North Carolina Republicans have introduced a Medicaid Expansion bill. It is not a non-waiver expansion. Instead, it wants work requirements, wellness requirements and premium payments of 2% of income for beneficiaries who earn between 50% and 138% Federal Poverty Level. We know that general wellness programs do nothing but add administratively complexity when applied to the employer sponsored universe. We know that work requirements are paperwork requirements that increase compliance costs and reduce enrollment without actually advancing the core purpose of Medicaid.
I want to focus on premiums. Here is the language from the bill:
SECTION 4. Participant contributions. – NC Health Care for Working Families
39 program participants shall pay an annual premium, billed monthly, that is set at two percent (2%) of the participant’s household income. Participant contributions shall be utilized to fund the program as required by Section 7 of this act. Failure of a program participant to make a premium contribution within 90 days of its due date shall result in the suspension of the program participant from the program unless that program participant shows that he or she is exempt from the premium requirements prior to the expiration of that 90-day period. An individual who was suspended from the program for nonpayment of the monthly premium may reactivate coverage if that individual meets the eligibility requirements and pays the total amount in previously unpaid premiums owed by the individual.
Collecting these premiums are expensive. 2% of 50% FPL is $10-11 per month. The administrative cost of mailing bills, processing checks and sending reminder notices and chasing back premiums will eat up a significant amount of administrative expenses. Arkansas tried a complex monthly individual collection process and they ended up spending twenty times as much money as they collected. Here is evidence from 2017:
— Paul Shafer (@shaferpr) June 26, 2017
Collecting small dollar premiums that are unlikely to be universally tied to a credit card or an automated electronic withdrawal is expensive. Chasing people down for these payments is expensive. Retroactively repaying claims is expensive. This is an administrative nightmare.
It is also likely to make many people objectively worse off due to Silver gapping on the Exchange.
A single individual earning $16750 (approximately 138% FPL) is expected to pay $48 per month for the benchmark Silver plan. This is approximately 3.4% of income. This buys a CSR-94 plan with a $200-$500 deductible. However, as we all know, people can take their ACA subsidy and buy a less expensive plan. They save every incremental dollar.
Monthly premiums for healthy people who are not network sensitive and only price sensitive are cheaper if there is at least a $20 gap between the benchmark and the least expensive silver plan. Below is a Tableau of the Silver Gap for a single 40 year old in 2019. Every county except Wake County has at least a $20 Silver Gap. Even in Wake County, married couples and adults with children earning 138% FPL will likely qualify for less expensive ACA plans as premiums increase faster than income for a given FPL level when more people are added to a family unit so therefore the subsidy amount increases faster than income. Almost all counties have zero premium Silver plans for 40 year old individuals earning just over 100% FPL.
Collecting and tracking premiums will be an administrative nightmare.
Collecting premiums will make many people who are currently on Exchange in a CSR-Silver plan worse off.
Collecting premiums will deter long term enrollment of the reasonably healthy.
But I’m at a point where a sub-optimal Medicaid expansion with known and significant problems is better than no expansion.