Premium increases lead to Medicaid enrollment drop off
Increases in premiums resulted in beneficiaries dropping out of Michigan’s Medicaid program, according to a new working paper published in the National Bureau of Economic Research.
The majority of lower-income adults who left from the state program were healthy, implying that bumps in premium encouraged adverse selection among the state’s Medicaid managed-care plans, the study said. Every dollar increase in monthly premiums among members with below-average health spending led disenrollment to increase by 0.82 percentage points.
While fewer people enrolling in Medicaid might sound like it would save taxpayer dollars, since they are technically paying to care for fewer lives, an increase in the number of people moving in and out of Medicaid increases the administrative costs needed to track previous enrollees, introduces adverse selection among managed-care companies, and could result in an increase in taxpayer dollars needed to fund subsidized charity care programs for the newly uninsured, said Kara Cliff, lead researcher for the study, who is now a professor at the University of Illinois at Chicago.
“If you charge people premiums, they will disenroll from insurance, regardless of if those premiums are fairly small in dollar amounts and if those premiums are enforceable,” said Cliff.
Researchers from the University of Michigan analyzed administrative data from the state’s Department of Health and Human Services to determine how premium payments impacted churn among adult Medicaid enrollees from 2014 to 2016. CMS mandated the study—Michigan was one of the first states with a Republican governor and legislature to expand Medicaid under the Affordable Care Act, and received a federal waiver that allowed officials to charge some Medicaid members a premium, with the aim that having individuals pay up to 2% of the amount of their plan would “encourage[sic] enrollees to take responsibility for their health and care costs,” according to the study. This paper represents just one of a series of ongoing analyses by the University of Michigan.
Cliff was unsure how CMS would use the results, which found that imposing a premium increased disenrollment among those with below-average health spending or no chronic disease by 13 percentage points over the time period studied. These individuals left Medicaid even though they could not, technically, be kicked off the program for not paying their premiums, and could reduce their costs by completing certain preventative care appointments, the study said. CMS was unable to respond to an interview request.
“If they won the lottery, they could have those earnings garnished, and the same thing with tax refunds,” Cliff said. “But otherwise, people couldn’t lose their insurance if they didn’t pay the premiums, and they couldn’t be barred from health services. There’s not a lot of enforcement. And yet, still, people dropped their insurance.”
While researchers did not study how a decline in healthy enrollees impacted the managed-care companies that run Michigan’s Medicaid program, she said it could destabilize these insurers, since they were suddenly responsible for a much sicker population than their original risk scores illustrated. Michigan’s managed-care companies receive a set rate per member per month from the state to care for their members. Any care that exceeds that fixed rate represents a cost the insurer must swallow. The study said that healthy people leaving the Medicaid program led to an approximately 1% drop in total expansion program revenue.
“These losses are not trivial; Michigan builds margins of about 2% into their capitation rates across plans,” researchers wrote.
McLaren Health Plan does have a “a lot” of churn among its younger, healthy Medicaid expansion members, said Tasha LaJeanna Oliver, director of the integrated delivery system’s Medicaid programs. Most of its enrollees are between the ages of 18 to 24, do not have chronic conditions and normally do not leave their coverage for more than six months, she said. When they do drop, it’s usually because of a life change, like losing a job, or because they forgot to pay their bill. To help retain these members, McLaren now allows individuals’ premium costs to be drawn directly from their bank accounts and is looking into restructuring its marketing and outreach programs. LaJeanna Oliver said she wasn’t sure about the exact rate of churn among the Grand Blanc-based health insurer’s members.
“Membership is tied directly to financial outcomes and things like that, but that churn for us is somewhat minimal. So, we have not noticed a large financial impact in regards to that,” LaJeanna Oliver said.
She added that, during the COVID-19 pandemic, Medicaid expansion membership has grown 30% year-over-year to approximately 90,000 members. The pandemic has underscored the importance of health insurance for these younger Medicaid members who may have previously lacked the forethought to pay for insurance and figured “I’m healthy, I’m invincible,” , LaJeanna Oliver said.
Their change in perspective could save taxpayers money long-term.
The study found that disenrollment of healthy enrollees leads to an increase in individuals taking advantage of safety-net providers, conditional coverage or enrolling in Medicaid after a health scare. All these moves could increase the long-term costs on taxpayers, said Cliff, the report author.
“The more churn you have, the less likely people are to get preventive care and they have trouble with continuity of care, which we know is important. And you have higher administrative costs, trying to track all these people as they go in and out,” Cliff said. “Even if you say, ‘Well, look, you’re not losing the sick people,’ it doesn’t mean that those people who you’re losing wouldn’t benefit from being covered by health insurance.”
As states consider expanding Medicaid, Cliff said lawmakers should realize that imposing premiums will limit their program’s reach. She said the study also has implications for other insurance markets that target low-income populations, like the ACA exchanges. Because members studied were sensitive to even small premiums charged, Cliff said that subsidies in the individual market would need to cover nearly all premium costs if they wanted to maintain enrollment among healthy beneficiaries. This finding is particularly relevant as lawmakers mull making the enhanced ACA subsidies permanent, she said.
“If you want to make sure that the program reaches the targeted population, there does need to be substantial subsidization of the premium amounts,” Cliff said.