Effects of Medicaid Health Plan Dominance on the Health Insurance Marketplaces

Medicaid insurers (managed-care organizations that offered coverage through Medicaid programs before 2014 but had not sold insurance in private insurance markets until then) have become increasingly dominant in many of the Affordable Care Act (ACA) health insurance marketplaces. In 2020, Medicaid insurers are offering marketplace coverage in 255 of the 502 rating regions nationwide, and the regions in which the plans participate span 29 states and account for nearly two-thirds of the U.S. population. In the past few years, Medicaid insurers nationwide have expanded their footprint in the marketplaces, including entering new markets previously dominated by a single insurer. However, some health system stakeholders have raised concerns, particularly in the early years of ACA marketplace operations, about the potential negative consequences of Medicaid insurer participation in the market, namely consumer access concerns related to limited networks.

In a new report supported by the Robert Wood Johnson Foundation, insurance experts at Georgetown University’s Center on Health Insurance Reforms (CHIR) and the Urban Institute share findings from interviews with over 20 key stakeholders in six study states exploring how Medicaid insurers function in the marketplace and the advantages and disadvantages associated with their presence. Key findings include:

  • Medicaid insurers are a critical and competitive option in the health insurance marketplaces and often incentivize insurers to offer lower-cost plans.
  • Medicaid insurers’ business models are the key to their competitive edge. Medicaid insurers have taken their experiences from the Medicaid program and applied them successfully in the individual market, including leveraging existing provider contracts, keeping administrative costs low, and maintaining enrollment by offering members coverage continuity as they transition between the Medicaid and individual markets.
  • Medicaid insurers have largely adopted some commercial insurer practices, such as paying broker commissions, engaging in more marketing and advertising, and slowing increasing payments to providers to more closely align with what commercial insurers pay. Interviewees perceived few differences between these insurers’ plans and those of traditional commercial insurers today.
  • Early skepticism over Medicaid insurers’ commercial market participation has largely dissipated. In fact, most interviewees have positive perceptions of Medicaid insurers and credit the insurers for increasing plan choice and affordability.

To learn more, download the full report here.

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