Elasticity is the name of the game (at least in CA) (Guest Post)

Hat Tip To: 
Javier Anderson

by Javier Anderson, April 17, 2014

According to a new policy paper by the UC Berkeley’s Center for Labor Research and Education, it is likely that up to half of California’s Exchange Enrollees will not be enrolled in their current Quality Health Plan’s (or QHP’s) by the end of the first year of the exchanges existence. This is due to a myriad of life factors allowing consumers to drop these plans for other policies afforded to them by their spouses, employers, or other government insurance providers (Medicare, Medicaid, Tricare etc.)

This explanation goes a long way in clarifying one of the most contentious issues that critics as well as supporters of the Patient Affordable Care Act of 2010 (colloquially known as ‘Obama care’) have had issue in fully grasping, why a relatively large portion of those who have now enrolled have yet to pay for their premiums or who are no longer doing so. Many have simply moved on to a different plan or form of coverage and are no longer paying for the former coverage they don’t use. This revelation seriously puts into question the dominant theory that these enrollees have simply signed up and are not  paying for the services provided to them, becoming what the insurance industry calls ‘deadbeats’.

"This is not at all surprising," says Ken Jacobs, head of the Center for Labor Research and Education at UC, Berkeley who spoke in an interview for NPR on an article clarifying the perceived success of the law and to gauge the lasting impact of the President’s signature law. “That's always the case in the individual market,” Jacobs says. “It's transient.” This is comparable to the general agitation seen in the Governments Health Care service for the poor, known as Medicaid.

Mr. Jacobs went on to clarify what the situation might be for many of these individuals. “We have people, who are starting in the non- group market, and they get a job with job-based coverage and they leave," Jacobs continued. "Or their income goes down and they end up going into Medicaid." The outcome can also play out in the reverse Jacobs noted, "So [that] they go into the exchange, or they get a job with job-based coverage and they leave the exchange."

The study observes that a large portion of those who signed up early on to California exchange (known as Cover California or Cover CA for short) may well fit into some of these logical, but not so categorically convenient groupings. By the time their new coverage kicked-in, no matter what the circumstance, these individuals dropped their QHP coverage and therefor stopped paying, some before they had even paid their first premium. "By the time they needed to pay," Jacobs explained, "life had changed and they no longer needed that coverage."

This stirring of plans, known as ‘churn’ to Health Care policy makers, has long since been observed since the enactment of Medicaid in the 1970’s and has posed a difficult issue with how to deal with both changing incomes as well as maintaining continuous coverage for those involved. Many states are attempting numerous ways to resolve this issue which has plagued policy-makers as well as insurance providers alike for many years. Remedies such as offering Medicaid recipients with subsidized QHP’s, and creating State Basic Health Plans (BHP’s) are just some of the many solutions available to state-lawmakers and policy experts alike. With the issue of payment or non-payment, a new wrinkle seems to have been added with the creation of QHP’s.  Questions about how the government will treat these policies have now become an important issue in the laws initial implementation.

The study approximates that roughly one-fifth of those enrolled in a QHP today will likely drop exchange-based coverage for an employer-based policy while another fifth will drop their coverage to enroll in the states medical insurance provider for the poor, known as Medi-Cal. Other varying circumstances such as moving out of state, joining coverage with a spouse/domestic partner might add further noise to the observed churn.

While the study only reflects the churn that has been observed in California, it should not be surprising that other state marketplaces and the federal marketplace should show similar signs as well. While a federal report has yet to quantify this roil in the risk pool, one doing so should be expected in the near future once the historic first enrollment period has officially ceased across the country.

The paper also reported on the long term likelihood that those enrolled should be able to keep themselves insured.  The numbers varied when it came to comparing the number of those on the individual QHP market versus those now enrolling in California extended coverage of Medicaid.  Of those on Medi-Cal, it is expected that fully one-sixth of those now enrolled will experience enough of an increase in income so as to allow them to purchase coverage (transient or otherwise) in Cover CA.

It remains to be seen how the fleeting nature of some of these enrollees will affect the insurance marketplace as a whole, but studies in the near future are likely to pin-point as well as propose methods to better comprehend, as well as ameliorate their impact on the debate between opponents and supporters of the law who still argue about the paid/unpaid status of these customers.

Sources & Citations

Brino, A. (2014, March 13). Eligibility 'churn' presents problems for states, health plans. Healthcare Payer News. Retrieved April 17, 2014

Brino, A. (2013, October 22). Many exchange plans try to solve 'churn' problem. Healthcare Payer News. Retrieved April 17, 2014

Rovner, J. (2014, April 16). Is Obamacare A Success? We Might Not Know For A While. NPR. Retrieved April 17, 2014

Dietz, M., Graham-Squire, D., & Jacobs, K. (2014, April 1). The Ongoing Importance of Enrollment: Churn in Covered California and Medi-Cal. The Ongoing Importance of Enrollment: Churn in Covered California and Medi-Cal. Retrieved April 17, 2014