Can Biden avoid a health insurance cliff?
Preserving and expanding health insurance coverage for Americans has been a primary goal of the Biden administration. Through legislative and executive initiatives, he succeeded in strengthening federal programs geared towards this goal. But this success may be short-lived. A health insurance cliff looms that threatens to erode the coverage gains made in Biden’s first two years. As 2022 declines, the question remains open whether the Biden administration will get around that cliff or crumble on it.
The cliff stems in part from delays attached to Biden’s efforts to reinvigorate and expand the Affordable Care Act (ACA) health insurance exchanges. These exchanges, or marketplaces, allow individuals to purchase coverage from participating insurance companies. The ACA authorized federal subsidies for buyers with incomes between 100% and 400% of the poverty level (i.e. incomes between $26,500 and $106,000 for a family of four people in 2021). Biden’s success in securing passage of the American Rescue Plan Act in 2021 has significantly improved exchange grants. Approved on a strict party-line vote, the bailout increases financial support for people in the ACA’s 100% to 400% poverty cohort. For the first time, it also subsidizes people whose income exceeds the 400% threshold. The subsidy for this wealthier group kicks in when the cost of premiums for a benchmark trading plan exceeds 8.5% of the applicant’s household income. An estimated 2.4 million people with incomes between 400% and 600% of the poverty line would benefit from this provision when applying for insurance cover.
The Bailout Act and Biden’s executive initiatives (e.g. dramatically extended listing periods) sparked an increase in exchange listings, which reversed four years of decline during the Trump presidency. Exchange insurance subscriptions for 2021 grew to more than 12 million, a 5% increase over the previous year. The increases continued in 2022 with more than 14.5 million registrations. But time is running out on this uptick in listings since the U.S. bailout grants only apply in 2021 and 2022. The Congressional Budget Office estimates that not renewing the grants will cause exchange listings to drop by three million. , reducing the listings to what they were. were the last year of the Trump administration.
The Biden administration’s efforts to avoid this registration cliff are focused on passing the Build Back Better legislation. The original expansive version of this legislation failed in late 2021 when, in the face of unified Republican opposition and two Democratic senators, Joe Manchin of West Virginia and Kristen Sinema of Arizona, refused to support it. This setback prompted the Biden administration to seek approval for a cheaper “skinny” version of Build Back Better. This release is likely to include a continuation of enhanced exchange subsidies. The legislation has a chance to win Senator Manchin’s support since his opposition to the original bill did not stem from its health care provisions. Still, Manchin indicated that his support for such a measure rests on the fact that it also includes tax reforms and does not increase the federal deficit. The prospects for legislation extending foreign exchange subsidies are therefore, at best, uncertain.
As if that enrollment cliff weren’t daunting enough for the Biden administration, the impending end to the Covid-inspired public health emergency is also looming. Legislation strengthening Medicaid in response to the pandemic has forged this feature of the cliff. Medicaid is the largest federal subsidy program to states, which subsidizes health coverage for low-income Americans. The federal contribution typically covers 50% to about 75% of state expenditures (the matching rate) for the program, with less wealthy states receiving proportionally larger federal grants. The Families First Coronavirus Response Act of March 2020 authorized a 6.2% increase in the Medicaid match rate with states beginning January 1, 2020 and continuing through the expiration of the public health emergency declared by the federal government. To receive this enhanced grant, a state had to refrain from making Medicaid eligibility criteria more stringent or de-enrolling current beneficiaries. This meant that beneficiaries whose income subsequently exceeded the Medicaid eligibility level would remain enrolled for the duration of the public health emergency. Subsequently, Medicaid enrollments soared 25%, from 64 million in February 2020 just before the pandemic to an all-time high of 80 million in mid-2022.
However, once the president ends the public health emergency, states will lose the enhanced federal grant and will have to make timely income-based eligibility reviews for enrollees or face penalties. federal taxes. This process threatens to fuel a decline in health insurance coverage. Many Medicaid recipients would have incomes too high to be eligible for the program any longer and fail to transition smoothly to ACA insurance scholarships. Many more would continue to meet Medicaid eligibility criteria but lose coverage for failing to meet often onerous administrative requirements for renewal.
Limits on the state’s ability to process renewal applications compound the problems. The National Association of Medicaid Directors has expressed concern that many states lack sufficient numbers of experienced and well-trained staff to effectively carry out the renewal function in a timely manner. While some states consider coping with the limits of their administrative capacity by outsourcing the renewal function, it is far from clear whether these private entities are better equipped to perform this task. Additionally, some states, eager to reduce Medicaid costs, may incentivize contractors to reduce enrollment for applicants who meet the program’s eligibility criteria. These factors have prompted the Kaiser Family Foundation to predict that at least 5.3 million and possibly as many as 14.2 million enrollees will lose Medicaid coverage when the public health emergency ends.
The Biden administration has moved to reduce the threat of a precipitous decline in insurance coverage. While the Trump administration had given states six months to complete the redetermination process, the Biden administration has pledged to give them 60 days notice of the end of the health emergency and an additional 14 months to proceed with new eligibility determinations. The White House also decided to establish a special year-round enrollment period on ACA exchanges to transition those who are no longer eligible for Medicaid to this coverage. The Biden administration has also provided a steady stream of advice encouraging states to adopt client-friendly renewal practices. He threatened to financially penalize states that adopt cumbersome renewal procedures that circumvent Medicaid law (for example, requiring in-person interviews for renewal applicants). A key question for the Biden administration is when to end the public health emergency. Many health care providers and advocates for low-income recipients have urged Biden to extend the emergency until at least October. It seems likely that his administration will not only accede to this request, but postpone this politically painful decision until after the election.
Overall, uncertainty surrounds the extent to which the Biden administration will be able to avoid the health insurance cliff. In the case of ACA scholarships, this uncertainty stems from a legislative challenge. Will Biden get passage of a version of Build Back Better that extends US bailout grants for those seeking cover? In the case of the pandemic-inspired Medicaid expansion, the uncertainty stems from a Implementation challenge where states hold the trump cards. Whatever steps federal officials take to mitigate the threat to insurance coverage associated with the end of the public health emergency, they must rely on states to implement them. Given that states vary widely in their administrative capacity and commitment to preserving Medicaid enrollment, avoiding this coverage cliff is far from certain.