What Medicaid expansion means for private plans
By National Underwriter
By Noah Guillaume
The American Academy of Actuaries released a decision brief outlining how states’ expansion of Medicaid could impact private health care plans.
Under the Patient Protection and Affordable Care Act, states have the option to expand Medicaid eligibility to 133 percent of the federal poverty level (FPL). This would effectively extend to 138 percent of FPL because Medicaid eligibility determinations would disregard 5 percent of income.
Among the Academy’s observations in the Implications of Medicaid Expansion Decisions on Private Coverage, the health status differences among new enrollees could increase individual market premiums for states that opt out of Medicaid expansion.
In states that do not extend to 138 percent of FPL, individuals 100 percent to 138 percent of FPL—who otherwise would have been eligible for Medicaid—will have access to premium subsidies. This group can be expected to have higher health care needs than higher-income exchange enrollees.
The Congressional Budget Office estimates that due to higher spending among lower-income enrollees, average individual market premiums will be 2 percent higher than projections made on the assumption that all states would expand eligibility. This estimate does reflect the increase in premiums overall for all states, which means increases would be higher in state that do not expand.
Premiums will be higher early on because of lower per-enrollee reinsurance subsidies. Funding for the reinsurance program is fixed, so a wave of enrollees would mean a lower payment on a per-enrollee basis. A reduction in the reinsurance subsidy as a percent of the premium could exceed that from higher enrollment if average premiums increase because of the greater health costs of new enrollees.
Under PPACA, states can use federal subsidies toward a state Basic Health Program (BHP) for individuals 133 percent to 200 percent of FPL who are neither eligible for Medicaid nor offered employer-sponsored coverage. States can put a federal subsidy toward the BHP that would be 95 percent of the premium and cost-sharing subsidies available in an exchange.
Contracts with private plans or providers at discounted rates can be used in states that expand Medicaid to 138 percent of FPL to develop a BHP for the 138 percent to 200 percent of FPL population. That BHP could then potentially offer richer benefits at a lower cost than plans in the exchange.
States that choose not to expand eligibility would need further federal clarification on how federal exchange subsidies could be used.
Originally published on LifeHealthPro.com