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Medicaid Expansion Presents Health Insurers With Opportunity, Risk

Health insurers could gain business by capitalizing on the new health reform law's expansion of Medicaid, but working with the program presents inherent risks, including potential cuts to insurer payments caused by state budget shortfalls, Reuters reports.

The new reform law raises the income eligibility limit for Medicaid to 133% of the federal poverty level and broadens qualifications to include adults who have no children.

According to the Congressional Budget Office, the changes will add 15 million U.S. residents to Medicaid, increasing enrollment by around 30%.

Large insurers could see the expansion as a welcome growth opportunity because the new reform law likely will have an adverse effect on their individual and Medicare plans, according to Reuters.

However, insurers cannot take advantage of the expansion until it begins in 2014. In addition, insurers could put themselves at risk by offering Medicaid plans because they will be insuring a new type of population and suddenly handling a large influx of beneficiaries.

Furthermore, states with budget issues stemming from the economic recession could cut payments to insurers that operate Medicaid plans, as happened in 2009.

Eileen Ellis, consultant and former director of Michigan's Medicaid program, said, "The opportunity is greater than the risk, but it's not all roses." She added, "There are going to be some bumpy times, especially between now and January 2014" (Krauskopf, Reuters, 3/30).

This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.
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