Rate shock by numbers: Medicaid eligibility and dependent coverage shake up the debate

by Adrianna McIntyre and Josh Fangmeier 

UPDATE: For our follow-up, click here. We incorporate the distribution of the currently uninsured to project the profile of “exchange-eligible” young invincibles in 2014.

There’s a reason that the rate shock debate has continued festering for over a week, in spite of the internet’s fleeting attention span: it’s messy. For a few days, people were actually arguing over different iterations of “rate shock.” Not to worry, we’ve come to agreement on how to frame the debate: how will rate changes on the individual insurance market affect “bros”? You know what’s been conspicuously absent from this conversation, though? Data. Looking at real, hard numbers—not hypothetical scenarios about hypothetical people, bros or otherwise—is revealing.

I asked Josh Fangmeier, a health policy analyst, if it was possible to crunch numbers comparing income and insurance status across age groups. It turns out that publicly available Census data are very good for these kinds of questions, and Josh is very good at crunching numbers [1]. Using the the most recent information available, from 2011, we looked at two questions: first, how will health reform affect young adults currently in the individual market? Second—and this is trickier—what does the composition of 19-35-year olds mean for the viability of state insurance exchanges? Will Obamacare’s system of sticks and carrots be enough to attract the “critical mass” of young adults required to keep premiums affordable?

That’s a lot to tackle. This post deconstructs the present individual market. Tomorrow, we’ll look at implications for the projected population of exchange-eligible young adults, which also includes those who are currently uninsured.

If you look at people already in the individual insurance market, income and age distributions matter. We restricted our scope to childless adults between the ages of 19 and 35, because that’s the focus of the young invincibles/“bro” narrative. When I first put the numbers into a graph, I only looked at those with incomes above 138% of the federal poverty line, which is the threshold for Medicaid eligibility in states opting to expand.

Current Individual Insurance Market, 138% FPL+

The horizontal axis compares incomes by age group, and the vertical axis shows the number of people in each category. You’ll notice some unsurprising trends: first, as age increases, the number of childless adults in the individual market decreases—ostensibly because they start having kids. Lots of childless low-income beneficiaries are under 26, meaning they now have the opportunity to stay on Mom and Dad’s plan (whether that’s through an employer or a state exchange). And, as age increases, so does income.

But do people with even lower incomes shop for private insurance? As it happens, that answer is overwhelmingly “yes”.

Turns out income distribution is really, really important—especially when you consider the Medicaid expansion. This graph uses the exact same data as the one above, except I introduced enrollment numbers for people on the nongroup market in the poorest subset of the population. Check out the size of those red bars:

Current Individual Market (19-35) - All Incomes

Almost two-thirds (63.4%) of childless young adults who had individual insurance in 2011 had incomes that would qualify for Medicaid in 2014. Medicaid offers generous coverage with little cost sharing [2]. So, when people say that the Medicaid expansion is a BFD for this demographic, it’s not an exaggeration. That’s been largely lost in this debate.

Medicaid EligibilityOf course, not all bros will benefit equally from the Medicaid expansion, because only 22 states and DC have committed to it so far. For the chart at right, we used this map from Avalere to identify expansion and nonexpansion states, lumping the “leaning” states into their respective categories. Among childless  adults on the individual market, thirty percent of those under 35 could qualify for Medicaid but won’t, because their states opted out. And many of those individuals won’t receive assistance to buy insurance on the exchanges, because subsidies aren’t offered to most people expected to qualify for Medicaid. The exchanges weren’t designed for an optional  expansion. Premium rates go up for the young and healthy. No one disputes that this will happen, and the nation’s poorest childless adults aren’t insulated from costs. They will be exempt from the tax penalty, but that’s a sorry consolation prize.

A little over 70% of all 19-25 year olds are below 138% FPL, so it’s perhaps unsurprising that we observe a similar trend in the individual market. It’s difficult to predict how many of them will take advantage of the under-26 provision; we don’t have data about their parents’ income or insurance status [3]. Given those caveats, I understand if you wanted to ignore that age group. Eliminating them from the analysis entirely, we would still see over one-third of the individual market, ages 26-35, qualify for Medicaid in 2014 (yep, we have a pie chart for that, too).

This is mostly good news for young people having access to affordable, comprehensive health care. These data offer an untold side of the rate-shock story: a majority of childless young adults who currently buy insurance on the individual market might move out of that market. Over half will qualify for dependent coverage, because they’re under 26, or for Medicaid coverage, because they have incomes are below 138% FPL. Both options are almost certainly cheaper than the plans they currently hold. The ones who really lose out in this scheme aren’t affluent twenty-something bros who will face higher insurance rates, but the people who live near or below the poverty line in states that refuse to expand Medicaid. These folks will be priced out of the individual market because they don’t receive federal subsidies—and don’t have access to the law’s intended safety net.

That’s nice to know, but doesn’t tell us a whole lot about rate shock. The existing market actually tells us very little about the rate shock situation because the uninsured systematically outnumber those who already have individual insurance. We’ll be back tomorrow with a closer look at data that gets to the crux of that question: what does the landscape of the anticipated exchange population look like? Stay tuned.

Footnotes

1. Josh and I will be drawing up a PDF that explains the methodology he used in analyzing ACS data, including use of the SHADAC “health insurance unit” for determining income as %FPL and a discussion of potential limitations (e.g., the data is from 2011, limited to childless adults, and does not consider immigration status). Watch this space for a link once we’ve finalized it.

2. Critics of Medicaid might see coverage through the program as a subjectively undesirable outcome, but to my knowledge we have no information on the preferences of young adults between individual insurance and the public program. It’s pretty indisputable that Medicaid will cost less than private coverage—even a bare-bones catastrophic plan—while offering more covered services. Whatever the opposite of rate shock is, that’s what people who move from the individual market to Medicaid will experience on a financial level.

3. Quick note: this data was collected in 2011, which means that young adults were already eligible for extended dependent coverage (that provision went into effect in September 2010). However, it’s possible that individuals weren’t aware of the option or had parents who were uninsured, on Medicaid (if they had younger dependent children), or have private insurance that doesn’t cover dependents (the extension only applies to plans that do).

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Adrianna is a graduate student in public policy and public health at the University of Michigan. Follow her on Twitter at @onceuponA.

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6 thoughts on “Rate shock by numbers: Medicaid eligibility and dependent coverage shake up the debate

  1. […] Adrianna McIntyre and Josh Fangmeier just published a data- and chart-rich post on income and age characteristics of the individual market. It adds considerable detail to the plight of the bros. Go read it! […]

  2. […] Adrianna McIntyre has pulled me back in. Austin already posted on her piece, and even pulled a chart. I want to pull a different one. Take a look at […]

  3. In the second bar chart, does that include college students? I’m seeking clarification because I’m wondering if the number not in a group has been overstated. Don’t most full time college students group insurance on an opt in basis? or a compulsory basis? I don’t know, but would like to.

    • That’s a good point, and I dithered over whether or not to reference college. This data would capture students—that is likely account (in part) for the income skewing so low for that demographic. College insurance requirements (voluntary/compulsory) vary, and I’m not entirely certain how those plans get categorized for the purpose of Census data. For example, I worked part-time over the last year and used my employer-sponsored insurance any time I visited the university health center. There was a plan I could have enrolled in through my school if I hadn’t had insurance, but no one’s required to do that.

      I wasn’t comfortable jumping to the conclusion that the 19-25 data “must” indicate that college students predominante the individual insurance market for their cohort—not when that demographic is also among the most likely to have access to dependent coverage (I had that until I graduated, even before the under-26 provision went into effect) and the uninsured outnumber the nongroup-insured.

  4. My question is a little off topic, probably not specifically in your purview, and maybe along the lines of Chilton’s question as well.

    I’m still reeling from this:
    “A little over 70% of all 19-25 year olds are below 138% FPL”

    I had no idea about this. So now I’m interested in seeing more about this.
    (Because I think this is even bigger than our health insurance problems, frankly.)

    – To count those below “138% FPL”… I’m assuming this means that these individuals are either “on their own” (whether in college or not), or living at home or in a dorm (in college or not) in a household that is below 138% FPL.
    This does NOT count individuals between 19-25 who are say… unemployed & living with their well off or even wealthy parents, correct?
    I just want to be sure that FPL measures household incomes, and that’s how it’s used here… not just as individuals who happen to be adults with low personal income and a free or low cost roof over their head… ’cause boy, I bet that would apply to quite a few people between 19-25 from the stories I’ve heard. (And I’d be interested about their coverage as well.)

    – If the above collage of different circumstances makes up that 70%, is there some pie chart or graph or something that would break that 70% down into “living with poor parents”, “living on one’s own but in college and receiving assistance from financially able parents”, and “living on one’s own and working a piss poor job supporting themselves with no help from their parents”. ?? Obviously I imagine that the descriptions wouldn’t be quite what I’m saying, but you get the idea of what I’m interested in here. Is there such a break down somewhere?

    Anyway, yes, thank you for this, it’s very informative. I have tried to become informed about the health care system. But to be honest, I’m a little out of touch with this 19-25 age group. I honestly didn’t know that Medicaid was such a “BFD” for that age group. In fact, I had to look up “BFD”.

    • Josh Fangmeier says:

      You make a great point. There is certainly some degree of variation in the circumstances of young childless adults who fall in that 70%.

      In our analysis, we did not use household income to determine FPL percentage. Rather we used the health insurance unit (HIU) definition developed by SHADAC for counting income. The HIU definition, in my opinion, is superior to the household definition for determining actual program eligibility.

      The HIU definition generally assigns the same FPL percentage to young childless adults with same individual incomes, regardless of whether they live on their own, go to college, or live with their parents.

      If you are really interested in the wonky details of income counting, I encourage you check out SHADAC’s issue brief on this.

      http://www.shadac.org/files/shadac/publications/SHADAC_Brief27.pdf

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