30 Aug MEDICAID ENROLLMENT CHANGES AND FINANCIAL PRESSURE FOR INSURERS
During the course of the pandemic, Medicaid enrollment surged because of federal measures that required states to maintain coverage for beneficiaries, even if they gained other insurance. This policy, carried out in March 2020, lasted three years and added over 23.3 million people to the Medicaid program, pushing the total number of beneficiaries to 95 million at its peak. Private insurers managing Medicaid plans greatly benefited from this influx, as roughly 75% of Medicaid enrollees were under their care. That being said, with the end of the public health emergency, states have started removing individuals from Medicaid, leading to more than 20 million people being disenrolled over the past year.
This decline in membership has resulted in a significant decrease in revenue for insurers. While the reduction in revenue was expected, the greater concern for insurers has been the shift in the demographic of remaining enrollees. As healthier individuals left Medicaid, those who remained tended to have higher healthcare costs. This unexpected trend has put pressure on insurers’ earnings, with companies like Centene, Elevance, and UnitedHealth experiencing increased Medicaid expenses this year.
In some cases, many disenrolled individuals had other insurance coverage, including employer-sponsored plans, but were still being counted as Medicaid members. Some were even unaware of their continued Medicaid enrollment during the pandemic, further inflating the numbers of people who weren’t utilizing Medicaid services, yet still generating payments for insurers. This dynamic created a windfall for insurance companies, who were receiving funds from states for members who didn’t access care.
The impact of these changes is being felt in the stock market. For example, Elevance’s shares dropped when the company forecasted higher Medicaid costs in the latter half of the year. Molina, however, experienced a favorable trading response after reporting earnings that offset Medicaid-related pressures with other financial gains.
Medicaid businesses already operate on thin profit margins, and higher utilization rates intensify their financial challenges. Though insurers are working to obtain better rates from states to account for rising costs, the process is slow because of the decentralized nature of Medicaid, where each state establishes rates individually. Even though eventual rate adjustments are expected to alleviate some of the pressure, the road ahead for Medicaid insurers remains uncertain and challenging as they navigate this transitional Medicaid enrollment period. To safeguard program resources, insurers must look to innovative ways to increase efficiency and reduce costs.