The Marketplace Pulse series provides expert insights on timely policy topics related to the health insurance marketplaces. The series, authored by RWJF Senior Policy Adviser Katherine Hempstead, analyzes changes in the individual market; shifting carrier trends; nationwide insurance data; and more to help states, researchers, and policymakers better understand the pulse of the marketplace.
Since the early days of the COVID-19 pandemic, enrollment in Medicaid has grown as states complied with PHE measures which sought to maintain continuous coverage. These requirements prevent states from terminating coverage, in exchange for increased federal Medicaid funding. The PHE was established in early 2020 and has been extended multiple times.
When the PHE ends, which could be as early as this July, states will face a massive administrative challenge. The stakes are high, and the potential for coverage loss is great. The Urban Institute recently estimated that 13 to 16 million people, including approximately 6 million children, risk losing their eligibility for Medicaid.
For many of those that lose their eligibility for Medicaid, transitioning to the Marketplace is a potential path to stay covered. Approximately one-third of those losing coverage will be eligible for subsidized coverage in the Marketplace. One major complicating factor is the potential end to the increased subsidies that were implemented with the American Rescue Plan Act. These provisions will expire at the end of 2022 unless Congress acts.
In the transition from Medicaid to the Marketplace, the role of MCOs may be important, particularly plans that participate in both markets in the same geography, sometimes referred to as “overlap plans.” Overlap between Medicaid and the Marketplace grew over the past several years. The resurgence in Marketplace participation was driven by Medicaid MCOs, most notably Centene, which expanded from its role as primarily a Medicaid plan to offer Marketplace coverage and is now the single largest plan in both segments. Since then, synergy between Medicaid and Marketplace participation continued among traditional Medicaid MCOs as well as commercial plans like United Health, which calibrated their re-entry to the Marketplace to current or potential Medicaid service areas.
Our updated map shows the prevalence of overlap by MCO since 2020. During that time, the share of counties with at least one overlap plan increased from 59% to 67%. For some plans, most notably Centene, there is a high degree of overlap between their Medicaid and Marketplace participation, while for others like Anthem and United Health Group there is far less.
Coverage advocates have been favorably predisposed to the concept of overlap plans under the assumption that transitions between markets—i.e., “churn”—may be less disruptive if members remain covered by the same MCO. Similarly, families with mixed eligibility between the Marketplace and Medicaid may find accessing care easier if they are all enrolled with the same MCO. Previous research suggests that overlap plans are more affordable than others and that marketplaces are more competitive when there are plans that participate in both markets.
However, the benefits of overlap may be more theoretical than actual. Little is known about the extent to which members currently move between segments, and to what extent these transitions are easier if they are able to stay with the same plan. Nor has there been much analysis of the comparability of provider networks, which has major implications for continuity of care and is often described as the major benefit of remaining with the same carrier.
In light of the PHE, there is new attention to the potential role that plans can play in keeping people covered. The Centers for Medicare and Medicaid Services encouraged states to consider partnering with MCOs in various ways, by having them provide updated contact information on enrollees, engage in outreach to help prepare enrollees for impending redetermination processes, assist with re-enrollment for those who have lost their eligibility for procedural reasons, and facilitate transitions to Marketplace plans for those who have lost their eligibility. While Medicaid marketing rules prohibit MCOs from encouraging enrollment in their own Medicaid plans, there are not similar rules regarding the advertising of Marketplace plans.
A toolkit for states encourages Medicaid directors to consider MCOs as “essential partners in both ensuring that members keep their coverage and supporting successful coverage transitions.” It is not yet clear to what extent states will take advantage of the opportunity to partner with MCOs. Some states report data system incompatibilities that will make it impossible to receive contact information from MCOs. A lack of integration between state Medicaid agencies and departments of insurance may be a barrier to collaboration in some states, while in others, there may be concerns that such collaboration would provide an unfair advantage to plans that participate in both markets. Some states are taking steps on their own to ease coverage transitions, such as California’s program to automatically migrate enrollees losing Medicaid coverage to the lowest cost silver plan, or Oregon’s consideration of a “bridge plan.”
MCOs would probably prefer to retain their Medicaid members in the Medicaid program, if possible. With regard to transitions to the Marketplace, there may be a complicated mix of incentives. Some recent activity is consistent with the idea that plans believe the expanded connection between Medicaid and the Marketplace created by the PHE is advantageous. For example, perhaps in anticipation of the opportunity to gain new members, several Medicaid plans newly entered the Marketplace this year, and several MCOs expanded their footprint to offer Marketplace plans in territories where they already participate in Medicaid.
On the other hand, there are some signs of wariness about Marketplace membership growth, and some plans may prefer that their Medicaid members do not join their Marketplace plans. They may be concerned that there will be adverse selection among those who choose to enroll in Marketplace coverage versus those who let their coverage drop, especially if the expanded tax credits from the American Rescue Plan Act are not extended. They likely know which of their Medicaid members will be profitable for them in the Marketplace, where provider and prescription drug costs are different, as is risk adjustment. Molina recently announced disappointment with their performance in the Marketplace, blaming the extended special enrollment period for adverse selection and higher than expected claims costs. They described their Marketplace line as an “adjunct” to their more important and desirable Medicaid business. Other plans have shown signs of stress. Bright Health, which does not provide Medicaid, recently announced layoffs in response to losses, despite large gains in Marketplace enrollment.
The synergies between Medicaid and the Marketplace which have been growing for the past several years will soon be put to a real-world test when millions face the loss of their coverage. It’s not yet clear whether or how states and MCOs will collaborate, but it is likely that fragmented public systems and private incentives will prevent an optimal response from the standpoint of maximizing coverage.
A series authored by RWJF Senior Policy Adviser Katherine Hempstead provides expert insights on timely policy topics related to the health insurance marketplaces.
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