The Times They Are A Changin’… Or Should We Say “Churning?”

January 20, 2014

With the advent of the ACA, the definition of “churning” in a health care insurance context has been expanded.

The term used to refer to low-income Americans under the age of 65 fluctuating back and forth between qualifying for Medicaid and then, because of an increase in their income, finding that they no longer qualify — and then sometimes back to qualifying again. Now it also encompasses shifting eligibility between Medicaid and being able to buy health plans on private exchanges with a federal subsidy based on income levels.

Prior to the ACA, the options were much more clear: a person either qualified for Medicaid or not. Options now include qualifying for Medicaid under the old rules, for expanded Medicaid in the states that opted into that part of the ACA, and public exchanges.

In 2013, we discussed in this blog the implications of states opting to expand or not expand Medicaid coverage. Since the public exchanges opened for business on October 1, 2013, some states that initially opted out have reconsidered and their governors have petitioned their state legislatures to approve the expansion, such as Ohio and Pennsylvania.

This coming year will be the proving ground for this new definition of churning and its impact on low-income Americans as they try navigate a changing health care landscape. Those who fail to stay on top of their eligibility could fall into coverage gaps, run the risk of having to pay back the federal government for subsidies used when they were not eligible, or both.

For example, individuals who are unemployed when they apply for insurance will most likely be eligible either for Medicaid or for tax subsidies on the public exchange.

However, if that individual gets a job with an income that disqualifies him or her from subsidies and that does not include employer-sponsored health insurance, those subsidies may have to repaid come tax time.

By the numbers…

Medicaid Eligibility based on Medicaid.gov

  • A national Medicaid minimum eligibility level of 133% of the federal poverty level ($29,700 for a family of four in 2011) for nearly all Americans under age 65

Public Exchange Eligibility from Healthcare.gov

  • Eligibility depends on a variety of factors, but individuals are eligible for premium tax credits if they have incomes between 100 and 400% of the federal poverty level ($11,490 to $45,960 for an individual in 2013)

See the chart below for a more detailed breakdown of public exchange and Medicaid eligibilities, and their income breakdowns.

health-care-savings-chart-small

 

[Click on table to expand]

source: https://www.healthcare.gov/how-can-i-save-money-on-marketplace-coverage/

Other implications of this type of churning include the psychological toll on a person associated with the uncertainty of not knowing whether he or she is covered. This is particularly true for people with mental issues and substance abuse problems.

According to Matt Salo, executive director of the National Association of Medicaid Directors, states are anxious to seek solutions to this issue. “You want people to have ­consistent insurance coverage, whether you’re dealing with someone who’s got mental health and substance abuse issues or a variety of undertreated chronic conditions,” said Salo.

The population poised to be affected by this new type of churning is not small. A recent report by the Urban Institute found that 29.4 million people (or 31% of those who will receive either Medicaid or exchange subsidies) will churn between the two programs in a given year.

It remains to be seen how state and federal governments and organizations will respond to this issue, but we’re already starting to see changes on the state level.

Several states are working to get legislation on the books to address the problem. For example, a bill sponsored by Texas representatives Gene Green and Joe Barton would require states to guarantee 12 months of continuous eligibility for Medicaid recipients. As many as two dozen states already have similar laws in place for children on Medicaid and in the Children’s Health Insurance Program (CHIP).

This issue will no doubt come to the forefront as more Americans’ eligibility fluctuates, and begin to look to their state and federal officials for answers.

In the words of Bob Dylan (plus our addition), “The Times They Are a-Churnin.’”

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