Wednesday, January 15, 2014

Enrollees in "private option" for Medicaid expansion lean younger, lowering median age in Arkansas Marketplace

Posted By on Wed, Jan 15, 2014 at 4:39 PM

The Arkansas Department of Human Services released demographic information for the first time today on enrollees in the "private option," revealing a much younger population than has thus far been signing up in the federally facilitated Arkansas Health Insurance Marketplace. More than half of the people enrolled in the "private option" — Arkansas's unique version of Medicaid expansion — are younger than 40, and more than 75 percent are under 50. That could help to keep premiums lower in the marketplace in coming years*.

The "private option" uses Medicaid funds via the federal healthcare law to fully pay the premiums of private health insurance plans for low-income Arkansans. Because those plans are the same ones that other Arkansans are shopping for on the individual market, it's all one big risk pool. The demographic mix of the "private option," therefore, doesn't just impact the cost to the government of the "private option" itself — it impacts the premium prices that carriers will offer to anyone shopping in the Marketplace. 

The impact of the "private option" has thus far been fairly dramatic: Medicaid Director Andy Allison said  that it lowers the median age of the current pool in the marketplace by at least 10 years. In a DHS press release, Allison stated, "Arkansas’s private insurance market is significantly larger and younger than it would be, and includes healthier participants than it otherwise would. That makes Arkansas a more attractive place for insurance carriers, and likely will increase competition among the carriers that sell plans in this state."

Here's the approximate breakdown by age of the "private option" pool (through January 2): 

18-29: 26 percent
30-39: 30 percent
40-49: 21 percent
50-59: 18 percent
60+   :  5   pecernt

Compare that to the feds' breakdown of plans selected in Arkansas via the federally facilitated Marketplace (they used different age breakdowns than DHS but you'll get the idea): 

18-25: 10 percent
26-34: 12 percent
35-44: 15 percent
45-54: 23 percent
55-64: 40 percent

Again, that's a pretty dramatic difference. Unlike healthcare.gov, the "private option" appears to be on target with the Obama administration's original goal of getting around 40 percent of signups to be 18-35 year olds. Ultimately what matters most is that the pool of people skews healthy. These numbers don't tell us that, but age correlates with health risk, and so far the "private option" is making the overall risk pool much younger. Very good (preliminary) news.

There's also another big reason to surmise that the "private option" population will make the overall risk pool healthier — DHS is screening enrollees for health risk and sending the medically needy to the traditional Medicaid program. That keeps the most risky enrollees (approximately 10 percent) off of the marketplace. (From a budgeting standpoint, those folks will still be covered by the same federal matching rates — the feds pick up the full cost for the first three years, gradually falling to 90 percent in 2020 and beyond.) 

The mix of enrollees (young and old, healthy and sick, etc.)  in a health insurance market matters much more than the volume of people that sign up. That said, some bare minimum of people is necessary to have a functioning, sustainable market, and without the "private option" Arkansas might be teetering on the brink. A little more than 12,000 Arkansans had selected a plan through healthcare.gov as of the end of December. Meanwhile, more than 90,000 people have been determined eligible and will enroll in the "private option." The "private option" has provided the vast majority of the customers so far; without it, it's fair to wonder whether carriers would bother continuing in Arkansas. 

It's far too early to come to any clear conclusions about the actuarial big picture, but here's where we stand right now: Without the "private option," the Arkansas Marketplace might well be in crisis. With it, things are looking in pretty good shape.

*Of course, all of this could change if the legislature refuses to appropriate the funds for the "private option" in the fiscal session this February. That would put a major dent in the marketplace and potentially lead to rising premiums and/or carriers exiting the state. 

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