Federal Researchers Connect Medicaid Expansion To Lower Premiums

Aug 26, 2016

The Obama administration is touting a new argument for why states like North Carolina should expand Medicaid. Federal researchers found in states that already have, the premiums people pay on the Obamacare exchanges are lower.

The Affordable Care Act was designed to cover the poorest people through Medicaid expansion, but the U.S. Supreme Court made that optional for states. North Carolina is among about 20 that chose not to. The new report shows that on the exchanges in those states, premiums are about 7 percent higher. 

"What this study shows is that Medicaid expansion works to keep prices down for middle-income people who buy coverage on healthcare.gov," says Ben Wakana, press secretary for the U.S. Department of Health and Human Services. 

Credit healthcare.gov

To be clear, we're just talking about people on the exchange, not the much larger population covered through work.  

Here's the reason for the price difference:

In expansion states, there are very few people who make right around 100 percent of the federal poverty level and get insurance through the exchange. They don't need to – they're now eligible for Medicaid. 

But in states that didn't expand, Wakana says those people make up roughly 40 percent of the exchange market. 

"And what research has demonstrated over the years is that low-income individuals on average have a little bit poorer health status than those with higher incomes," he says.

The way health insurance works, the more sick people you insure, the higher the premiums need to be to cover their medical costs.

The resulting price difference makes sense to Sara Rosenbaum, a health law professor at George Washington University.

"You essentially shift some of the risky population from Medicaid to the exchange in states that don't expand Medicaid," she says.

Whether those poorer, sicker people are on Medicaid or the exchange doesn't make much of a difference for who picks up their tab. That's because the federal government offers large subsidies on the exchange.