ACA Medicaid Enrollees Threaten State Budgets

By Josh Fisher, Esq., Manager of State Issues

While many have focused on the difficulties facing people seeking to enroll through Federally Facilitated Health Benefit Exchanges, state-run health benefit exchanges have been able to enroll large numbers of individuals seeking care. However, the relatively large number of enrollees may mask an enrollment issue for the states that could become larger once the Federally Facilitated Exchanges come on line.

On October 21, the Washington Health Benefit Exchange announced that the Washington Healthplanfinder, the health insurance marketplace in the state of Washington, received over 56,000 applications from state residents and that 35,000 enrollments were completed since the exchange launched on October 1. In the press release, Dorothy Teeter, Director of the state Health Care Authority, said the state has seen over 30,000 enrollments for Medicaid-eligible residents and approximately 2/3 of these enrollments resulted from Medicaid expansion.

Impressive numbers to be sure, but what do they really mean? The Washington Health Benefit Exchange provided the following breakdown on the 35,000 enrollments:

Enrollments Completed

4,529               Qualified Health Plans

19,658             Medicaid Newly Eligible/Coverage January 1

11,341             Medicaid/Immediate Coverage

35,528             Total

These numbers show that out of 35,000 enrollments, less than 5,000 were seeking private insurance. The overwhelming majority (87%) were either Medicaid enrollees who were already eligible for coverage or those newly eligible under the expansion provided for in the Affordable Care Act. In Connecticut, Access Health CT released figures showing that more than half of the people who have signed up for coverage through the state’s health insurance exchange qualified for Medicaid. Not all states have released these detailed numbers. For example, California, and the federal government, will release more detailed comparisons in November. However, California is expected to start with 600,000 Medicaid enrollees when the state’s Low Income Health Program is merged into the state’s Medicaid expansion in 2014.

Under the Affordable Care Act (ACA), eligibility and enrollment for Medicaid is required to be handled through the exchanges. Medicaid expansion under the ACA was originally envisioned as a nationwide expansion with income eligibility guidelines set to increase to 138% of the federal poverty level effective January 1, 2014. After the Supreme Court’s June 2012 ruling on the ACA, Medicaid expansion became optional for the states. Today, approximately half the states have either decided to expand or are actively considering expansion.

Beginning in 2014 coverage for the newly eligible (anyone not previously eligible in their state) will be fully funded by the federal government for three years. It will phase down to 90%, starting in 2017. The federal government will provide billions in funding to the states that moved ahead with the Medicaid expansion. But what about those Medicaid enrollees that existed before the expansion and are not newly eligible?

All states, regardless of whether they opted to enact expanded eligibility levels, will experience increases in enrollment and costs tied to increased participation among those currently eligible for Medicaid as a result of enrollment simplification and coordination with the new exchanges. However, expansion is not what will drive the costs associated with more currently eligible Medicaid enrollees. States will be required to pay the additional administrative costs as well as the higher share of coverage for eligible citizens outside the expansion who are not now enrolled but who would likely do so after the Affordable Care Act’s individual mandate goes into effect in 2014. While states will continue to receive their standard federal contributions for “traditionally eligible” populations this amount differs from state to state and is always lower than the 100% matching offered under the ACA for the newly eligible.

The issue is clear in Washington state, as the number of currently eligible Medicaid enrollees is far more than double the totals of those seeking private insurance. Bloomberg recently pointed out that the ratios in Kentucky and Oregon are similarly high. The number of currently eligible Medicaid enrollees accessing benefits through the exchanges will be a key factor in state budgets and federal implementation issues as we move into 2014.

Non-expansion states are facing a surge of Medicaid enrollees and will continue to have large uninsured populations. Both categories will contribute to increased state spending. The resulting fiscal pressures will compel many non-expansion states to accept expansion and the associated federal dollars that come with it. Last week, Ohio Governor John Kasich (R) took extraordinary measures to expand Medicaid over opposition from the General Assembly. Pennsylvania Governor Tom Corbett (R), who previously opposed expansion, is now pursuing a plan to accept federal dollars. Additionally, New Hampshire will begin a special session November 7 to explore expansion.  The number of states seeking expansion in 2014 will increase as implementation of the ACA moves forward.

***

Josh Fisher is Manager of State Issues. His work at Stateside Associates has given him an intimate knowledge of the legislative process in all 50 states. He works with clients on a wide range of state and local government affairs issues and was most recently Manager of the Legislative Information Division at Stateside Associates.

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