Federal study finds Medicaid expansion improves individual risk pool, reduces HIX plan premiums

The HHS analysis uses 2015 data on HealthCare.gov plans and enrollment to assess how Medicaid expansion affects Marketplace premiums. It controls for differences across states in demographic characteristics, pre-ACA uninsured rates, health care costs, and state policy decisions other than Medicaid expansion, finding a 7 percent difference in Marketplace premiums holding these factors fixed.

States that expanded Medicaid coverage under the ACA have Marketplace risk pools comprised largely of individuals with incomes above 138 percent FPL, while non-expansion states have Marketplace risk pools that include more individuals below 138 percent FPL. Because lower-income individuals on average have poorer health status than those with higher incomes, a state’s decision not to expand Medicaid affects the Marketplace risk pool and, ultimately, Marketplace premiums. Issuers have noted that Medicaid expansion is one way that states can strengthen their Marketplaces.

Source: Medicaid expansion lowers Marketplace premiums by 7 percent

The upshot of this analysis is the actuarial health of the statewide individual health insurance risk pools would be improved taking into account the correlation between socio-economic status and health status and removing households earning between 100 and 138 percent of federal poverty from the pool by making that cohort eligible for expanded Medicaid.

Given that some health plan issuers have withdrawn from state health benefit exchange marketplaces citing lower population health status — and higher risk — than anticipated, it would be interesting to see if there’s a correlation between states that opted not to expand Medicaid eligibility and states where plans have exited exchanges for plan year 2017.


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

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Frederick Pilot

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