State of the States: Winter 2023

Coverage losses during Medicaid “unwinding” continue to exceed worst fears 

More than 12.5 million Americans have lost Medicaid coverage nationwide during the “unwinding” of the COVID-era continuous coverage requirements, according to the most recent data released by KFF.   

The U.S. Department of Health and Human Services (HHS) allowed state Medicaid programs to resume eligibility determinations in April following a mandatory three-year pause during the PHE. Because enrollees who were no longer eligible were allowed to continue receiving Medicaid during the PHE, the agency estimated that roughly 15 million Medicaid and Children’s Health Insurance Program (CHIP) enrollees could lose coverage before the “unwinding” concludes next spring. 

However, the number of total and procedural coverage losses continues to far outpace HHS estimates and could meet or exceed the upper end of projections by private foundations such as KFF (which predicted that from 8 to 24 million enrollees could lose benefits depending on mitigation strategies used by states). The upper end of that range would equal a 28 percent drop in total enrollment. 

There continues to be extremely wide variation in disenrollment rates across states, ranging from 62 percent in Texas (where more than 1.7 million have lost Medicaid) to only ten percent in Illinois and Maine. However, HFA and other stakeholders remain most concerned that more than 70 percent of Medicaid terminations continue to be for procedural reasons (i.e. not returning forms promptly) among beneficiaries that could still be eligible. This far exceeds the rate of procedural terminations predicted by HHS (just under 50 percent). Erroneous terminations needlessly disrupt vital treatments for persons with chronic conditions and can lead to severely adverse health outcomes, as confirmed by a new study in Health Affairs. 

New Mexico and Utah continue to see shockingly high rates of procedural terminations (roughly 95 percent), while even large states like California have surprisingly seen procedural losses approaching 90 percent. Southern states continue to have the overall highest rates of procedural terminations (averaging 83 percent of all coverage losses). By contrast, other states are doing a far better job of minimizing procedural terminations. Only 14 percent of Illinois Medicaid terminations are for procedural reasons, while both Oregon and Maine have kept this figure at or below 33 percent. 

Feds urge states to minimize Medicaid coverage losses among children 

According to the Georgetown Center for Children and Families (CCF), net Medicaid/CHIP enrollment for children under age 21 has fallen by at least three million during the “unwinding” process that started in April with nearly 40 percent of total coverage losses occurring among this population (ranging from 61 percent in Texas to only 18 percent in Massachusetts). 

Data released this month by HHS reveals that largest proportion of child coverage losses are concentrated among a handful of states. Florida and Texas alone account for almost one-third of Medicaid/CHIP terminations for children. Both states have seen child enrollment fall by 12 percent during the “unwinding”. However, child enrollment in both Idaho and South Dakota has already declined by 27 percent while four other states (Arkansas, Montana, New Hampshire, and Utah) have fallen by 16-18 percent. 

The HHS data also revealed a stark partisan divide in how states are protecting against child coverage losses. For example, the nine states that still refuse to expand Medicaid under the Affordable Care Act have disenrolled more children than all the non-expansion states combined (largely because they have not used federal waivers to help children stay enrolled).    

Arkansas has already completed redeterminations for all Medicaid/CHIP enrollees, rushing through the process in only six months even though all states were afforded a 14-month grace period by HHS (through May 2024). The Arkansas Department of Human Services (DHS) removed 427,000 enrollees or more than 40 percent of its nearly one million residents on Medicaid. DHS officials did not have figures on how many enrolled in other coverage (or successfully re-applied for Medicaid). However, DHS acknowledged that more than 35 percent of terminated enrollees in Arkansas were children (including 25,000 newborns).   

HFA and other stakeholders have been alarmed that child Medicaid enrollment nationwide has declined more rapidly than adults during the “unwinding” (down 4.6 percent compared to 3.8 percent), even though children have more coverage options and should thus be more likely to remain eligible.  

In the face of pressure from advocates, HHS sent letters in mid-December to the nine states that represent 60 percent of all Medicaid/CHIP coverage losses for children. The letters urged states to take advantage of the 400 different federal flexibilities available to them to help mitigate against coverage losses for children, including waivers allowing them to extend child Medicaid coverage for up to 12 months during the “unwinding”. (Kentucky and North Carolina recently received federal approval for this waiver and several others are pending with HHS). 

The letters also pleaded with states to remove existing barriers to coverage, including extended call center wait times that have plagued Medicaid programs in California, Florida, and Texas during the “unwinding”. However, both CCF and the Florida Health Justice Project have documented how these barriers have only grown in Florida after state agencies implemented a brand new online portal for Medicaid eligibility that required enrollees to create new online accounts with no more than a two-week notice.  

New York joins Colorado to remove medical debt from consumer credit reports 

Unpaid medical debt will no longer appear in New York residents’ credit reports under a bill signed into law by Governor Kathy Hochul (D) in December. 

Effective immediately, the Fair Medical Debt Reporting Act (S.4907A) prohibits credit agencies from collecting information or reporting about medical debt. The law also bans hospitals and health care providers in the state from reporting such debt to the agencies. 

The law does not prevent all medical debt from affecting New Yorkers’ credit scores. For example, it is not applied to debt charged to a credit card (unless issued specifically for health services) nor does it impact out-of-state health care providers. 

Earlier this year, Colorado become the first state to enact a law removing medical debt from credit reports (H.B. 1126). At least a dozen other states are considering similar legislation. 

Three major U.S. credit reporting companies had agreed last spring to stop counting unpaid medical debt under at least $500, but advocates have long insisted that did not go nearly far enough.  At the direction of the White House, the Consumer Financial Protection Bureau has also started drafting regulations that would remove medical bills from credit reports nationwide. 

Public option plans continue to progress at state level 

Despite intense opposition from the insurers/providers and other initial obstacles, three states that have created public option plans to compete with private insurers have started to make significant progress over the past year. 

Public option plans were traditionally viewed as government-administered plans where the state would bear the full financial risk for all claims. However, three states (Washington, Colorado, and Nevada) adapted this model to instead require private insurers offer plans that meet specific cost-containment requirements set by state agencies (either through premium limits, caps on provider rates, or standard benefit packages). These “quasi” public option plans still compete with other private plans that are not subject to these restrictions. 

Washington was the first state to pursue this federally approved model in 2021 but provider opposition resulted in very limited enrollment in their Cascade Select plans (only about one percent of ACA Marketplace consumers signed up in year one as public option plans were available in very few counties). However, enrollment has more than tripled since 2022 (to 11 percent of all Marketplace consumers) and is likely to increase further in 2024 when Cascade Select plans will be offered in all but two of the state’s counties. By contrast, Colorado Option plans saw instant success as they accounted for 13 percent of open enrollment sign-ups in Colorado’s Marketplace for 2023 (the first year they were offered). 

Both Washington and Colorado are starting to realize cost-savings as well. In Washington, Cascade Select rates will increase by three percent less than other Marketplace plans in 2024 and (just as in 2023) are expected to remain the lowest-cost silver plan for most counties.   

For Colorado, requested rate hikes for Colorado Option plans were more than 30 percent lower than other plans and 25 individual and 24 small-group market Colorado Option plans will meet the state’s target of a ten percent reduction in premiums (compared to 2021). Earlier this year, Colorado also became the first state to receive federal funding for their public option program. 

Nevada was actually the second state (after Washington) to enact a public-option program in 2021 under Governor Steve Sisolak (D) but the plans are not scheduled to be offered in the Marketplace until the 2026 plan year. The program faced new opposition this year from newly-elected Governor Joe Lombardo (R).  However, a compromise with the Democratically-controlled legislature will allow state agencies to submit the required Section 1332 State Innovation Waiver request to the federal government by the end of 2023.  

The waiver would create a reinsurance program for Nevada funded by savings from the public-option program which would compensate insurers for exceptional claims (similar reinsurance programs have been federally-approved in at least 19 other states). The public option program is expected to reduce premiums by 15 percent over the first five years and bring the state more than $300 million in federal funds. 

Both Nevada and Colorado have established back-up contingencies if the public option plans fail to realize the desired premium reductions. 

Maine, Minnesota, and New Mexico passed legislation also passed legislation earlier this year laying the groundwork for future public option programs. However, all three states are considering different options other than the private insurer–led model used by Washington, Colorado, and Nevada. For example, the Maine and New Mexico laws require state agencies to first study whether consumers should be able to “buy-in” to public option plans that are part of the state Medicaid program, giving states greater control over the public-option program but also increasing the need for additional waivers from the federal government. 

Minnesota is also considering a “buy-in” option but focusing instead on expanding MinnesotaCare, the state’s Basic Health Program, in 2027. It remains the only state besides New York to use federal premium tax credit dollars under the ACA to instead fund a state coverage program for those earning up to 200 percent of the federal poverty level (New York is seeking federal approval to expand to 250 percent). The Basic Health Program option allows states to provide this population with more generous benefits at lower premiums.