Opinion: Daily Journal

Broken health insurance system likely to get worse

Health insurance coverage is one issue that will transcend short-term and long-term recovery from COVID-19. Short-term changes in health coverage will likely require long-term strategies to address the needs of individuals whose source of health coverage changed during the pandemic.

A recent report by consulting firm Health Management Associates predicts extensive changes to North Carolina’s health insurance market as the state and nation continue to respond to the coronavirus outbreak. This information should inform policies implemented by lawmakers and business leaders.

The HMA report forecasts enrollment and coverage changes in Medicaid, employer-sponsored plans, the individual market, as well as a measure of unemployed individuals. The report models three different national unemployment scenarios: low, medium, and high. The high scenario — 33 million unemployed — is an appropriate measure since, as of this writing, actual unemployment has surpassed this number.

Changes in Medicaid enrollment

 Economic downturns almost always increase Medicaid enrollment. The HMA report’s high unemployment scenario indicates North Carolina could see an increase of as many as 568,000 people on the Medicaid rolls. Data from the N.C. Department of Health and Human Services shows 2.2 million North Carolinians already enrolled in Medicaid in May.

Lawmakers should consider the budgetary impact of enrollment changes in the Medicaid program. The Families First Coronavirus Response Act temporarily raised the federal medical assistance match rate from 67.4% to 73.4%. Yet Medicaid is one of the most expensive programs, totaling $14.8 billion, of which the state contributes about $3.7 billion. Given the estimated $4 billion shortfall in fiscal 2020-21, lawmakers need to consider how enrollment changes in Medicaid will affect overall spending.

The General Assembly leadership’s decision to resist Medicaid expansion was a wise one. Elected officials in several states, including New York, California, Ohio, Alaska, and Georgia — a non-expansion state — have already indicated they plan to cut Medicaid spending by slashing provider payments. Provider payment decreases are the only option to cut spending in these programs. As a condition of the increased FMAP rate, states had to agree not to restrict eligibility, increase premiums, or remove beneficiaries, even if enrollees are ineligible. Keeping Medicaid spending as low as possible is crucial because provider payment cuts could hurt practices already struggling with an artificially suppressed patient volume.

Changes in employer-sponsored health insurance

Half of Americans receive their health insurance from their employer.  During a time when the country is facing massive job losses, millions will lose their employer-sponsored health insurance. The HMA report projects that as many as 1.1 million people could lose employer-sponsored health insurance temporarily or permanently. For employees who lost their jobs, the Affordable Care Act’s — Obamacare — special enrollment period and COBRA are two ways displaced employees can continue coverage.

Businesses that may be undecided about keeping their employer-sponsored health plans in place or are looking to cut costs have two options. Employers should consider offering health reimbursement accounts, which are financing arrangements that allow employers to reimburse employees for the cost of buying health insurance. The Trump administration relaxed rules for these plans to allow for expanded use. For employers that operate a self-insured plan, they should consider a reference-based pricing model that pays insurance claims at a rate that is tied to a percentage of Medicare. In both of these arrangements, employers have lower and more predictable costs, and the employees gain more control over their health coverage.

Changes in the individual market

 More than one million people who lose coverage from job loss may turn to the individual market to gain coverage. On net, the HMA report projects the individual market in North Carolina will grow by 27,000 people. For reference, there were 501,271 individual market enrollees in North Carolina in 2019.

Plans in the Affordable Care Act exchanges may be unaffordable for some individuals or families. Ensuring a wide range of affordable health plans available for sale will be important as demand for individual market plans rises with more uninsured, less employer-sponsored insurance, or more employers using health reimbursement accounts.

Lawmakers interested in lowering the price of insurance in the individual market should consider requesting a section 1332 waiver. Section 1332 waivers allow states to waive certain ACA requirements to create a more tailored health insurance market. States have used section 1332 waivers to set up a state-based reinsurance program to help employers offset the cost of expensive claims. Reinsurance programs in other states have been able to lower premiums by as much as 40%.

Just like so much else, health insurance coverage is something that will see serious changes moving forward. Businesses and lawmakers have tools at their disposal to help cushion the impact of these inevitable changes. Understanding the changing demographics and acting accordingly may produce long-term benefits for employers, employees, and those who buy their insurance in the individual market.

Jordan Roberts is Health Care Policy analyst for the John Locke Foundation.