Medicaid Plans More Cost Effective, Stable than Exchange Plans

May 23, 2018 - Medicaid health plans are more cost effective than federal exchange plans and could offer beneficiaries more affordable coverage options, according to a UnitedHealth Group analysis.

UnitedHealth Group said that federal healthcare agencies could create more affordable health plans for low-income individuals if CMS redistributes funding currently spent on the exchanges into Medicaid.

“The federal government is projected to spend $56 billion on public exchange subsidies in 2018 and $704 billion over 10 years (2018-2027),” UnitedHealth Group said. “Redeploying these federal resources to Medicaid coverage would cover more people at a lower cost.”

Medicaid coverage costs 43 percent less than federal exchange coverage, according to the report. The annual costs of Medicaid coverage average out to $5400 a year per enrollee, compared to $9400 per year for each enrollee on exchange plan coverage.

Public exchange health plan customers also saw increased premiums from 2014 to 2018 due to a variety of policy changes and alterations to the risk pools.   

Unsubsidized exchange premiums have grown by 88 percent, from $2616 in 2014 to $4932 in 2018 for a low-income 27-year-old. For 40-year-old enrollees, premiums grew by 76 percent, from $3276 in 2014 to $5772 in 2018.

Low-income public exchange enrollees pay an average of $2400 annually in premiums after subsidies and cost sharing assistance.

UnitedHealth Group found that the federal health plan exchanges have contributed little to national insured rates, citing low enrollment totals through the exchanges.

“[The] exchanges have failed to achieve enrollment expectations and currently cover far fewer people than other coverage platforms,” the team said. “Exchanges face low expectations for new growth and overall future participation.”

Federal exchange health plans cover 10 million people, or 3 percent of the US population. While a 2013 estimate by the Congressional Budget Office predicted that 25 million individuals would be using the exchanges in 2017, UnitedHealth Group found that the 2017 enrollment numbers totalled only 40 percent of the CBO estimate.

Meanwhile, employer-sponsored insurance covers 54 percent of all health plan beneficiaries (174 million enrollees) in the US. Medicaid covers 23 percent of all beneficiaries (75 million), and Medicare covers 18 percent of health plan holders (58 million).

UnitedHealth Group also cited exchange enrollment totals from previous years and found slight declines in year-to-year exchange enrollment. Of the 12.7 million individuals that enrolled in exchange plans in 2016, 3.6 million enrollees had lost or dropped their coverage by the end of the year.

Even though exchange enrollment remained stable for the 2018 open enrollment period, the exchanges may be negatively impacted by new federal policies.

Federal changes, including the expansion of association health plan (AHP) sales, repeal of the cost-sharing reductions (CSRs), and repeal of the individual mandate, are likely to weaken the exchange market.

AHPs are likely to threaten the exchange market since AHPs can offer low premiums that attract low-income enrollees, despite offering significantly fewer benefits. AHPs are likely to challenge payers that participate in individual markets by.

A repeal of the individual mandate will not incentivize individuals enrollees to purchase a health plans since they are not at risk for financial penalties based on lack of coverage. The CSRs are also critically important for exchange health plans since they help low-income members offset premium and other cost-sharing expenses.