Why lower ACA exchange enrollment may not be a bad thing

The federal government cheered the 2016 open-enrollment period as more than 12.7 million Americans signed up for health insurance, but a closer look at the data reveals that many individual counties recorded precipitous annual declines in plan selections.

That's not entirely worrisome news though, because people may have picked up health insurance from Medicaid, employers or other sources. Those numbers also show how closely linked state Medicaid programs and the Affordable Care Act's individual marketplaces are, given that many exchange enrollees are low income.

“When we think about it, a decline in marketplace enrollment isn't necessarily bad on its face,” said Molly Warren, a senior policy analyst at Enroll America, a group that helps consumers sign up for coverage and supports the ACA. “We're concerned if people are losing coverage.”

Approximately 9.63 million people selected a health plan or were automatically re-enrolled in their previous plan in the 38 states that used HealthCare.gov this year, compared with the 8.84 million people in the 37 HealthCare.gov states in 2015.

Modern Healthcare analyzed HHS data from 2015 and 2016 that broke down ACA exchange plan selections by county. The data included only those states that used the federally operated marketplace. As expected, enrollment increased almost everywhere from 2015 to 2016. HHS targeted Chicago, Houston, Miami and other large metropolitan areas for sign-ups, and indeed, the counties that contain those cities all experienced significant upticks in exchange membership.

But there were two notable outliers—Indiana and Pennsylvania—that had exceptionally poor showings.

Marion County, Indiana's most populous county, which includes the state capital of Indianapolis, saw 20% fewer exchange enrollees year over year. Only eight of Indiana's 92 counties recorded enrollment gains in the federal ACA exchange this year, and the entire state posted a 10.5% reduction in plan selections.

In Pennsylvania's Philadelphia County, there were 15,915 fewer ACA plan selections in 2016, a 21% decline from 2015, by far the biggest drop of any county in the country. Counties in western Pennsylvania also posted lower sign-up figures.

So what happened? Indiana and Pennsylvania expanded their Medicaid programs in 2015, and it's very likely many low-income people started jumping from their exchange plans to Medicaid. They essentially traded in their heavily subsidized insurance for even cheaper coverage.

Indiana's alternative Medicaid plan, pushed by Republican Gov. Mike Pence, expanded coverage to about 240,000 people and imposed some cost-sharing mechanisms. Pennsylvania Gov. Tom Wolf, a Democrat, unwound his GOP predecessor's alternative Medicaid expansion and shifted completely to the ACA's traditional Medicaid expansion, which expands eligibility to those who make up to 138% of the federal poverty level.

Larry Levitt, a senior vice president at the Kaiser Family Foundation, said the changing numbers in Indiana and Pennsylvania illustrate an important point: "Expanding Medicaid will increase coverage overall, but it will actually lead to a decrease in marketplace enrollment,” he said. Nineteen states still have not expanded Medicaid.

It's possible there will be a similar dip next year in exchange enrollment in Louisiana, which just expanded its Medicaid program, becoming the first state in the Deep South to do so. Levitt believes all states will make the same move, or enact alternative Medicaid expansions like Indiana.

“Over time, once those politics fade, the amount of money available to states to cover people and fund healthcare institutions eventually will just become too enticing,” Levitt said. “If that's the case, a lot of people will shift.”

What's not clear from the analysis, Levitt added, is whether the risk pool in the exchanges improves as people move into Medicaid.

It's also worth noting that Medicaid alone doesn't account for people leaving the ACA's marketplaces. People and families in the individual market may age into Medicare or find jobs with employer-based coverage, which lead to drops in plan selections.

“There's lot of different kinds of coverage,” Warren said. “Exchange coverage is just one piece of that.”

—Data analysis by Art Golab