By: Peter Kaczmarek, FSA, MAAA, John Rienstra, ASA, MAAA, Kurt Giesa, FSA, MAAA
With the end of the current public health emergency (PHE), states will begin removing people who are no longer eligible from their Medicaid rolls, a redetermination process that we expect will extend through 2023 and beyond. In addition, starting in 2023, the more generous premium tax credits (PTCs) that are currently available for individual health insurance coverage under the American Rescue Plan Act (ARPA) will no longer be available unless Congress acts to extend them. The end of the ARPA PTCs will result in a significant increase in the cost of coverage for millions of Americans who rely on the Affordable Care Act (ACA) Exchanges for their coverage. Further, for those individuals who are disenrolled from Medicaid, the higher premiums resulting from the end of the ARPA PTCs will serve as a significant barrier to obtaining coverage on the Exchanges.
We estimate that the sunsetting of the ARPA enhanced PTCs, when combined with the Medicaid redetermination process, will result in, at minimum, 5.1 million people becoming uninsured by 2024. This conservative estimate assumes that all those losing Medicaid coverage through the redetermination process take up employer-sponsored insurance coverage, if they have access to it, and that states make their best efforts to help those losing coverage to understand their options and remain covered.
On April 12, 2022, Xavier Becerra, the Secretary of Health and Human Services, renewed the determination that a PHE exists, thereby extending the requirement that states keep people enrolled in their Medicaid programs as a condition of the states receiving a temporary increase in the federal share of the states’ Medicaid costs. At some point, the PHE will end, and states will begin the process of actively removing, from among the roughly 90 million Medicaid enrollees, those who are not eligible for coverage under that program.
The ARPA enhances the PTCs that were included in the ACA in the following ways:
- By making, for the first time, PTCs available to those with household incomes greater than 400% of the federal poverty level (FPL)
- By making the premium $0 for a plan covering 94% of expected medical expenses for households with incomes between 100% and 150% of FPL (incomes between roughly $13,000 and $19,000 for a single individual in 2022)
- The ARPA PTCs reduce enrollees’ out-of-pocket premium costs by roughly two-thirds at 200% of FPL, and by 40% at 300% of FPL
The enhanced ARPA PTCs were effective in bringing people into the Exchanges. In 2022, individual Marketplace enrollment increased by 21%, to 14.5 million. The increases were highest in states that chose not to expand their Medicaid programs for adults under ACA. As examples, Exchange enrollment in Florida and Texas increased by 28% and 42%, respectively.
Modeling Medicaid Redetermination and the end of the ARPA Premium Tax Credits
We used our Health Reform Microsimulation (HRM) model to understand the potential impact of the sunsetting of the ARPA PTCs, and a separate, conservative estimate of the impact of the Medicaid redetermination process, on the number of uninsured.
The Impact of the PHE and Redeterminations on Medicaid Enrollment
In Figure 1, we show nationwide Medicaid enrollment, with actual enrollment through October 2021 (the most recent data available), and our estimates of how Medicaid enrollment will continue to grow through the end of the PHE, which we assume here to occur in September 2022. If the PHE were extended beyond this point, the effects of the reduction in Medicaid enrollment we show here could be delayed.
We show Medicaid enrollment peaking in September 2022 at 91.3 million. We also show our estimates of the effect of states’ redetermination efforts following the end of the PHE, with enrollment declining through the fourth quarter of 2022 and all of 2023 to 80.9 million by the end of 2023.
Some individuals losing Medicaid coverage will have access to employer-sponsored insurance (ESI). In our modeling, we have made the simplifying assumption that all individuals with affordable access to ESI (as defined under law) select that option. We have also assumed that states will make every effort to help those individuals losing coverage through the redetermination process to understand their options, which may include ESI coverage or subsidized coverage from the Exchanges. To the extent individuals losing coverage through the redetermination process decline affordable ESI or are not made aware of their coverage options, the number of uninsured will be greater than we estimate here.
Modeling Enrollment in the ACA
In Figure 2, we show the impact of the sunsetting of the enhanced ARPA PTCs on annual premiums for individuals age 45 at various incomes. The premium we are using in Figure 2 is the median premium for a 45-year-old for the benchmark silver plan across all rating areas in the Healthcare.gov states in 2022.
In Figure 2, we show for example that the loss of the ARPA subsidies will increase the annual premium for someone age 45 from $0 to $793 at 150% of FPL (roughly $19,000 in income). At incomes just above 400% FPL (roughly $52,000 in income), the premium will increase from $4,339 to $6,079.
Our modeling of the loss of the ARPA PTCs shows that the premium increases we illustrate in Figure 2 will cause a decline in enrollment commensurate with the enrollment increase the enhanced ARPA PTCs brought about. We would also point out that declining enrollment, like that which will occur if the ARPA PTCs end, is almost always accompanied by increasing morbidity as the healthiest individuals are generally the first to leave the market, and higher morbidity leads to premium increases.
The Combined Impact of Redeterminations and the Sunsetting of the ARPA Premium Tax Credits
The public health emergency will end, and individuals needing coverage will be looking to the Exchanges if they do not have access to affordable ESI or other coverage options. The sunsetting of the enhanced ARPA PTCs will make coverage on the Exchanges much more expensive for most enrollees. Even assuming all those individuals with access to affordable ESI coverage take that option, and assuming states’ best efforts in helping those individuals losing Medicaid coverage to find replacement coverage, our modeling shows that the end of the ARPA enhanced PTCs and the Medicaid redetermination process will result in 5.1 million more individuals becoming uninsured by 2024.
Qualifications, Assumptions, and Limiting Conditions
The opinions expressed here are those of the authors. There are no third-party beneficiaries with respect to this report, and Oliver Wyman does not accept any liability to any third party. Information furnished by others, upon which all or portions of this report are based, is believed to be reliable, but has not been independently verified, unless otherwise expressly indicated. Public information and industry and statistical data are from sources we deem to be reliable; however, we make no representation as to the accuracy or completeness of such information. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. Oliver Wyman accepts no responsibility for actual results or future events. The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. No obligation is assumed to revise this report to reflect changes, events, or conditions, which occur subsequent to the date hereof. Our modeling work was prepared on behalf of the Blue Cross Blue Shield Association. The authors of this report are members of the American Academy of Actuaries and meet that body’s qualification standards for performing this work.