Marketplace, MCOs Will Face a Rocky Transition When PHE Ends

When the Biden administration ends the COVID-19 public health emergency (PHE), states will disenroll millions of Medicaid beneficiaries — and insurers will have to take Medicaid MCO members off their books. Experts tell AIS Health, a division of MMIT, that carriers can take steps to retain some of those members by helping them enroll in Affordable Care Act (ACA) marketplace coverage — but say the number of people who make the switch will be far lower than the number of people who joined the Medicaid rolls during the pandemic (see infographic).

Medicaid and individual exchange enrollment have both boomed with the higher federal funding that was included in the American Rescue Plan Act (ARPA) — and both segments’ total enrollment and enrollee profiles will change significantly when that extra funding ends.

In ARPA, Congress increased the Federal Medical Assistance Percentage (FMAP) by 6.2% during the PHE and required states to suspend coverage redeterminations as long as the PHE is in effect. ARPA also extended eligibility for advance premium tax credits to include people who have incomes over 400% of the federal poverty level (about $51,000 for a single person or $105,000 for a family of four). As a result, 2.8 million more consumers are receiving tax credits in 2022 compared to 2021. However, those enhanced subsidies will expire at the end of this year unless Congress extends them. Whether that will happen is anybody’s guess.

In large part because of Medicaid redeterminations, the Biden administration has promised states that it will give 60 days’ notice before ending the PHE. Bloomberg reported on May 16 that the administration plans to extend the emergency declaration, which was set to expire on July 15.

When that happens, the enrollment shifts will be massive. In a May 10 analysis, the Kaiser Family Foundation (KFF) projected 25% growth in Medicaid enrollment between 2019 and the end of 2022, an increase of 22.2 million members. KFF estimates 5.3 million to 14.2 million people would be disenrolled at the end of the PHE under various scenarios, “with the largest losses among [ACA Medicaid] expansion adults, other adults such as parents not eligible based on a disability, and children.”

Coverage Losses Will Be Dramatic

The Urban Institute, meanwhile, projects 15.8 million people will lose Medicaid coverage, and about one-third of those people will be eligible for marketplace plans.

Meanwhile, the number of marketplace enrollees receiving tax credits increased by 2.8 million from 2021 to 2022, according to the Biden administration. Without the ARPA subsidy expansion, the average monthly premium for HealthCare.gov enrollees receiving subsidies would have been 53% higher in 2022.

With these changes on the horizon, major commercial insurers have begun working with states to manage the disenrollment process.

During an April 26 conference call with investors discussing Centene Corp.’s financial results, Chief Financial Officer Drew Asher said that the MCO and marketplace-focused carrier has added 2.8 million members since March 2020, shortly after the start of the pandemic.

“We expect a little over half of those members to attrit through the redetermination process. Granted, it’s an estimate, but it’s a very complex estimate that we’ve assessed 29 times over picking slope lines based upon direct conversations with the states,” Asher said, according to a transcript prepared by the Motley Fool. He added that the firm projects a resulting loss of about $6 billion in revenue, mostly in 2023. (The firm posted $4.2 billion in profits in 2021 against $125.9 billion in revenue.)

Centene Is Working Closely With States

He said that Centene was preparing for the shift by “engaging with states and actually preparing for the catcher’s mitt opportunity in the marketplace….The team has really put a lot of thought into making sure we’ve got the processes in place to be able to, in some cases…work directly with the state in terms of making those redetermined members aware of the opportunity to move in a marketplace.”

Chief Operating Officer Brent Layton added that in “the 29 states where we have Medicaid health plans, we have the exchange or our Ambetter product in 25 of them. So we’re able to overlap the counties and in a lot of ways, overlap the provider network, first and foremost. Second, we spent a great deal of time with the states. And absolutely both the federal level and the state level absolutely want people to have coverage, and both government entities are working very closely with us. In regards to the states, it’s about communication. How can we actually communicate with our members…through texting and so forth to let them know what their options and opportunities are?”

In that vein, health plans have pushed the Biden administration to allow them to contact members of Medicaid plans via text message and automated phone calls. HHS and CMS asked the Federal Communications Commission (FCC) whether health plans could use text messages and automated phone calls to “reach enrollees and remind them to respond to requests from the Medicaid agency.”

AHIP endorsed the move in a May 17 letter, with AHIP executive Mark Hamelburg writing that “text messaging and automated, pre-recorded calls will provide more effective communication to alert enrollees to the need to update their contact information and respond to state requests for information, and enhanced opportunities to allow individuals to maintain uninterrupted and continuous health benefit coverage.”

Not All Enrollees Will Switch to Exchange

But experts tell AIS Health that many people who lose Medicaid coverage will not enroll in marketplace coverage.

Sabrina Corlette, an attorney and co-director of Georgetown University’s Center on Health Insurance Reforms, observes that “just because they’re eligible does not mean that they will actually go through the process of applying, getting a determination of subsidy eligibility and then enrolling.”

“If somebody looks like they’re marketplace eligible, and they’re no longer Medicaid eligible, [the state] will do what’s called an account transfer and send that person over to the marketplace. What I’ve been told is the completion rate is abysmal. Something like less than one in 10 actually complete the marketplace application and enroll in a marketplace plan,” Corlette adds. “Consumers that are coming off of Medicaid don’t pay premiums. When they are converted over to the marketplace, even if they are heavily subsidized, most of them face a premium. That’s the end of the conversation right then.”

“It is a barrier if there’s any kind of cost sharing,” Katherine Hempstead, Ph.D., senior policy advisor at the Robert Wood Johnson Foundation, tells AIS Health. “For some people, even a nominal premium can be” a deterrent to enrolling in a new plan.

Premium Costs Are Deterrent for Switching

David Anderson, a research associate and Ph.D. candidate at the Duke University Margolis Center for Health Policy, tells AIS Health that his own research has demonstrated that “the act of having to make a payment is a significant deterrent to coverage, even if that payment is pretty small — like a buck or two.”

Anderson adds that the complexity of the marketplace is another deterrent to enrollment. He points out that Medicaid has not required income checks for nearly two years. By contrast, marketplace plans require new members to estimate their income for the full year. In addition, in Medicaid, “your plan choice universe is small,” Anderson says. “It’s one, two, maybe a half-dozen insurers, all of them offering one fundamental product. You’re looking at maybe five or six choices to make,” if any.

Meanwhile, “it’s not unusual for someone on the marketplace to look at 10 different insurers and 150 different plans,” he adds.

All this means that while “insurers that have both a Medicaid contract and an ACA line of business in the same county, they can probably model who is likely to lose eligibility for Medicaid, and they can aggressively start marketing to those folks. They can say, ‘hey, you’re currently on Big Purple Medicaid, come over to Big Purple Exchange. Here’s a brochure, I’ll call you in two weeks if we don’t hear from you’ — and do a lot of hand holding to bridge them over. But there’s going to be significant attrition.”

That’s not a new phenomenon, Corlette observes: “Before COVID, we had state-based marketplaces telling us that the number of people who jumped through all these hoops is very, very small.”

Hempstead points out that the expiration of ARPA subsidies won’t just affect possible future enrollees moving off Medicaid.

Costs Likely to Go Up for Everyone Next Year

“That’s going to have a big effect, frankly, for people that are already enrolled. A lot of people will face pretty significant premium increases,” Hempstead explains.

She adds that “I think everyone in the country is going to see increased health insurance premiums. The rate filings are going to show some pretty big premium increases. That’ll be true of employer insurance too. So there’s that, and you take away the subsidy — that’s obviously going to be bad for people.”

But, despite all the gloom, there is a silver lining for plans, according to Joel Ario, managing director of Manatt Health. Though the shift to the exchange will be marginal from a national perspective, they represent a substantial opportunity at the level of an individual health plan.

“Even though it’s a relatively small percentage of people [recently enrolled in Medicaid] who would be eligible for the exchanges, and a small percentage would likely end up [enrolling] in the exchanges, that’s still a significant opportunity for the exchange market” because of the sheer size of the enrollment shift, Ario says.

“If it’s 10% of that population that the exchanges capture, that would be a significant increase in the exchange market” because of its much smaller size, he added.

David Cordani, CEO of Cigna Corp., made a similar point during an earnings call on May 6. Cigna currently covers no Medicaid lives, according to AIS Health’s Directory of Health Plans. Cigna sold its only MCO, a Texas plan, to Molina Inc. for $60 million at the start of this year. Cigna has stepped up its participation in the marketplace, however, adding three new marketplace states during the 2022 plan year.

“As it relates to the Medicaid redeterminations…we do not have a big uptake [in enrollment] that would be planned for relative to redeterminations,” Cordani said, according to a transcript prepared by Seeking Alpha.

He added: “We do think we’ll be a net beneficiary….We do not believe you have to be a Medicaid player to benefit from” shifts from Medicaid enrollment to commercial or exchange plans. “That presents some potential upside for us going forward,” he said.

Contact Anderson at david.m.anderson@duke.edu, Ario via Samuel Eisele at seisele@manatt.com, Corlette at sabrina.corlette@georgetown.edu and Hempstead at khempstead@rwjf.org.

What Is at Stake if Medicaid Continuous Coverage Requirement Ends?

By Jinghong Chen

Medicaid enrollment could grow by 25% from 2019 through the end of fiscal year 2022, if the COVID public health emergency and federal continuous enrollment requirement get extended, a Kaiser Family Foundation analysis projected. It also estimated that from FY 2020 through 2022, states will have received $100.4 billion in fiscal relief through enhanced Medicaid matching funds, which is more than double the total estimated costs for those enrolled due to the “maintenance of eligibility” (MOE) requirement. Meanwhile, another Kaiser Family Foundation study found that Medicaid enrollment could have increased by 12.9% if a similar policy prohibiting disenrollment was in place in 2018.

NOTES: The 2018 continuous enrollment policy simulation assumed no disenrollments through 2018 except due to death or moving out of state. The data is based on full-benefit enrollees in 41 states; Florida, Indiana, Kentucky, Maine, Mississippi, Nebraska, Oklahoma, Oregon, Utah and Wyoming were excluded due to missing or inconsistent data.

SOURCES: “Fiscal and Enrollment Implications of Medicaid Continuous Coverage Requirement During and After the PHE Ends,” Kaiser Family Foundation. “Unwinding the PHE: What We Can Learn From Pre-Pandemic Enrollment Patterns,” Kaiser Family Foundation.

This story and infographic were reprinted from AIS Health’s weekly publication Health Plan Weekly.

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