The Affordable Care Act's insurance marketplace has been tough on payers looking to make a profit on that business, but Medicaid expansion funneled millions of new members to insurers, boosting revenue. That soon may change.
Legislation passed in two House committees last week would repeal the ACA and essentially roll back Medicaid expansion. That could result in 4 million to 6 million beneficiaries losing insurance between 2020 and 2024, slashing health insurers' premium revenue and, by proxy, earnings.
Most states contract with private insurers to provide coverage to Medicaid beneficiaries. That gives insurers more patients and a more predictable stream of revenue.
Molina Healthcare took in about $3 billion in Medicaid expansion premium revenue last year. The company's CEO, Dr. J. Mario Molina, said the states are not in a position to take on more costs and predicts many will drop Medicaid expansion.
The GOP's American Health Care Act, introduced last week, would phase out the enhanced federal contribution that finances Medicaid expansion starting in 2020. The 31 states that expanded Medicaid could respond by reducing reimbursement rates to offset lost federal funding. That would squeeze insurers in the long run. Medicaid, which covers around 76 million people, accounts for about 20% of insurance companies' total premiums, according to S&P Global, which released a report last week on the impact of the new bill.