The uninsured paradox: more are eligible, fewer may be covered

More than half of uninsured individuals are now eligible for free or subsidized coverage under the Patient Protection and Affordable Care Act. But despite the expanded access to coverage options for low- and middle-income households, the number of uninsured could spiral upward over the next decade.

Those are the seemingly paradoxical findings of a pair of recently released studies about the effects of the federal healthcare law on the number of individuals lacking insurance coverage.

An analysis by researchers with the Urban Institute's Health Policy Center found that 56% of uninsured individuals are now eligible for Medicaid, the Children's Health Insurance Program or subsidized coverage through the state and federal exchanges under the ACA.

In states that have opted to expand Medicaid eligibility to individuals with incomes up to 138% of the federal poverty level, 68% of uninsured individuals are now eligible for government-subsidized insurance coverage. That figure drops to 44% in states that have declined to adopt the Medicaid expansion permissible under the federal healthcare law. Roughly half the states have decided to expand.

In West Virginia, which has expanded Medicaid, 83% of the uninsured are now eligible for free or subsidized coverage, according to the Urban Institute analysis. By contrast, just 40% of the uninsured in Texas, which has not expanded Medicaid, are now eligible for government programs.

The Urban Institute researchers anticipate that the number of uninsured in expansion states will decrease by 56% by 2016, while their non-expansion counterparts will see the rate of uninsured drop by roughly a third.

But will the number of uninsured begin to rise again in 2017? That's the finding of Stephen Parente, a healthcare expert at the University of Minnesota who advised Sen. John McCain's 2008 presidential campaign. Utilizing a model that was developed a decade ago with support from HHS, Parente anticipates that the number of individuals obtaining coverage through the state and federal exchanges will drop sharply in 2017 and then decline steadily through 2024. According to this model, the individual market will contract from 36.3 million in 2016 to 29.6 million in 2024—a nearly 20% decrease. The number of uninsured will also increase dramatically in 2017, according to Parente's model, rising about 19% from 30.3 million to 36.1 million.

That's in part because the risk corridor and re-insurance programs that are designed to protect insurers from excessive risk are set to expire after 2016. That could lead to a spike in premiums and cause individuals to forgo coverage because of the cost.

But Parente also points to the Obama administration's decision to allow plans that don't comply with the coverage requirements of the ACA to be renewed for up to three years as another aggravating factor. That decision likely means that many individuals who decided to stick with noncompliant plans will be forced into the exchanges at about the same time as the risk corridor and re-insurance programs are expiring.

“That became kind of a mess,” said Parente, of the decision to allow noncompliant plans to be renewed. “I don't think we honestly know what happened in the end.”

It should be noted that Parente's numbers differ markedly from the projections of the nonpartisan Congressional Budget Office. The federal agency anticipates that the number of non-elderly uninsured will decrease from 45 million in 2014 to 31 million in 2024.

Parente also used the model to analyze the individual market in 10 states through 2024. It revealed sharp differences across the country. In Iowa, the size of the individual market is anticipated to decrease by 43% in 2017. By contrast, in Michigan the decline is only expected to be 2%.

Parente attributes those differences to the level of state regulation in place prior to implementation of the ACA coverage requirements. In states that aggressively regulated what plans could be sold, like Michigan, there will be little fallout from the elimination of noncompliant plans from the marketplace. But in states with a lax regulatory climate, like Iowa, the shakeup in 2017 will be significant.

“A lot of states had a lot of laws on the books already,” Parente said.

Follow Paul Demko on Twitter: @MHpdemko