Health reform’s ‘churning’ challenge

(Spencer Platt - GETTY IMAGES)

The Affordable Care Act relies on two main programs to expand health insurance coverage. First, there’s Medicaid, which will expand to cover anyone under 133 percent of the federal poverty level in 2014. Then there are the exchanges, new state-based marketplaces where individuals can use federal subsidies to buy private plans.

Coordinating between these two programs, it turns out, is no small task. In fact, it’s one of the most daunting challenges that both state and federal officials face in implementing health reform.

Think of a woman earning $10,000 at a part time job. Under the health reform law, she’d qualify for Medicaid: she’s below the earning threshold (133 percent of the federal poverty line, which works out to over $14,500 for an individual).

Let’s say she adds on another part time job, one that pays $5,000. The woman no longer qualifies for Medicaid; she’s above the $14,500 threshold. She moves to the exchange, where she’ll receive heavily subsidized, private insurance.

Income fluctuation like this is really widespread. Back in February, a Health Affairs study estimated that we’re likely to see “millions of adults and their families between Medicaid and state exchanges, often within months of their initial enrollment.” About half of those hovering around 133 percent of the federal poverty line will experience an eligibility change within a year, the study found.

Health policy experts refer to this problem as “churning,” where individuals churn off and on of different insurance programs. That movement can trigger changes in provider networks, benefit packages and cost sharing. In short: a lot of confusion, particularly for a population likely to be interacting with private insurance for the first time.

The Affordable Care Act takes a number of steps to deal with this. On Friday, the department of Health and Human Services released over 200 pages of regulations that focus on how Medicaid and exchanges will insure seamless coverage. Tricia Brooks of the Georgetown Health Policy Institute describes the new rules as a “big leap forward.” The rules propose that states review Medicaid eligibility annually, creating less chance for disruption. They clarify that, for those that do bump up onto exchange, Medicaid will remain in effect until the new plan’s coverage starts.

“If you asked me to rattle off the top five or six things that states need to do, it covered most bases,” says Brooks. “It’s a very consumer focused, consumer friendly regulation.”

There’s one other key tool states have that has gotten much attention: the basic health plan. The Affordable Care Act gives states the option to create a “Medicaid look-alike” plan to cover individuals between 133 and 200 percent of the Federal Poverty Line. The plan could, theoretically, integrate easily with Medicaid and capture much of the churning population. There are some downsides, though: if a state has a basic health plan, those who are eligible can no longer purchase through the exchange.

A regulation on basic health plans is moving through the Obama administration — it landed it the Office of Management and Budget this morning, which means we should get a look at it relatively soon.