Medicaid unwinding: How is it impacting the health care markets?

The Medicaid unwinding began one year ago this week, and the impact of millions of Americans being disenrolled from Medicaid coverage will continue to be felt into the next few years.

The American Academy of Actuaries looked into the Medicaid unwinding’s impact on the health care markets in 2024 during a recent webinar.

During the pandemic, states were prohibited from disenrolling people from Medicaid in exchange for an increase in federal Medicaid matching payments, explained Jennifer Tolbert with KFF’s Program on Medicaid and the Uninsured. Congress passed the Consolidated Appropriations Act in December 2022, ending the continuous enrollment provision on March 31, 2023, and phasing down enhanced federal matching payments through Dec. 31, 2023.

States could resume disenrolling people from Medicaid starting April 1, 2023, but first had to conduct a full renewal in accordance with federal rules before terminating coverage.

Medicaid enrollment reached a high of 94 million in April 2023, but declined each month since then, finishing 2023 with 85 million enrollees. More than 19 million have been disenrolled from Medicaid as of late March. In addition, 46 million people had their Medicaid coverage renewed while another 34.3 million renewals are yet to be determined.

The states still have a way to go in completing the unwinding, Tolbert said. Some states delayed the start of their unwinding until June or July 2023, while some paused or slowed the pace of disenrollment during the unwinding period.

70% disenrolled due to procedural reasons

Of those who were disenrolled from Medicaid, 70% were disenrolled for procedural reasons, Tolbert said. Procedural disenrollment can happen for a variety of reasons, she said.

“Maybe someone didn’t receive their renewal notice or they weren’t able to gather the required documentation and return it within the required timeframe,” she said. “Some may have started a new job and enrolled in employer coverage, so they may have chosen not to complete the renewal process.”

But many who were disenrolled for procedural reasons may still be eligible for Medicaid coverage, she added, and might not realize they were dropped from coverage until they try to access care.

As of December 2023, about 28% of those disenrolled from Medicaid transitioned to coverage on the Affordable Care Act marketplace, Tolbert said. But many people disenrolled from Medicaid will become uninsured, even if they re-enroll in Medicaid or obtain other coverage, KFF research showed.

As the unwinding continues, a number of key questions remain, Tolbert said.

• What are the characteristics of people who have been disenrolled from Medicaid? How do their health status and health needs compare with those who have maintained Medicaid coverage?
• What strategies have been most effective at reducing procedural disenrollments and churn (moving back onto Medicaid after being disenrolled)?
• How will unwinding affect overall Medicaid enrollment and health coverage rates, particularly the uninsured rate?

Actuarial considerations of the unwinding

The Medicaid unwinding has several considerations for actuaries, said Colby Schaeffer of the American Academy of Actuaries’ Medicaid Committee. Among those considerations:

• Large changes in total enrollment between the pre-public health emergency, the PHE and the post-unwinding periods will result in a changing mix of Medicaid enrollees with varying usage patterns.
• The average risk profile of Medicaid enrollees is notably different between the PHE and post-unwinding periods. Those who may already have other health insurance coverage dilute the risk profile during the PHE. Eligibility redeterminations that lead to the disenrollment of non-utilizers will remove the dilution, resulting in an increase to expected per capita costs.
• The average risk profile can be thought of us acuity, which is the average cost of a cohort of individuals due to their underlying risk that drives usage of health care services.

Susan Rupe is managing editor for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected]. Follow her on X @INNsusan.

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Susan Rupe is editor in chief, magazine, for InsuranceNewsNet. She formerly served as communications director for an insurance agents' association and was an award-winning newspaper reporter and editor. Contact her at [email protected].