Churn and the ACA

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Prior to the Affordable Care Act (ACA), with 47 million Americans uninsured, advocates and policy experts focused on expanding health insurance coverage for those who lacked it. Now that the law has broadened access to insurance, states are turning their attention to protecting enrollees from disruptions when they transition from one type of coverage to another, movement known as churn.

Churn is typically caused by a change in eligibility status, which itself stems from fluctuations in income, loss of a job, or changes in family circumstance, such as pregnancy. Short of a system, such as single-payer, where people may stay on the same plan for most of their lives, churn is inevitable. Indeed, in our fragmented health insurance system, millions of people naturally churn over the course of a given year, moving from employer-provided insurance to private insurance, or from private insurance to Medicaid, and so on. At low income levels, employment is particularly unstable, leading to high levels of churn among that population. For example, a newly-eligible Medicaid beneficiary (in an expansion state) who experiences a change in income over the course of a year—such as picking up an extra retail job during the holiday season—may lose his or her Medicaid eligibility as a result. Switching over to the exchange for new coverage could mean a totally different network of doctors, new drug formularies, and higher premiums and cost-sharing, not to mention the complexity and burden of going through a new and different enrollment process.

Is the ACA to blame for churn?  No—in fact, the ACA directly reduces one form of churning, and offers tools to mitigate the impact of other forms. Before the ACA, millions churned off insurance coverage for all the reasons mentioned above. And after losing coverage, many people—especially those with preexisting conditions—found it hard, if not impossible, to get it back. Because the ACA makes the individual health insurance market more accessible and affordable, the law creates a new culture of coverage with a continuum of options, and actually cuts down on churning into uninsured status.

Churning between different types of coverage still exists, however, and it can have adverse effects on individuals. They may delay necessary care, or they may not receive the proper care. Even if they do end up in subsequent coverage, enrollees may find that their primary care doctor, specialist or prescription drugs aren’t covered in the new plan. Frequently having to navigate new networks can take an emotional toll and result in unanticipated out-of-network spending.

Different eligibility criteria for different populations can also cause a churn challenge, especially for families. Most states have different Medicaid eligibility limits for children than for adults. This means that if a family’s income increases, or a child ages out of CHIP coverage, the eligibility for the parents may change, while the eligibility for the children may not. This scenario results in split families, wherein the children have one type of coverage and adults have a different type. In many states, this means understanding the details, benefits and cost structures of two types of coverage, often from different companies, in the same household.

So what can we do to safeguard consumers from these disruptions? Fortunately, states have resources in their toolkits to mitigate the impacts of churn. They can work to maintain continuity of care for individuals, and they can make sure that insurance remains affordable when people jump from one coverage source to another.

The Basic Health Plan (BHP) and related proposals seek to preserve continuity of care for people just above the Medicaid cutoff up to 200% of the poverty line. Fluctuations in income, especially of a seasonal nature, are less likely at the higher cliff, which means that states with a BHP will help many of their residents avoid unnecessarily losing coverage. Some states, such as Minnesota and New York, had generous Medicaid eligibility levels prior to the ACA, covering certain populations above 133% FPL. For them, a BHP is a way to continue more generous coverage, while moving up the income cliff and preventing some churn.

A different strategy to ensure continuity of care is to build a bridge between Medicaid and private coverage. The new exchanges created by the ACA offer premium subsidies, transparency, and other benefits, making them the new hub for coverage. And because plans are centralized on the exchanges and state-based exchanges in particular have a wide regulatory purview, states can much more easily ensure a smooth transition for their residents, especially where Medicaid managed care has a strong presence.

In Nevada, for example, a robust Medicaid managed care infrastructure allows the state to provide seamless transitions between Medicaid plans and exchange plans. The state requires Medicaid companies to offer plans (“Qualified Health Plans” or “QHPs”) on the exchange, ensuring that residents who experience a change in eligibility can remain with the same insurance carrier (and ideally the same network and formulary).

California’s bridge plan similarly targets the population who lose their Medicaid eligibility at some point during the year. To reduce disruptions to individuals, the bridge plan allows them to transition to QHPs offered by Medicaid managed care companies, featuring provider networks similar to Medi-Cal managed care. In lieu of a Basic Health Plan, the bridge plan adopted by the state maintains enrollees in the exchange’s risk pool.

Maryland and Rhode Island have pursued related regulatory approaches to ensuring continuity of care. The two states both require that all plans in the market follow strict rules around continuity of care for a course of treatment.  This means, for example, that a patient who is in the middle of chemotherapy treatment will be able to continue with their chosen provider if they churn onto different coverage.

And while Arkansas has been recognized for pioneering the “private option” Medicaid expansion, a new form of premium assistance, it hasn’t received much attention for that approach’s positive effect on churn. One study projects that enrolling the Medicaid expansion population in QHPs will actually prevent up to two-third of the expected churn.

Besides focusing on continuity of care, states may also seek to address affordability concerns through their churn mitigation strategies. Since premium and cost-sharing may be higher in the new coverage people churn “up” to, some states are considering offering what are known as wraparound subsidies. This strategy reduces out-of-pocket costs for low-income enrollees in QHP coverage. For example, Massachusetts is pursuing wraparound subsidies for individuals between 139% and 300% FPL who are enrolled in particular QHPs.

The right strategy for a particular state depends on a number of local factors, including previous Medicaid eligibility levels, preexisting Medicaid waivers from the federal government, Medicaid expansion status under the ACA, and the prevalence of managed care within Medicaid systems.

The new culture of coverage created by the ACA can’t eliminate churn, but it does empower states to lessen the impact, if they so choose.

Heather Howard is a Lecturer in Public Affairs at Princeton University and directs the Robert Wood Johnson Foundation-funded State Health Reform Assistance Network (statenetwork.org)

14 replies »

  1. It is hard to imagine that pregnancy triggers churn considering how important pre-natal care is. This needs to be addressed as soon as possible because no other first-world country has issues with their health care like this one.

  2. I presume that means a variant of EITC reaching the working poor as they strive to claw their way out of poverty, many of whom will go to their graves never having made it. Hmm. Sounds like a boon for insurance companies coupled with a return to employer-based group policies for everybody, even part-timers now being kicked into Medicare (or the curb in states refusing to expand Medicaid).

    Those not destitute enough for Medicaid and without earned income could then return to the ED like the good old days. What could possibly go wrong?

  3. Thanks for your comments, JB and John. I agree that churning won’t be completely eliminated under the ACA, but it will be significantly reduced. The diagram at the top is intended to illustrate the ideal scenario under the ACA, especially if states adopted the measures that I discuss in the post. Of course, due to political and operational challenges, not all will.

  4. Thank you for this article. I also wonder what happened to the uninsured, in the post-PPACA diagram, because they still exist.

    I doubt very much that churn is lessened by ACA. On the contrary, because Medicaid reaches into higher incomes now, it is more likely that they will churn in and out of employer-based coverage than the pre-ACA Medicaid dependents.

    The best way to solve churn is to repeal Obamacare and replace it with a universal, refundable tax credit.

  5. I think it’s foolish to leave the Uninsured out of the post ACA model. Sure the ratios may be different, but the category is definitely still there.
    How nice it would be to find a policy one is so satisfied with that you can reasonably plan to keep it for twenty years…

  6. Churning is an expensive proposition for insurance companies. For all the reasons stated, people are changing insurers, on average, every 3-5 years.
    This makes it more costly for the insurer, for they must replace their entire custonmer base every 3-5 years.
    It is much more cost effective to provide a policy for 20 years or more.
    This is the philosophy behind Health Matching Insurance, a patented product to be offered by National Prosperity Life and Health.
    With premiums typically reducing every year, eventually providing 60-80% off of traditional premiums, HMI is insurance that works in one’s favor over time.
    Don Levit
    Treasurer of NpLH

  7. Bubba, I think you are right. In fact the ACA has created a whole new class of churning (selling more than is beneficial).

  8. It sounds like we need a new definition of churn?

    Maybe new terminology entirely?