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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.

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The Arkansas Experiment: Is the ‘Private Option’ a Realistic Plan For Medicaid?

Arkansas is now the first state to use Medicaid expansion dollars to buy private coverage for many of its 250,000 newly eligible residents rather than enroll them in the existing Medicaid program. This week the Arkansas House of Representatives approved the plan, followed by the  Senate, to confirm that the state will be implementing this “market-based approach” to expanding Medicaid.

The idea of buying private insurance for Medicaid recipients is emerging as a “conservative compromise” for some of the 24 states (home to more than 25 million uninsured residents) leaning toward rejecting federal funding the Affordable Care Act provides for the expansion. In the original legislation, the ACA required states to expand Medicaid to adults earning up to 138 percent of the federal poverty level, $15,870 for an individual or $32,499 for a family of four. The federal government would fully cover the costs of this expansion for two years, with states gradually having to contribute 10% by 2020. Last summer, the Supreme Court struck down the Medicaid expansion requirement, allowing states to refuse federal funding and opt out of the expansion.

But most of these states, including Florida, Texas and Indiana, are leaving a lot of money on the table—from hundreds of millions to $1 billion or more in federal funding.  Under pressure from healthcare providers and other interested parties, some governors view premium assistance programs that move the poor, disabled and frail elderly to the state insurance exchanges to buy private insurance as a way to capture this windfall without appearing to embrace ObamaCare.

In Missouri, for example, Republican state legislator Jay Barnes calls the Obama administration’s plan for Medicaid expansion a “one-size-fits-all, far-left-wing ideological path.”

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Why Should You Care Whether or Not Your State Decides to Expand Medicaid Coverage?

By expanding Medicaid, the state-federal partnership that offers health insurance to low-income Americans, the Affordable Care Act set out to cover some 17 million uninsured – or roughly half of the 34 million who are expected to gain coverage under reform. But when the Supreme Court ruled on the Affordable Care Act in June, it struck down a key provision which threatened that if a state refused to co-operate in extending Medicaid to more of its citizens, it could lose the federal funding it now receives for its current Medicaid enrollees.

In a 7-to-2 decision, the justices ruled that this punishment was too coercive: “withholding of ‘existing Medicaid funds’ is ‘a gun to the head’” – that would force states to acquiesce.

As a result, states can, if they choose, opt out of the Medicaid expansion, and some governors are threatening to do just that – even though the federal government has committed to pay 100 percent of the cost from 2014 to 2017. After that, the federal share would gradually decline to 90 percent in 2020, and remain there. This is a generous offer; today the federal government now picks up just 57 percent of the Medicaid tab.

Nevertheless, some states claim that the 10 percent that they would have to ante up after 2020 is more than they can afford. A few go further and admit that this isn’t just about money: by rejecting the federal funds, they are voicing their objection to “Obamacare.”

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