To minimize the disruption of health insurance churn, particularly for low-income people, state policymakers should take action to ease enrollment transitions between Medicaid and marketplace coverage.
Strengthening Health, Affordable Care Act, Health, Health Care Costs, Health Coverage and Access, Poverty+3 More Pipe Repair Rubber Balloons
Associate Director, State and Local Government Affairs
Health insurance churn—transitions between insurance types or out of insurance—occurs frequently in the United States’ multipayer health system. Voluntary and involuntary life events such as household composition changes, income fluctuation, premium nonpayment, and administrative errors can all affect an individual’s health insurance eligibility and result in them transitioning between coverage types or becoming uninsured.1 In 2015, 25 percent of the U.S. population gained, lost, or changed their source of health insurance coverage. Such coverage losses and disruptions can impede health care access and lead to poorer health outcomes and increased financial burden.2
While consumers across all types of insurance experience churn, Medicaid enrollees are most likely to be affected.3 In 2018, 8 percent of Medicaid and Children’s Health Insurance Program (CHIP) beneficiaries disenrolled and reenrolled in the program within a year.4 This churn compounds the access and affordability barriers already facing the Medicaid population, further contributing to periods of uninsurance, poor health outcomes, and delayed care.5 Indeed, churn in the Medicaid program not only affects enrollee health, but has also been linked to additional administrative costs and less predictable expenditures for state agencies. A 2015 Health Affairs analysis estimated that the cost to Medicaid is between $400 and $600 for one enrollee churning in a 12-month period.6
Given the proximate income eligibility threshold between Medicaid and subsidized marketplace coverage, adults with incomes close to the Medicaid threshold frequently churn between the two. As states seek to improve access to coverage, they should prioritize policies that successfully build bridges to private marketplace coverage for individuals who lose Medicaid eligibility—particularly low-income residents facing affordability barriers.
This report first examines the causes, frequency, and implications of churn among the Medicaid population, then discusses the suitability of marketplace coverage for low-income Americans. It concludes with policy recommendations for states to facilitate successful transitions between the coverage programs—highlighting efforts in Minnesota, New York, Oregon, California, Rhode Island, and Nevada—including:
Propensity for enrollee churn is baked into the Medicare program design. The complex process for determining eligibility and the unique needs and circumstances of the population served by Medicaid open many paths for enrollees to cycle through periods of eligibility and ineligibility for coverage, which can lead to negative health consequences for the individuals the program serves.
As a state-administered program, Medicaid eligibility rules depend on the state an individual lives in. However, in order to receive federal funding for Medicaid, states are required at a minimum to cover children through age 18 in families with incomes below 138 percent of the federal poverty level (FPL); pregnant people with incomes below 138 percent of the FPL; caretakers or parents with low incomes; and the majority of seniors and people with disabilities who receive cash assistance through the Supplemental Security Income (SSI) program.7 States can choose to cover additional groups, including seniors and disabled adults not receiving SSI; individuals receiving home or community-based services; and, in states that expanded Medicaid after the passage of the Affordable Care Act in 2010, nondisabled adults with incomes below 138 percent of the FPL.8 Financial eligibility is determined by the states using a modified adjusted gross income (MAGI), which considers taxable monthly income and filing relationships.9 Individuals must also meet nonfinancial eligibility criteria, including being a resident of the state in which they are receiving Medicaid10 and meeting immigration status requirements in certain states.11
Enrollees can become ineligible for Medicaid when they experience changes in income or circumstances, such as starting a new job or changes to household size.12 Certain groups, such as low-income working individuals with irregular work hours or part-time jobs, are more likely to have variable income and, as a result, oscillate between Medicaid and marketplace eligibility.13 Notably, a study conducted by the Pennsylvania Department of Human Services examining the length of stay for enrollees in the Pennsylvania Medicaid Program from 2015 to 2018 found that 40 percent disenrolled after exceeding the income limit, suggesting that changes to income, however slight or temporary, are a driving factor in determining whether or not enrollees are eligible for coverage.14
Churn can also stem from administrative issues. States are required to renew coverage every 12 months, and in 2019, more than half of the states conducted additional, periodic data checks between annual renewal periods to identify changes in circumstances.15 Although some states have implemented automated or streamlined renewal processes,16 some individuals who are eligible for coverage could still be disenrolled if they if they do not receive, understand, or reply to notices and forms to verify their eligibility or resolve discrepancies.17 In the Pennsylvania study, researchers found that more than 26 percent of people who were disenrolled lost coverage due to “failure to furnish required information.”18
With multiple avenues for beneficiaries to lose coverage, churn is particularly prevalent in the Medicaid program. As a result of eligibility-related and procedural churn, the average Medicaid beneficiary is covered for less than 10 months of the year.19 In 2018, nearly 1 in 5 Medicaid enrollees lost coverage and then reenrolled within three months, and more than one-third disenrolled and reenrolled within a calendar year, according to the U.S. Centers for Medicare and Medicaid Services.20
As the largest public insurance program, Medicaid provides coverage to populations that otherwise lack access to affordable insurance. More than half of Medicaid enrollees are people of color, and the program provides insurance to 83 percent of low-income children, 48 percent of children with special needs, and 45 percent of nonelderly adults with disabilities in the United States.21 Medicaid enrollees often also have complex and costly care needs, with the Medicaid-covered population having higher rates of asthma, diabetes, hypertension, and substance use disorder than individuals with other types of coverage.22 Fortunately, Medicaid coverage is associated with improved health outcomes, reduced medical debt, and improved financial mobility.23
However, churning Medicaid enrollees are more likely to report coverage and access challenges, in addition to a decline in overall health, as evidenced by them skipping or missing prescription medications, delaying needed medical care, and exhibiting decreased likelihood of having a regular source of care such as a primary care physician.24 Focusing on successful coverage transitions for Medicaid disenrollees can support states’ health equity goals of closing gaps in coverage and reducing health disparities.
For Medicaid enrollees who lose eligibility, employer-sponsored and private insurance are often unaffordable. In fact, according to a recent study by the Peterson-KFF Health System Tracker, the cost-sharing—deductibles, copayments, and coinsurance—associated with private plans and employer-sponsored insurance often far exceeds many households’ liquid assets.25 Nearly half of U.S. households cannot afford typical employer plan deductibles, and 42 percent of households do not have enough liquid assets to cover midrange private health plan deductibles.26 Similarly, many households lack the resources to meet the typical out-of-pocket maximums in private plans, and serious illness or an accident could expose families to insurmountable costs.27
Marketplace plans are a more affordable coverage option due to financial assistance available to low-income enrollees. Individuals with incomes at or above 100 percent of the FPL may qualify to receive federal premium tax credits (PTCs), which reduce monthly premiums, and enrollees with incomes between 100 and 250 percent of the FPL are eligible for cost-sharing reductions (CSRs) to lower their out-of-pocket expenses.28 Meanwhile, the Inflation Reduction Act of 2022 extended the enhanced financial assistance through 2025, initially made available through the American Rescue Plan Act of 2021, lowering costs for millions of marketplace enrollees and guaranteeing that individuals with incomes under 150 percent of the FPL have access to a $0 premium plan option.29 In 2022, 89 percent of marketplace enrollees received PTCs, and 49 percent received CSRs.30
In addition to being more affordable relative to other forms of private insurance, marketplace-covered benefits are comparable to those in Medicaid. Indeed, federally required Medicaid benefits align closely with the marketplace’s 10 essential benefits, including physician services, inpatient and outpatient hospital services, laboratory, and X-ray services.31 However, marketplace plans are also required to cover prescription drugs, mental health and substance use disorder services, and rehabilitative and habilitative services, some of which are optional under Medicaid.32
The marketplace’s enrollment assistance framework can also ease coverage transitions for Medicaid disenrollees. The marketplace websites, exchange call centers, navigators, certified application counselors, and community partners are critical resources to successfully guide individuals through the marketplace enrollment process.33 For example, the federal HealthCare.gov and state-based marketplace websites provide consumers with a centralized location to compare plan options and estimate premium and out-of-pocket costs. Meanwhile, free and unbiased consumer assistance from trained personnel or trusted community partners can mitigate barriers to coverage, including confusion regarding eligibility, lack of knowledge about coverage options, and a complicated application and plan selection process.34 Professional assistance is particularly important for segments of the Medicaid population that face additional barriers in accessing coverage or navigating enrollment, such as immigrant populations and individuals with limited English proficiency.35
Despite marketplace subsidy eligibility set at 138 percent of the FPL—immediately above the upper Medicaid income eligibility threshold—in states that have expanded Medicaid through the ACA, enrollment transitions between Medicaid and subsidized marketplace coverage are uncommon. In fact, the Medicaid and CHIP Payment and Access Commission found that in 2018, only 4 percent of beneficiaries who were disenrolled from Medicaid enrolled in marketplace coverage within 12 months.36 With the U.S. Department of Health and Human Services estimating that 2.7 million former Medicaid enrollees will qualify for subsidized marketplace coverage at the end of the federal COVID-19 public health emergency, it is particularly important for states to proactively explore policy approaches before eligibility determinations resume on April 1, 2023.37
of beneficiaries who were disenrolled from Medicaid in 2018 enrolled in marketplace coverage within 12 months.
To effectively direct former Medicaid enrollees into marketplace coverage, states can 1) establish a Basic Health Program, 2) provide state-funded financial assistance, 3) automate enrollment transitions, and 4) incentivize multimarket plan participation.
As discussed above, former Medicaid enrollees face affordability challenges when seeking private insurance and would benefit from an off-ramp to an additional coverage source that mirrors Medicaid’s benefits and cost sharing. By establishing a Basic Health Program (BHP), states can offer affordable coverage targeted toward individuals with incomes just above the Medicaid threshold.
The BHP, an option under Section 1331 of the ACA, provides lower-cost comprehensive coverage for individuals with incomes between 133 percent and 200 percent of the FPL.38 Under a BHP, the state contracts with private plans to offer coverage that is as comprehensive and affordable as subsidized marketplace coverage. Plans are required to cover the ACA’s essential health benefits and premiums, and out-of-pocket costs cannot exceed that of the second-lowest-cost silver marketplace plan—considering any financial assistance.39 Eligible individuals enroll in BHP plans in lieu of marketplace coverage.40
BHPs receive federal funding equivalent to 95 percent of the amount of marketplace premium tax credits and cost-sharing reductions for which enrollees would have been otherwise eligible, which helps to minimize state costs for the program.41 By shifting the transition point between Medicaid plans and subsidized marketplace coverage up to a higher income threshold, BHPs can reduce churn by 16 percent, according to estimates by the Urban Institute.42 In addition, the flexibility offered to states to design BHP plans is an opportunity to facilitate less disruptive transitions by aligning BHP benefits to Medicaid.
While Minnesota and New York are the only two states that have implemented a BHP to date, additional states are currently exploring implementing BHPs to improve affordability.
Minnesota, the first state to operate a BHP, launched MinnesotaCare in January 2015. Program enrollees are covered under a single benefit package with an income-based sliding premium scale; for enrollees with incomes that are 35 percent to 200 percent of the FPL, premiums range from $4 to $80 per month.43 Minnesota’s BHP had 107,000 enrollees as of August 2022.44
New York’s BHP, the Essential Plan, was also implemented in 2015 and offers four plan products tiered by income and immigration status. Two products are for enrollees with household incomes below 138 percent of the FPL who are ineligible for Medicaid—including lawfully present immigrants—and two products are for those between 138 and 200 percent of the FPL.45 In May 2022, more than 986,000 New Yorkers were enrolled in the Essential Plan.46
Oregon first explored implementing a BHP in 2014 to reduce Medicaid churn and increase access and coverage affordability for its low-income residents.47 After convening stakeholder advisory workgroups and commissioning feasibility studies that recommended implementation, state health officials declined to submit a 1331 application, assuming that BHP-eligible residents would enroll in subsidized marketplace coverage.48
However, premium affordability remained a challenge for Oregonians.49 In 2022, the state reintroduced BHP as policy option to preserve coverage gains (Oregon’s uninsured rate dropped to a record low of 4.6 percent in 2021) and reduce coverage loss and disruption ahead of the end of the federal COVID-19 public health emergency.50 Via H.B. 4035, Oregon’s legislature instructed the Oregon Health Authority (OHA) to determine the most viable path to acquire federal funding for a coverage plan for residents with family incomes below 200 percent of the FPL who do not qualify for marketplace coverage.51
The OHA determined that a BHP would be the most well-defined and straightforward pathway to increasing enrollment among the population with incomes 138 percent to 200 percent of the FPL. The state estimated that 85,000 Oregonians would be eligible.52 Implementation of a BHP would support a phased implementation of the Oregon Bridge Program, designed to “mitigate the coverage cliff” Medicaid disenrollees face, according to researchers from the Center on Health Insurance Reforms at Georgetown University.53
During the first phase of the Bridge Program, existing Medicaid enrollees with family incomes between 138 percent and 200 percent of the FPL would remain enrolled in Medicaid via a temporary amendment upon conclusion of the public health emergency.54 In the second phase, existing Medicaid enrollees eligible for the BHP would be transitioned after eligibility redeterminations. Finally, the BHP would be opened to eligible individuals without other coverage, and individuals in the marketplace during the open enrollment period.
After electing Gov. Andy Beshear (D) in 2019, Kentucky set health policy goals to establish a spectrum of affordable, state-led, low-cost coverage options and commissioned a feasibility study for a BHP.55 During the 2022 legislative session, the Kentucky General Assembly appropriated $4.5 million in state funds and $4.5 million in federal funds in the 2022–2024 state budget to operate the state’s Basic Health Program.56 However, in 2022, the Kentucky Department for Medicaid Services “placed development of a Basic Health Program on hold.”57
Cost-sharing and premiums are a documented affordability challenge for low-income individuals.58 Research has found that small-dollar copay amounts—as little as $1 to $5—result in reductions in utilization of health services such as preventive and primary care, prescription drugs, and mental health visits for Medicaid enrollees.59 With cost being an enrollment barrier for many former Medicaid enrollees seeking alternate coverage, state-based subsidies could improve the affordability of marketplace coverage and smooth transitions.
Several states have implemented subsidies that supplement federal assistance and further improve premium and cost-sharing affordability:60
Navigating the marketplace plan selection process with its numerous health plan options is administratively burdensome and can be an enrollment barrier for former Medicaid enrollees.66 By removing plan selection, auto-enrollment promotes continuity of coverage and makes it easier for individuals to remain insured.67
California and Rhode Island intend to auto-enroll Medicaid disenrollees into marketplace plans at the end of the public health emergency.68 Their state-based marketplaces will use real-time data from an integrated eligibility system to automatically enroll individuals into a silver marketplace plan when they lose their Medicaid coverage, and individuals are required to opt into a marketplace plan due to the potential tax liability.69 In California, individuals have one month to opt into coverage by paying their first month’s premium or to opt out by electing to cancel their coverage.70 In Rhode Island, Medicaid disenrollees with incomes at or below 250 percent of the FPL will be auto-enrolled into a marketplace plan from the same insurance carrier as their Medicaid coverage and will have 60 days to make changes or opt out.71 For disenrolled Medicaid members with incomes up to 250 percent of the FPL who select a marketplace plan, the state will pay two months’ premium.72 Notably, Rhode Island’s legislature allocated $1.3 million in the state’s 2023 budget to facilitate the program.73
Auto-enrollment is best suited for states with state-based marketplaces that have integrated their Medicaid and marketplace eligibility systems, such as Idaho, the District of Columbia, and Nevada.74 Synergy and coordination across health and human services programs allow individuals to seamlessly transition from Medicaid to the marketplace with eligibility information that has already been provided to the state. States that operate their own state-based marketplace should monitor California and Rhode Island’s auto-enrollment process and consider implementing similar programs. By automating enrollment, states can ease administrative burdens, improve coverage transitions from Medicaid to the marketplace, and decrease the likelihood that low-income residents losing Medicaid will experience gaps in coverage.
Multimarket plans, from issuers that offer both Medicaid managed care plans and marketplace coverage, can improve marketplace coverage affordability. Indeed, a 2020 Health Affairs study found that counties served by multimarket plans had lower premiums due to their ability to leverage their Medicaid contracts in negotiating provider payment rates for marketplace plans.75 On average, premiums for a 50-year-old enrolled in the second lowest cost silver plan are $188 less in multimarket plan counties than in nonmultimarket counties.76
Multimarket plans also help to preserve continuity of coverage and care for former Medicaid enrollees, particularly by limiting provider disruption. Longitudinal analysis from 2006 to 2012 found that Medicaid enrollees who churn in and out of coverage deferred office-based care—including preventive services—and their utilization rates did not match those with continuous coverage until several months after reenrolling in coverage.77 When individuals move between Medicaid and marketplace coverage and change issuers, they may face different provider networks. A common provider network within a multimarket plan can help preserve provider-patient relationships because individuals who experience eligibility shifts would not need to switch providers, thus improving the cohesiveness of coverage.
State policymakers can incentivize issuers to participate in both Medicaid and the marketplace. Nevada, for example, offers issuers bonus points in the competitive bidding process for Medicaid managed care if they also participate in the marketplace.78 As a result, three of the state’s four Medicaid managed care organizations also participate in the marketplace.
Health insurance churn threatens access and compromises health outcomes, especially for low-income individuals enrolled in Medicaid. Fortunately, policies that facilitate successful transitions to marketplace coverage can address affordability challenges, limit coverage disruptions, and improve continuity of care. State policymakers should pursue policy options to address churn among their Medicaid population by building bridges to marketplace coverage.
Behavioral Health Data Spotlight,” available at https://www.medicaid.gov/medicaid/access-care/downloads/coverage-and-behavioral-health-data-spotlight.pdf (last accessed February 2023).
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