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Medicaid expansion ripple effect lowers premiums for middle class, study finds

Insurance premiums for middle-income people covered in the Affordable Care Act marketplace were 7 percent lower in expansion states, study finds.

Jeff Lagasse, Associate Editor

Middle-class people in Medicaid expansion states fared better with insurance premium costs than those in non-expansion states. That's the word from a new study by the Department of Health and Human Services.

Premiums for middle-income people covered in the Affordable Care Act marketplace were an average of 7 percent lower in states that expanded Medicaid as part of the federal law, the analysis found.

The in-house research by DHHS suggests that combining marketplace coverage and Medicaid expansion benefitted consumers in three groups: Those with incomes below 100 percent of the federal poverty level who gain coverage only through expansion; those with incomes between 100 and 138 percent of the poverty level whose Medicaid coverage is more likely to fit their budget; and those with marketplace coverage, who stand to benefit from the positive impact of Medicaid expansion on premiums.

[Also: Montana's Medicaid expansion backers cite promising data after first 7 months]

To mitigate the prevalence of other factors that may impact premiums, such as patient demographics and disparate state laws affecting health coverage, researchers examined expansion states that bordered non-expansion states, and zeroed in on counties in those states that lined up next to each other. For instance, researchers examined border counties in Maine, which did not expand Medicaid, and adjacent counties in New Hampshire, which did. Thus, researchers argued, comparisons would be made between demographically similar regions.

Medicaid expansion states effectively have private insurance risk pools comprised largely of people with incomes above 138 percent of the FPL, since those with incomes below this level are covered by Medicaid. In non-expansion states, those with incomes below 100 percent FPL generally had no option for subsidized coverage, but anyone with incomes in the 100-138 percent range could access financial assistance through the marketplace.

[Also: C-suite feels ripple effect from Medicaid expansion, study says]

The people in that group make up close to 40 percent of the marketplace population on average, compared to just 6 percent in states that have expanded Medicaid. Since lower-income individuals tend to have poorer health, a state's decision to expand Medicaid has the potential to affect the individual market risk pool -- and ultimately, marketplace premiums, DHHS found.

The data indicates that those in relatively poorer health are likely to have higher healthcare expenditures, which in turn may lead to higher expected spending per enrollee in expansion versus non-expansion states, according to the analysis. That's consistent with the increase in premiums found by DHHS.

As of February 2016, 20 million people have gained health insurance due to provisions of the ACA, according to federal data. DHHS said it plans to extend the analysis to future years to determine whether premium differences are destined to continue.

Twitter: @JELagasse