When stripped of emotion and hyperbole, the debate about repealing and replacing the Affordable Care Act (ACA) is fundamentally about how to stretch limited funds to offer health care to two populations in need: the poor, who receive health care through Medicaid, and the “near-poor,” who were frequently without coverage prior to the ACA’s enactment. While millions of the near-poor remain uninsured today, six out of 10 limited-income individuals who purchased health care through the ACA’s health insurance Marketplaces were uninsured prior to the ACA. It is this near-poor and recently insured population, and how to cost-effectively provide health care for them, that is the focus of this post.
Many insurers have ably managed their sicker- and poorer-than-expected Marketplace membership by borrowing from the playbook of the most similar market, Medicaid. In short, we believe that the “Medicaidization” of the Marketplaces is a necessary and positive trend, and we remind policy makers that regardless of legislation or regulatory change, health plans must employ the Medicaidization playbook to well-serve a population that both parties believe needs coverage.
Health insurance Marketplaces—the centerpiece of the ACA—provide health insurance in government-refereed individual and small-group markets. However, health plans offering coverage through Marketplaces have been confronted with challenges. Enrollment is roughly 12 million, far behind original Congressional Budget Office projections of 21 million by 2016. This is largely because fewer employers than expected dropped employee coverage after the law passed and because many younger and healthier people have chosen to remain uninsured or covered by their parents’ insurance. As a whole, Marketplace enrollees are sicker and more costly than expected, and more than 80 percent receive means-tested subsidies to buy down some of their insurance costs. Furthermore, lawsuits and congressional actions have hobbled the ACA’s risk mitigation programs and threaten its subsidies. As a result, several health plans left the Marketplaces in 2017 in many states, and at least one—Humana—will exit entirely in 2018.
While the struggles of the ACA-reformed markets and the insurers that operate within those markets are well-documented, there have also been some success stories. Medicaid-focused health plans, as well as commercial plans that adopted tactics common in the Medicaid market, have performed at near break-even or better while serving the near-poor population in the Marketplaces. The relative success of Medicaid-focused plans in the Marketplaces contrasts with the struggles of national for-profit insurers and has led to the Medicaidization of the Marketplaces.
The term “Medicaidization” is not new to this post. It has been used by others, sometimes with a negative connotation. So it is helpful to define the term more precisely. Medicaidization, as used here, describes a set of practices—from sensitivity to sociocultural issues to utilization management—that have evolved to serve the Medicaid population. Because of socioeconomic disadvantage and poor health, this population responds to its health care needs very differently than other populations. However, the term “Medicaidization” belies the fact that health plans beyond those that focus on Medicaid are capable of deploying these same practices—such as several Blues and provider-owned plans—as described below.
The Medicaidization Playbook
There are elements of the Medicaidization of the Marketplaces that benefit the near-poor enrollees who participate in Marketplace health plans. We discuss the most prominent of them below.
Lower Cost For Enrollees
As a group, Medicaid-focused health plans have the lowest premiums on the Marketplaces. Research by Jon Gabel demonstrates that nationwide, the average premiums offered in 2016 by Medicaid plans (for a 40-year-old nonsmoker) were lower than those offered by CO-OPs, national commercial plans, and Blues plans by a range of $9 to $32 per month. The Urban Institute found that competition from a Medicaid-focused plan in the Marketplaces is associated with lower rates of premium growth. McKinsey has also documented that Medicaid-focused plans are frequently the lowest-cost plans on the Marketplaces.
Thirty-eight percent of Marketplace consumers had a Medicaid-focused plan as the lowest price plan—the single largest proportion by carrier type—with Blues plans coming in next, offering the lowest-price silver plan for 29 percent of consumers. McKinsey also documents that median Medicaid-focused plan premiums rose only 6 percent heading into 2017, while premiums for the Marketplaces as a whole increased by 22 percent. In a market dominated by price-sensitive, near-poor enrollees, lower premiums are critically important.
Reduced Impact Of Churn
For four consecutive years, the percentage of Marketplace plans that also offer Medicaid coverage has hovered at just above 40 percent nationwide, with varied consistency at the county level across states. In 2017, 44.3 percent of Marketplace plans operate Medicaid managed care organizations in the same state where they participate in the Marketplace. The continuity of serving both markets is important for several reasons. Research by Benjamin Sommers showed that in 2015, nearly 25 percent of low-income enrollees in Texas and Arkansas experienced changes in coverage. Health plans that operate in both Medicaid and the Marketplaces are able to coordinate care and maintain provider continuity as enrollees make these changes.
This continuity is particularly important for families with members in different markets, such as children who qualify for Medicaid or the Children’s Health Insurance Program whose parents have Marketplace coverage and anyone with an established doctor-patient relationship whose treatment is at risk if networks change. The Sommers study showed that nearly one in five people experiencing churn had to change doctors due to changing coverage, about one in six had to change prescription medication, and more than one in three skipped doses or stopped taking certain medications due to their coverage changing. Federal policy makers have recognized the value of health plans maintaining members as they transition between markets by loosening marketing rules for health plans that operate across markets. Per 2016’s Medicaid managed care regulation, Medicaid plans that operate in Marketplaces are permitted to market their Marketplace products to Medicaid beneficiaries as they transition between coverage types.
Customized Interventions
Medicaid-focused plans have learned to address the needs of people with low incomes by addressing social determinants of health. These health plans are often leaders in initiatives that focus on social determinants that fall outside the usual confines of covered health benefits, such as job training, housing supports, education, and food security. From providing donations for supportive housing for the homeless to delivering food packets to patients who may heal faster with a nutritional intervention, Medicaid-focused plans have learned that to serve low-income populations successfully, they must offer services outside the traditional boundaries of health care.
In its role of overseeing the ACA and most of the Marketplaces, the Centers for Medicare and Medicaid Services (CMS) recently convened two “Innovations Forums,” which called out best practices of particular Marketplace health plans. The best practices chosen by CMS—including accountable care models, disease-specific care management programs, community outreach to non-English speakers, and debit cards for goods and services that promote healthy living—are particularly appropriate for near-poor populations. The health plans selected to present at the Innovations Forums—Aetna, Blue Cross Blue Shield of Florida, Blue Cross Blue Shield of Massachusetts, CareSource, Centene, Highmark, Horizon Blue Cross Blue Shield, SelectHealth, UPMC Health Plan—tilt heavily toward Medicaid and Blues plans.
Commitment To Local Markets
Marketplace withdrawals by national, for-profit carriers have generally been prompted by losses and disappointment with the ACA risk mitigation programs that did not cushion losses as expected. This year’s pullouts resulted in a significant drop in participation in the Marketplaces. In 2017, one-third of US counties, serving roughly 20 percent of Marketplace enrollees, have only one carrier offering products.
However, because of their community presence, Medicaid and Blues plans remain—even in the most profit-challenged states—as the national commercial carriers have withdrawn. In fact, a recent evaluation of health plan successes and failures in the Marketplaces found a positive correlation between plans with experience in Medicaid managed care and remaining in the Marketplaces to date. Policy makers will want to consider ways to keep these local carriers in the Marketplaces to avoid “empty shelf” scenarios going forward.
Financial Performance
In total, insurers have lost several billion dollars from participating in the Marketplaces. But because state Medicaid programs generally pay less for care than employers or Medicare, Medicaid-focused plans operate on a low-cost chassis, permitting them to weather the difficulties of the sicker-than-expected Marketplace population. In the first year of Marketplace operation, Medicaid-focused plans experienced smaller losses than all other carrier types except provider-led plans—with losses totaling 2.9 percent compared with a market aggregate loss of 4.8 percent.
Criticisms Of Medicaidization
There are criticisms of the Medicaidization of Marketplace plans—particularly regarding lower provider payments and narrow provider networks. Some providers are concerned that the lower payments they receive from Medicaid-focused plans (compared to commercial plans) will, at some point, become unsustainable if applied across a larger population. While this may be a valid concern in some cases, it is ultimately a question that the market must sort out. Just as carriers choose to participate in insurance markets, providers choose to participate in health plan provider networks.
A more common complaint regarding Medicaid-focused plans is that they have narrow networks. Research by NORC, however, suggests that the Medicaid plan provider networks in the Marketplaces are less likely to be narrow than the networks of national for-profit plans (18.0 percent of Medicaid plans had narrow networks versus 20.5 percent of for-profit plans). Meanwhile, research on California plans by Simon Haeder and colleagues suggests that concerns about narrow networks may be misdirected. They note that plans with a narrow network do not have lower quality scores than those with a broader network. Despite concerns about commercial plan networks narrowing toward Medicaid norms, we do not have evidence that enrollees are disadvantaged by this trend.
Looking Ahead
It is hard to know precisely how the ACA “repeal and replace” debate will end, but if the GOP discontinues Medicaid expansion, the post-ACA individual market risk pool will even more closely resemble the Medicaid market, as many of the 11 million people slightly above the poverty line will come into the individual market for coverage. While GOP-favored products such as health savings accounts may emerge as a new way to finance health care for some of the near-poor, they will only be successful if they are administered with the “Medicaidization” competencies that we have noted above.
A GOP-reformed post-ACA individual market would likely include a greater diversity of products—perhaps featuring the return of limited-benefit products that were noncompliant with the ACA’s coverage rules. There could be high-risk pools for people with significant long-term illnesses. But this remade market would still be dominated by near-poor consumers with socioeconomic barriers, seeking quality, affordable health care from trusted local brands. The carriers that ultimately thrive in this market will not all be Medicaid-focused health plans. Blues and some provider-based plans will succeed, and purveyors of new products may find market niches as well. But they will do so largely by working from the Medicaidization playbook. Policy makers will be wise to consider the importance of these successful practices, both today and in a possible post-ACA individual market, and craft policies that capitalize on them.
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