Marketplace Enrollees in Medicaid Expansion States Would Likely Lose Under GOP Health Plan

The bill from Senators Bill Cassidy and Lindsey Graham to repeal the Affordable Care Act (ACA) would harm all states, but especially those that expanded Medicaid under the ACA. While Senate Republicans cancelled this week’s planned vote on the bill, they’ve signaled an interest in resurrecting it. If they do, enrollees in the ACA’s marketplace coverage in expansion states will again face the prospect of losing assistance as a result of the bill’s inadequate block grant, the Congressional Budget Office’s (CBO) partial analysis of Cassidy-Graham found.

Cassidy-Graham would repeal the ACA’s Medicaid expansion and marketplace subsidies and replace them with a block grant that would give states that expanded Medicaid less federal funding than they receive under current law. By 2026, the states that expanded Medicaid would receive about 30 percent less funding than the amount projected under current law. After 2026, the block grant would end altogether.

Most states that expanded Medicaid would choose to try to maintain as much of that coverage as possible at the expense of providing help to the millions of people enrolled in marketplace coverage because, CBO finds, providing subsidies “effectively would be the more difficult task.” Approximately 10.3 million people in these states are now enrolled in subsidized marketplace coverage.

In addition to eliminating the ACA’s generous subsidies, Cassidy-Graham would end the requirement to purchase health insurance. As a result, beginning in 2020, states would struggle to maintain individual market coverage without abandoning market reforms and allowing issuers to discriminate against the sick. Attempting to keep in place the market reforms — rules that prohibit discrimination based on pre-existing conditions and allow premium variation only for age, geography, and tobacco use status — would cause high premiums that would spiral higher as only those who needed the most medical care enrolled. “Anticipating such an unsustainable spiral, some insurers would not participate in the nongroup market,” CBO says, further increasing premiums as fewer and fewer insurers offered coverage. The only alternative would be for states to enact market reforms that would let insurers discriminate against people who are older or have pre-existing conditions, as they did before the ACA, to keep premiums down for younger and healthier enrollees.

In either scenario, expenses for the sick would rise precipitously, as would the cost of assisting them, due to the limited block grant funds. Faced with a shattered insurance market and monumental challenges in launching a new mechanism to distribute aid beginning in 2020, CBO predicts that states would largely abandon the people who currently get coverage in the marketplace. Marketplace enrollees, mostly working people with modest incomes, would be left to navigate the new individual insurance market without the protective market rules or subsidies available today, and many would become uninsured.