Assessing 2020 ACA marketplace enrollment? Don't forget Virginia's 2-year Medicaid expansion shakeout

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In assessing total ACA marketplace enrollment for 2020, it's important to keep in mind that the fallout from Medicaid expansion expansion in Virginia continued into a second year.

As I've noted before, that's generally been the case in states that have enacted belated Medicaid expansions after the ACA's core programs launched in 2014.

Marketplace enrollment drops when a state implements the Medicaid expansion (rendered voluntary to states by the Supreme Court in 2012) because the lowest-income marketplace enrollees become eligible for Medicaid -- and therefore no longer eligible for marketplace plans, at least theoretically.

In expansion states, people with incomes up to 138% of the Federal Poverty Level (FPL) are eligible for Medicaid -- and so, not for marketplace subsidies. In states that have refused the expansion (e.g., Virginia until Jan. 2019), eligibility for marketplace coverage begins at 100% FPL.

When states expand Medicaid, is there a multi-year marketplace drain?

Happy New Year to the 200,000 Virginians who have gained Medicaid coverage through the state's Medicaid expansion, which went into effect today. Enrollment began on November 1. ACA marketplace enrollment in Virginia is accordingly down 18%, from 400,000 in 2018 to 328,000 this year. The vast majority of that drop is attributable to the Medicaid expansion, as Virginians with incomes in the 100-138% FPL range, previously eligible for marketplace coverage, are now eligible for Medicaid. [Update, 7/1/20: It's down another 18%, to 269,000 in 2020, while overall hc.gov enrollment was down 1.5%]

I had previously calculated that just shy of 100,000 Virginians who were enrolled in the ACA marketplace as of the end of open enrollment for 2018 would likely be eligible for Medicaid. the enrollment drop attributable to Medicaid is probably a bit more than half that number. That fits a pattern, I think, established in other states that enacted belated Medicaid expansions. Expansion appears to drive marketplace enrollment reductions for more than one year.

Virginia's CSR load should be cut more than in half in 2019

David Anderson makes a valuable point about an after-effect of latter day Medicaid expansions like Virginia's -- that is, expansion following Trump's cutoff of federal reimbursement to insurers for the Cost Sharing Reduction (CSR) subsidies they are obligated to provide to qualifying ACA marketplace enrollees.  

It's this: now that insurers have to price CSR into premiums, Medicaid expansion will reduce premiums for unsubsidized enrollees by removing much of the CSR load.

Virginia — like many other states — had its insurers load the cost of providing CSR into the premiums for silver plans, which are the plans that set the local benchmark from which all premium subsidies are calculated. This led to a significant spike in silver benchmark premiums. Other plans saw significant but far lower premium increases. On average, CSR workarounds led to an extra $960 to $1,040 in premiums for silver plans.

The data shows us that people who were previously eligible for an ACA health plan and will now be eligible for Medicaid under the expansion were the highest per-capita recipients of the cost-sharing reduction subsidies. As these individuals move to Medicaid expansion, the cost of funding CSR through silver premiums will decline.

As it turns out, we know just about how many current Virginia enrollees with CSR will be eligible for Medicaid if their income doesn't change. CMS data shows that, of Virginia's 400,015 enrollees as of the end of Open Enrollment last December, 222,305 obtained CSR. Of those, 120,898 obtained the highest level of CSR, which raises the actuarial value of a silver plan from a baseline of 70% (which is what silver plans without the CSR load would price for) to 94%.

When ACA marketplace coverage is cheaper than Medicaid

In my last post, I noted that thanks to Virginia's decision to expand Medicaid, a bit over 100,000 current enrollees in the state's ACA marketplace (or people similarly situated next year) will be switching over to Medicaid in 2019.  Also, since the Republican-tinged expansion terms include premiums ranging from $1/month to 2% of income for people in the 100-138% FPL, some of these people will actually pay more for Medicaid coverage than they do now for marketplace plans.

David Anderson covered this ground in more detail:

A single 40 year old making 138% FPL who buys the benchmark Silver plan pays 2% of their income in premiums which translates to $28 per month. People who expect to be relatively healthy will often elect to buy the least expensive Silver. The APTC subsidy is fixed so the choice to buy a lower cost Silver plan means the a dollar for dollar reduction in out of pocket premiums. Significant portions of Virginia including greater Richmond, exurban NoVA and central Virginia between I-81 and I-95 have a Silver plan that is at least $28 less than the Benchmark Silver. This means that there is a $0 premium plan available for folks who will now be moving to Medicaid with a 2% premium.

A couple of points of elaboration: first, not everyone in the 100-138% FPL income band (the group that has been eligible for marketplace subsidies pre-expansion) will pay 2% of income. Second, a lot of people in this income range currently pay less than 2% of income but more than $0.  Some have $0 deductibles; some have small ones ($150). Yearly out-of-pocket maximums range from $900 to $2000 -- I imagine maximum OOP at least will be lower in Medicaid.