Medicaid buy-in option could be a tough sell to states, managed care insurers

Many of the states where a Medicaid buy-in option would be most effective probably won’t adopt it, and even states that are receptive to it may find it difficult to get insurers on board.

The Medicaid buy-in option is the subject of legislation introduced in October by Sen. Brian Schatz, D-Hawaii, and Rep. Ben Ray Luján, D-N.M. The basic idea is that middle-income people could use their premium tax credits to purchase a Medicaid-based public insurance plan on the Affordable Care Act exchanges—increasing these consumers' access to affordable plans.

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That option would be the most beneficial in states with low insurer participation and high premiums in their ACA marketplaces, according to a new analysis from the Urban Institute. However, many of these states haven’t expanded Medicaid eligibility to include more low-income adults, so they’re probably not likely to adopt a buy-in option that takes the Medicaid program even further from its traditional roots.

Among states that have expanded Medicaid, though, some continue to grapple with high ACA marketplace premiums and low competition. Those states—Arizona, West Virginia, Pennsylvania and Maryland—may be the most likely to both take advantage of and benefit from a Medicaid buy-in option.

The buy-in option would also be most effective in states where managed care organizations (MCOs) cover most of the Medicaid population but don’t sell plans in the individual marketplaces. But there’s a catch: Convincing those MCOs to sell Medicaid-like plans to a new set of customers would be a heavy lift, because they’d face many of the same complications that have led them to avoid the individual marketplaces. These include:

  • Insurers could face significant new costs due to their inexperience in setting and collecting premiums for the population they’re serving.
  • Frequently shifting federal regulations and policies make the number and average healthcare needs of enrollees “highly uncertain.”
  • Insurers may not want to deal with ACA marketplace rules that “create more intense competition.”
  • Smaller MCOs may not have the network capacity to expand.

There are steps that states could take to make insurers more likely to participate in a Medicaid buy-in program, though. For example, they could help with premium determination and collection, set up state-based reinsurance programs, and offer joint marketing and enrollment assistance, according to the Urban Institute.

Meanwhile, as Democrats push for more liberal policies like a Medicaid buy-in program, the Trump administration and conservative states are forging ahead with plans to make conservative changes to Medicaid. But one of those experiments—Kentucky’s waiver imposing work requirements on beneficiaries—has already come up against a legal challenge.