Shocker (not): Medicaid expansion LOWERS private insurance premiums

Jeffrey Clemens has an excellent explanation of why people who complain about high health insurance premiums should support Medicaid expansion:

Medicaid Expansion Helps Affordable Care Exchanges Work Better

A simple cost comparison using data from the Medical Expenditure Panel Survey illustrates why Medicaid expansions can substantially affect premium prices for private insurance plans. Under national health reform, community rating regulations apply to purchases made on state exchanges by both individual consumers and small employers. In 2011, the health care costs of individuals getting insurance in these ways averaged $4,300 (with lower costs for the healthiest among them). By contrast, health care costs for nonelderly adults on Medicaid averaged $8,300 (even though Medicaid pays low rates to hospitals and physicians). If all Medicaid beneficiaries were shifted to the exchanges, prices for each purchaser would go up by more than $1000.

I haven't read the MEPS referred to, but I think the gist of it is this:

The cost to actual healthcare providers for "standard" policyholders is $4,300 apiece.

The cost to actual healthcare providers for those who fall into the Medicaid expansion pool is $8,300 apiece. Those enrollees are 93% more expensive to cover.

So, if you have 100 "standard" people enrolled who cost $4,300 each and then add 100 "expansion" enrollees at $8,300 apiece, that means the average cost-per-enrollee to the insurance companies has gone from an average of $4,300 to an average of $6,300...or 46% higher on average. Of course, that's assuming a 1:1 ratio.

If you dump those people onto the exchanges, the insurance companies will have to price their premiums high enough to cover the extra costs of the Medicaid crowd. Their risk pool has been impacted just like if any other expensive-to-treat demographic enrolled in higher-than-expected numbers (ie, the whole "But how many YOUNG PEOPLE enrolled??" panic, remember?).

Seems to me that states like Arkansas, which have a "private Medicaid option" program, are basically doing exactly this, so the real-world impact of their ACA policy premiums should be interesting to watch.