Few States Show Interest in Establishing Own Exchange, But Medicaid Expansion Is Gaining Momentum

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February 20, 2014

Most states that are on the federally facilitated marketplace (FFM) are not showing great movement towards establishing their own exchanges under the Affordable Care Act (ACA), but the growing Medicaid rolls are changing many state's perspective on whether to expand their programs.

The Department of Health and Human Services (HHS) has proposed extending the deadline for states to get approval of their 2015 Health Insurance Exchange (HIX) Blueprints to June 15, 2014. What would that mean for states considering a state-based exchange (SBE) model? In the near term, probably not a whole lot.  

With the 2014 elections on the horizon, most states that have been on the fence about pursuing their own SBE will likely continue on the federally facilitated marketplace (FFM). Instead of seeing states transitioning to an SBE, we’ll likely see far more movement this year around the continued expansion of Medicaid.

The federal government has committed to funding 100 percent of states’ expanded Medicaid populations for the first three years, and then no less than 90 percent thereafter. Nearly half of all states have already decided to participate in the expansion (or expand their programs). Even states that didn’t choose to expand are seeing a large growth of beneficiaries becoming covered under their Medicaid program—people who were already eligible, but who had not applied for health insurance.  We expect the momentum toward Medicaid expansion to gain steam as we move into 2014.  And we expect to see states experimenting with creative ways of implementing the expansion through more commercial insurance solutions, premium assistance, and greater consumer engagement and incentives.

As you can imagine, a tremendous amount of upfront planning must be completed to ensure that states can adequately accommodate the millions of people who will be covered under an expanded Medicaid program – just ask any state that expanded this year.

Having supported states through Medicaid re-enrollments and expansions in the past, we know that scaling operations isn’t easy. In call centers alone, states may be required to hire and train hundreds of temporary employees to keep up with demand. Overburdened caseworkers may not be able to handle the increased application processing and eligibility determination workload.  Decentralized, inefficient operations are difficult to change quickly.  That’s an enormous transition, and states need to have an operational plan in place to navigate the complexities of Medicaid expansion, before they take the federal government up on its offer.