expansion -- but for Medicaid only in states that implement it.

As of the end of the ACA's last "open season" enrollment period in February 2015, 22 states had not yet adopted the law's Medicaid expansion, and one state, Indiana, had just adopted it, effective February 1.  In those states, about one third of enrollees in private health plans purchased in the ACA marketplace had incomes in the 100-138% FPL range and so would have been eligible for Medicaid if their states had embraced the expansion.  They constitute perhaps 15-20% of all enrollees in the ACA private plan plan marketplace.

The marketplace offers a more attractive deal to buyers in this category than to higher income buyers. For those under 138% FPL, the subsidized premium for the benchmark second-cheapest silver plan in their region is capped at 2% of income (e.g., $20 per month for a single person earning $12,000). That silver plan comes with Cost Sharing Reduction (CSR) subsidies-- available with silver plans only -- that raise its actuarial value to 94% -- better than most employer-sponsored plans. That usually translates to a deductible of $0 to $250 and a yearly out-of-pocket maximum of under $1,000. Copays for doctor visits and drugs are usually quite low.

Transitioned to Medicaid, people in this income group will be spared all or close to all of these costs. But they may also have a more limited choice of medical providers.

The transition may also be a mixed blessing for private insurers selling in the state in question.  On the one hand, the risk pool will shrink -- unless it grows enough to offset a loss of up to a third of prior-year customers (as Pennsylvania's private plan market apparently did in 2015). On the other hand, the lost customers will by definition be the lowest-income, and thus perhaps also sicker on average than those remaining.

As for the ACA marketplace as a whole, the slow but steady movement of states from the nonexpansion to the expansion column is one headwind against overall enrollment growth. At present, about 1.5 million subsidized private plan holders would be eligible for Medicaid (and ineligible for private plans subsidies) should their states expand.

For 2016, two states, Montana and Alaska, have newly expanded Medicaid, and one more, Louisiana, has embraced the expansion in principle and should implement it at some point during the year.  In addition, in 2016 New York will become the second state to implement a Basic Health Plan (BHP) for residents with incomes ranging from 100-200% FPL. A BHP is a Medicaid-like public program with very low cost-sharing.  Fully 40% of New York's current private plan enrollees should qualify.

All told, these transitions should pull about 225,000 enrollees out of the ACA private plan marketplace.

In New York, the calculation is straightforward. The state's enrollment report for 2015 tallies 415,352 private plan enrollees. 74% were eligible for premium subsidies, and 54% of them had incomes at or under 200% FPL. That's about 166,000 who should be eligible for the BHP.

In the three new expansion states, a bit of extrapolation is needed to estimate how many current private plan enrollees may be Medicaid-eligible. In March, HHS broke out state enrollment figures by income band, one of which is 100-150% FPL. HHS did not provide figures for those in the 100-138% FPL range, who in nonexpansion states would have been eligible for Medicaid. I calculated last March -- somewhat conservatively, I suspect -- that about 67% of those in the 100-150% FPL range were in the "shoulda been in Medicaid" category (100-138% FPL). For each new expansion state, I've taken that percentage and applied it to CMS's last 2015 enrollment update (to June 30), which reflected considerable attrition. (I'm assuming that attrition was proportionate across all income groups.)  Here are the results:

Louisiana is the nation's poorest state, and as of mid-February, 46% of its enrollees were in the 100-150% FPL range. Applied to the June enrollment figures, that comes to about 65,500, approximately 44,000 of whom should be Medicaid-eligible when the state goes forward with expansion.

In Montana, 32.4% of private plan enrollees were in the 100-150% FPL range, or about 16,000 as of June 30. That suggests about 10,700 Medicaid-eligibles.

In Alaska, 30% are between 100% and 150% FPL, and enrollment as of June 30 was 19,380. A mere 3,500 are likely Medicaid-eligible.

The biggest impact is in New York, proportionately as well as well as in raw count. About 40% of its current private plan enrollees should transition out, compared to about 30% in Louisiana. The base price of insurance in New York is very high, and its marketplace will lose all enrollees who are eligible for the strong CSR available to buyers under 201% FPL (much weaker CSR is available in the 200-250% FPL income band). Time will tell whether the New York market holds up well.

In Louisiana, enrollment has been quite low, attrition  high, and CSR takeup among those eligible for the benefit  very low for a poor state. Just 71% of CSR-eligible enrollees in Louisiana selected a silver plan and so accessed the benefit, versus 86% in comparably poor Mississippi (where, it must be said, attrition was also high). Those in the 100-138% income range -- many of whom probably either never enrolled or dropped coverage -- will probably be better off in Medicaid,  as is probably generally the case for people in that income category.

Other states made this transition in 2014 and 2015. In Pennsylvania, which expanded effective Jan. 1, 2015, nearly half of the state's 2014 private plan enrollees may have had to move to Medicaid, and the process was bumpy. While many may have been double-enrolled for some months, the shakeout appears to have been more or less complete by midsummer.

Nationally, the phased-in Medicaid expansion may actually be good for the private plan marketplace -- if tragic for those in the coverage gap and likely a net negative for those the near-poor left in the private plan market.

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