Econintersect: The American Academy of Actuaries has published a report that suggests there will be a problem for those with health insurance in states that do not sign on for the expanded federal Medicaid program that is part of the PPACA (Patient Protection and Affordable Care Act - Obamacare).
The problem? Insurance premium costs for private insurance will go up more if the expanded Medicaid program than if they opt out. States have this option as a result of the Supreme Court decision upholding the PPACA in June.
The court decision said that the federal government can "encourage" states to enter the expanded Medicaid program but cannot "penalize" them for not doing so. The actuaries believe that the government will not punish the opt-out states but market forces will. They say that the low income population excluded from Medicare in the opt-out states will push a demographic with greater health issues into the mandated insurance population pool. This will raise the average premium for the pool.
Another exposure for opt-out states is for employers. This is summarized by an excerpt from the report:
Under the ACA, employers with 50 or more workers are subject to penalties if any fulltime employees receive a premium subsidy for coverage in the exchange. Employees are eligible for premium subsidies only if they don’t have access to Medicaid and their employer does not offer coverage that meets minimum value requirements and is deemed to be affordable to the employees (i.e., less than 9.5 percent of income). In states that opt out of the Medicaid expansion, low-income workers who otherwise might have enrolled in Medicaid might access premium subsidies thereby putting the employer at risk of penalties.
Here is the full press release from the American Academy of Actuaries:
WASHINGTON—14 Sept. 2012—States’ decisions about whether to expand Medicaid coverage or not can have implications for private health insurance plans, including increased premiums, according to the non-partisan American Academy of Actuaries.
The U.S. Supreme Court’s June 28 decision on the Affordable Care Act (ACA) makes the implementation of the ACA’s Medicaid expansion optional for states. Many states currently are considering whether and to what extent to implement the expansion, which would increase Medicaid eligibility to 133 percent of the federal poverty level.
“States need to consider the impact on private plan premiums and on employer penalties as they make their decisions on implementing the Medicaid expansion provisions in the ACA,” said Mita Lodh, member of the Academy’s Health Practice Council.
The Academy today released a Decision Brief, Implications of Medicaid Expansion Decisions on Private Coverage, highlighting how individual state decisions to expand Medicaid coverage could affect private health-care plans. In the brief, the Academy makes the following observations:
- Individual market premiums could increase in states that opt out of the Medicaid expansion, due to health status differences of new enrollees.
- Exchange premiums also may increase because fixed reinsurance subsidies would be spread over larger enrollee populations.
- Basic Health Program decisions by states, pending clarifications from the Department of Health and Human Services, could affect the risk profile of enrollees in an exchange.
- Employers may be at greater risk of penalties in states that don’t expand Medicaid eligibility.
The Decision Brief is part of the Academy’s efforts to provide insights on health reform and ACA implementation to state and federal policymakers and regulators.# # #
The American Academy of Actuaries is a 17,000-member professional association whose mission is to serve the public and the U.S. actuarial profession. The Academy assists public policymakers on all levels by providing leadership, objective expertise, and actuarial advice on risk and financial security issues. The Academy also sets qualification, practice, and professionalism standards for actuaries in the United States.
- What Medicaid expansion means for private plans (Noah Guillaume and Allison Bell, Life Health Pro, 19 September 2012)
- Actuaries: Medicaid Expansion Decuisions Can Affect Private Plans (Press Release, American Academy of Actuaries, 14 Septemebr 2012)
- Implications of Medicaid Expansion Decisions on Private Coverage (Decision Brief, American Academy of Actuaries, September 2012)