Marketplace Pulse: Crossing the Bridge to the Marketplace
The Marketplace Pulse series provides expert insights on timely policy topics related to the health insurance marketplaces. The series, authored by RWJF Senior Policy Adviser Katherine Hempstead, analyzes changes in the individual market; shifting carrier trends; nationwide insurance data; and more to help states, researchers, and policymakers better understand the pulse of the marketplace.
During World War I, the federal government extended generous and subsidized life insurance policies to members of the military. As soldiers returned home, maintaining their coverage became a significant operational challenge, since premiums became much more difficult to collect when they could no longer be deducted from military paychecks. Largely due to a lack of address data, the federal effort collapsed and nearly all of the policies lapsed.
A century later, we are grappling with another insurance crisis brought on by a national emergency, where coverage for millions hangs in the balance. The COVID-19 Public Health Emergency, declared in January of 2020, created a host of flexibilities that were designed to remove barriers to healthcare, including the requirement that states cease periodic eligibility redeterminations in the Medicaid program. Since then, Medicaid enrollment has grown to about 95 million, a 30% increase, and uninsurance stands at an all-time low. Nonetheless, states have resumed eligibility redeterminations beginning April 1. We are embarking on a large-scale social experiment for which we are ill-prepared, but from which the consequences will almost certainly be enormous.
The resumption of redeterminations creates what Tradeoffs podcast termed a “treacherous transition,” a logistical challenge of unprecedented levels as roughly 15 million children and adults are estimated to lose their eligibility for Medicaid. Millions of others will have their coverage incorrectly terminated for procedural reasons, creating a costly and time-consuming process of "administrative churn." Federal efforts have been focused on minimizing procedural terminations and providing incentives for states to follow best practices. State performance will critically impact the extent of churn and coverage loss.
The percent of Medicaid enrollees projected to lose their eligibility ranges across states from roughly 10% to 30%, reflecting differences in the economy, population characteristics, and Medicaid eligibility rules. What will become of those who lose eligibility? A little over half are expected to be covered by employer insurance. Many children will move to CHIP. But many others, close to four million by some estimates, risk becoming uninsured.
To minimize coverage loss, the ability to successfully transition members from Medicaid to the Marketplace will be critical. The Urban Institute estimates that approximately one million of those redetermined will enroll in the individual market, yet at least another 1.5 million will be eligible for tax credits but not enroll. Though a sizable fraction of those who risk becoming uninsured will be eligible for premium tax credits on the Affordable Care Act Marketplace, historical evidence suggests that take-up will be low. In addition to the challenge of outreach, the transition to monthly premium payments is a source of friction, so much so that some states have contemplated creating a Basic Health Plan, which generally has no premiums and very little cost-sharing, as an alternative.
Despite this unpromising history, there are intensified efforts to create a different outcome. In states with their own insurance Marketplaces, exchanges and Medicaid agencies are sharing data so that exchanges can reach out to members losing coverage. Those states who have integrated the eligibility and enrollment systems in Medicaid and the Marketplace have a particular advantage. Navigators and other advocates are assisting with outreach. CMS will also target those that lose Medicaid coverage and are eligible for coverage in the Marketplace. The potential for movement to the Marketplace is thought to be greater in expansion states, where Marketplace enrollment growth has been flat in recent years, perhaps due to the effect of continuous coverage. Expansion states in general are more likely to follow administrative practices designed to minimize coverage loss, which may facilitate more successful transitions to Marketplace coverage.
Finally, managed care organizations (MCOs) may also be able to play a role. MCOs have benefited greatly from the continuous coverage requirement, which has boosted enrollment in their plans to historic levels. Facing the prospect of significant membership loss, plans are incentivized to minimize churn, and are in many cases collaborating with state agencies and others in outreach efforts to members. Health insurers have even created a coalition to promote coverage retention.
Many Medicaid MCOs also participate in the Marketplace. In fact, as of Q1 2022, approximately half of Medicaid members were enrolled in an MCO which also offers a qualified health plan in their state. Being able to stay enrolled in a plan from the same insurer may increase the likelihood of retaining coverage, although this is far from certain. There is also no guarantee that this plan will be the consumer’s best choice, although it may offer the best consistency in provider networks. Yet the possibility does provide an incentive for plans to be more involved with outreach, since membership retention is at stake, and a larger transition will likely be more advantageous from a selection perspective. Elevance recently announced their readiness to ensure “seamless transitions” between their Medicaid and Marketplace coverage options. In their 4Q 2022 earnings call, Centene reported that it expected 200,000-300,000 members to move from their Medicaid to their Marketplace plans. While this estimate is a very small share of the company’s approximately 14,500,000 Medicaid enrollees, it would increase their Marketplace enrollment by about 10%.
After World War I, the federal effort to maintain returning soldiers’ life insurance coverage was overwhelmed by logistical difficulties. Fearing a permanent public role in the provision of insurance, life insurers cheered the government’s failure. Today, our public health insurance programs are largely privatized, and the government is the largest purchaser of health insurance. The co-dependent relationship between government and insurers does not always bring harmony. But unlike Medicare Advantage, where recent proposals to revise risk adjustment have put health plans and federal regulators at odds, public and private incentives are largely aligned in the case of Medicaid redetermination. The concerted efforts of state and federal officials, advocates, and health plans will hopefully yield a retention of coverage that defies both historical experience and our most dire predictions about the future.
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