Fluctuating insurance coverage is not a new problem for the U.S. health care system.
For years, individuals have gained or lost eligibility for federal health insurance programs as their incomes change.
The process is known as “churning” — a health care insider buzzword that is becoming more familiar to the public as state officials search for ways to prevent it, particularly under the Affordable Care Act.
Cycling Through Insurance
Under the law, if a person’s annual income is below 138% of the federal poverty level — or about $15,850 — he or she qualifies for coverage under the Medicaid expansion. If a person’s income is between 138% and 400% of the federal poverty level, he or she qualifies for federal tax subsidies to purchase private coverage through the state insurance exchanges.
However, normal life events — such as getting married or divorced, having children or taking a second job — can alter an individual’s income and push him or her back and forth between the two coverage levels, according to experts.
According to a 2011 study published in the journal Health Affairs, income fluctuations under the new law next year could produce eligibility shifts between Medicaid and subsidized coverage through the exchanges for as many as 28 million people.
Researchers found that those most at risk for fluctuating coverage are seasonal and hourly workers, as well as young adults who are not covered by their jobs or their parents’ health plans.
Health care officials who work with large Medi-Cal populations say fluctuations in eligibility cause the quality of care to decline and the cost of care to increase from added administrative expenses. Medi-Cal is California’s Medicaid program.
Other experts say that patients who lose access to their doctors or their medications because of churning will either avoid care altogether or seek treatment in emergency departments, which would increase health care spending. They note that insurance premiums through the exchange will rise if young, healthy people opt out of health coverage completely if they grow tired of frequent shifts in eligibility.
How Some States Are Reducing Churning
States are implementing or considering various ways to reduce the potential for churning under the ACA. Here are a few of the most common strategies.
Managed care organizations: Nevada is planning to include in Medicaid contracts with private insurers — called managed care organizations — a requirement that companies must offer a comparable private plan through the state’s insurance exchange next year. That way, if Nevada residents experience a bump in income, they will be able to purchase a plan through the state exchange with the same care network as their Medicaid coverage, which could eliminate gaps in care.
Premium assistance: A few states are considering the “premium assistance” model to manage churning. In this scenario, a state’s Medicaid program helps individuals pay for private health plans through the exchange. A recent study published in the New England Journal of Medicine found that employing a premium assistance model under the ACA could help states reduce churning by as much as two-thirds. However, the Government Accountability Office in 2010 found that only six states offered the model and projected that the number of beneficiaries in the program would be very low.
Basic Health Plan: Iowa, Massachusetts, Minnesota, New York and Washington have tested an early version of the Basic Health Plan option created by the ACA. The provision allows states to use federal tax subsidy money to create a state-run health plan for those whose incomes are between 139% and 200% of the federal poverty level. A 2012 report published in Health Affairs found that BHPs would significantly reduce the potential for churning under the ACA.
What California Is Doing About Churning
What strategy has Covered California, the state’s health insurance exchange, selected?
“Currently there is no strategy,” Dana Howard — Covered California spokesperson — told California Healthline.
However, he added that the exchange “does not see the implementation of the Affordable Care Act as causing an undue amount of fluctuation between Medi-Cal and Covered California.”
Last summer, the exchange board commissioned a report to examine the effect of a BHP in California.
The analysis — by the UC-Berkeley Labor Center and the UCLA Center for Health Policy Research — made three main points:
- The BHP would siphon between 720,000 and 950,000 participants from the exchange, which could limit the exchange’s bargaining power;
- BHP would not affect the risk mix in the exchange; and
- The number of Californians with health coverage would rise under the BHP, with a bump in covered individuals reaching between 60,000 and 120,000 Californians, in a base scenario.
According to Howard, the health exchange board decided not to pursue a BHP option in the end. Instead, he said, the exchange “is offering four … tiers of health plans, plus a catastrophic plan for individuals who qualify.”
However, state lawmakers seem poised to give aid to Covered California officials. Earlier this summer, the Legislature passed SBX1-3 — by Sen. Ed Hernandez (D-West Covina) — which would create a “bridge program” to allow people to stay in their health plan when financial or family circumstances change.
The measure awaits Gov. Jerry Brown’s (D) signature.
A Look Ahead
Although California chose not to pursue the BHP option, other states are encouraged by research saying it will reduce churning. However, those who wish to implement it will have to wait a year longer than originally planned.
In February, the Obama administration announced that implementation of BHP has been delayed until 2015.
HHS officials said they do not have enough time to issue the guidelines necessary to launch the program in 2014. The department now plans to release a proposed rule for public comment later this year, finalize the rules in 2014 and implement the program in 2015.
There also could be a federal rule that widely affects the churning process.
Among several regulations addressing various aspects of exchanges that are being reviewed by the Office of Management and Budget is a proposed rule governing appeals by people denied eligibility for Medicaid coverage and for exchange subsidies.
The rule would clarify the point at which a person qualifies for Medicaid or subsidized exchange coverage and whether that can change multiple times annually.
A final rule must be approved by Jan. 1, 2014.
Here’s a look at what else is making news in the world of health reform.
It’s All In the Headline: In her “Health Reform Watch” column in the Washington Post‘s “Wonkblog,” Sarah Kliff examines how newspapers spin the cost of health premiums under the ACA with some simple word choices.
GOP Uses Lightsabers Against Obamacare: Avik Roy at Forbes‘ “Apothecary” explains why some Republicans are desperate to defund the ACA before it is fully implemented, a situation best understood in the context of “Star Wars.”
Silver Lining: Sarah Collins writes in The Commonwealth Fund Blog that although some have taken the one-year delay of the ACA’s employer mandate as a “bad omen,” the move is “unlikely to substantially affect existing or new coverage options.”