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States That Opt Out Of Medicaid Expansion Will Drive Up Private Insurance Premiums

The cost-benefit analysis of the Republican governors opting out of the Medicaid expansion under the health care reform law has always been questionable. Although foregoing the Medicaid expansion allows governors to avoid a slight burden on their state budgets — one that will be modest even under pessimistic predictions — it also means failing to provide as many as 17 million currently uninsured Americans with health care coverage.

Wonkblog’s Sarah Kliff flagged a brief that brings up yet another factor for governors to consider when weighing the Medicaid expansion. By some estimates, opting out could drive premiums up 2 percent or higher for Americans covered by private insurers:

Using CBO data, the brief estimates that those higher health-care costs will be 2 percent higher than “projections made under the assumption that all states do expand Medicaid.” Those premium increases would be borne by both the federal government, which helps buy coverage for subsidized individuals, as well as the individual purchasers themselves.

The expansion of the Medicaid program would expand eligibility to everyone up to 138 percent of the federal poverty line (FPL). Until now, eligibility has maxed out at 100 percent of the poverty line. At the same time, the health insurance exchanges created by Obamacare will cover anyone from 100 to 400 percent of the FPL who isn’t already covered through either Medicaid or their employer. So in any state that opts out of the Medicaid expansion, those in the 100 to 138 percent range will wind up on the exchanges instead of in the Medicaid program. According to the CBO’s logic, these individuals will likely have more expensive health care needs in comparison to the rest of the population in the exchanges, which in turn will drive up premiums. Because all these markets are intertwined — providers that work with Medicaid also work with private insurers, and private insurers that offer plans on the exchanges will offer them outside the exchanges as well — this premium increase will occur in both opt-out and opt-in states, and for consumers both in and out of the exchanges.

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As Kliff’s analysis demonstrates, the Republican governors who are resisting the Obamacare Medicaid expansion aren’t just impacting the low-income residents in their own states who could benefit from increased access to health insurance. In fact, opting out of the Medicaid expansion could have consequences that spill over into other states across the country.