Debates over the health law’s Medicaid expansion — and whether or not states should participate — has centered on how it would impact state budgets. A new paper suggests that the privately-insured have a stake in the matter too. Their premiums, the Academy of American Actuaries say, would rise if states decide to forgo the public insurance expansion.
If a state decides not to expand its Medicaid program, residents between 100 and 133 percent of the Federal Poverty Line — individuals making between $11,170 and $14,893 — become eligible for subsidized health insurance on the public exchange. Those lower-income individuals “can be expected to have higher health care needs than the higher-income exchange enrollees.”
Using CBO data, the brief estimates that those higher health-care costs will be 2 percent higher than “projections made under the assumption that all states do expand Medicaid.” Those premium increases would be borne by both the federal government, which helps buy coverage for subsidized individuals, as well as the individual purchasers themselves.
That would be the expected, nationwide increase in premiums. States that opt out, however, would be likely to see even premiums tick up even more. That has to do with a very wonky, Obamacare provision about reinsurance. When the Affordable Care Act was written, there was worry that very sick people would flood the insurance exchanges when they launched the exchanges. That would cause insurance premiums to spike.
To safeguard against that, the Affordable Care Act included $25 billion in reinsurance funds: Money meant to stabilize the insurance market, and send extra subsidies to the insurers that ended up with really sick members.
That $25 billion budget is fixed; it’s not tethered, in anyway, to the number of people on the exchange. So if states don’t participate in the Medicaid expansion, that same amount of money will be expected to cover a bigger number of people.As the actuaries put it, “a lower payment would be available on a per-enrollee basis.” States without the Medicaid expansion have be expected to have greater exchange participation that would, once again, cause premiums for all to rise.