GOP Med­i­caid over­haul will hit in­sur­ers where it hurts

Modern Healthcare - - NEWS - By Shelby Liv­ingston

The Af­ford­able Care Act’s in­surance mar­ket­place has been tough on pay­ers look­ing to make a profit on that busi­ness, but Med­i­caid ex­pan­sion fun­neled mil­lions of new mem­bers to in­sur­ers, boost­ing rev­enue. That soon may change.

Leg­is­la­tion passed in two House com­mit­tees last week would re­peal the ACA and es­sen­tially roll back Med­i­caid ex­pan­sion. That could re­sult in 4 mil­lion to 6 mil­lion ben­e­fi­cia­ries los­ing in­surance be­tween 2020 and 2024, slash­ing health in­sur­ers’ pre­mium rev­enue and, by proxy, earn­ings.

Most states con­tract with pri­vate in­sur­ers to pro­vide cov­er­age to Med­i­caid ben­e­fi­cia­ries. That gives in­sur­ers more pa­tients and a more pre­dictable stream of rev­enue.

Molina Health­care took in about $ 3 bil­lion in Med­i­caid ex­pan­sion pre­mium rev­enue last year. The com­pany’s CEO, Dr. J. Mario Molina, said the states are not in a po­si­tion to take on more costs and pre­dicts many will drop Med­i­caid ex­pan­sion.

The GOP’s Amer­i­can Health Care Act, in­tro­duced last week, would phase out the en­hanced fed­eral con­tri­bu­tion that fi­nances Med­i­caid ex­pan­sion start­ing in 2020. The 31 states that ex­panded Med­i­caid could re­spond by re­duc­ing re­im­burse­ment rates to off­set lost fed­eral fund­ing. That would squeeze in­sur­ers in the long run.

Med­i­caid, which cov­ers around 76 mil­lion peo­ple, ac­counts for about 20% of in­surance com­pa­nies’ to­tal pre­mi­ums, ac­cord­ing to S&P Global, which re­leased a re­port last week on the im­pact of the new bill.

In­vestor-owned in­sur­ers that fo­cus al­most ex­clu­sively on out­sourced Med­i­caid cov­er­age, in­clud­ing Molina and Cen­tene Corp., have thrived un­der the Med­i­caid ex­pan­sion. Molina cov­ered 673,000 new mem­bers at the end of last year, or about 16% of its to­tal mem­ber­ship, ac­cord­ing to Se­cu­ri­ties and Ex­change Com­mis­sion fil­ings.

Cen­tene served 1.1 mil­lion mem­bers in Med­i­caid ex­pan­sion pro­grams across 10 states last year, com­pared with 449,000 in 2015. That’s about 10% of its to­tal mem­ber­ship. The com­pany wouldn’t dis­close its rev­enue from Med­i­caid ex­pan­sion.

Wel­lCare Health Plans, which deals mostly in Med­i­caid, grew its Med­i­caid mem­ber­ship 39% from 1.8 mil­lion mem­bers in 2013—be­fore Med­i­caid ex­pan­sion—to 2.5 mil­lion at the end of 2016. Its Med­i­caid pre­mium rev­enue to­taled $9.5 bil­lion in 2016, up 67% from $5.7 bil­lion in 2013.

Unit­ed­Health Group, which also has a large foot­print in Med­i­caid, added more than 1 mil­lion mem­bers through ex­pan­sion pro­grams in 15 states as of the end of 2016, an SEC fil­ing shows. De­spite un­cer­tainty in state fund­ing go­ing for­ward, Leerink Part­ners an­a­lyst Ana Gupte said in a re­cent re­search note that Unit­ed­Health’s “earn­ings ex­po­sure specif­i­cally to Med­i­caid ex­pan­sion is man­age­able.”

An­them’s Med­i­caid mem­ber­ship jumped 49% to 6.5 mil­lion mem­bers in 2016 from 4.4 mil­lion in 2013. The in­surer doesn’t break out pre­mium rev­enue from Med­i­caid.

Cen­tene CEO Michael Nei­dorff be­lieves states will fig­ure out how to cover the Med­i­caid ex­pan­sion pop­u­la­tion once fed­eral fund­ing is rolled back.

Even if the states re­ceive less money for Med­i­caid, the health plans still must be ac­tu­ar­i­ally sound, said Jeff My­ers, CEO of trade group Med­i­caid Health Plans of Amer­ica. Fed­eral law re­quires that only fi­nan­cially healthy in­sur­ers re­ceive Med­i­caid fund­ing. Congress will have to change the law to al­low plans to “sig­nif­i­cantly al­ter the ben­e­fit,” he said.

And that can’t be done through bud­get rec­on­cil­i­a­tion, which is how con­gres­sional Repub­li­cans in­tend to pass their re­peal bill.

My­ers said his or­ga­ni­za­tion is con­cerned about the cuts, but it’s not in­con­ceiv­able, he said, that states would chip in more to make up what is lost in fed­eral fund­ing. He pre­dicts that states will tran­si­tion more Med­i­caid mem­bers to cap­i­tated man­aged-care plans to rein in costs. About 73% of the Med­i­caid pop­u­la­tion is al­ready en­rolled in fully cap­i­tated risk mod­els, My­ers said. The re­main­ing en­rollees are the most ex­pen­sive ones.

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