Effects of Medicaid Health Plan Dominance in the Health Insurance Marketplaces

As more people become unemployed, lose their employer-sponsored insurance, and need cost-effective alternatives due to the COVID-19 pandemic, the marketplaces will likely be a valued resource for health insurance coverage.

The Issue

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 across the country. There was initial skepticism about Medicaid insurers’ ability to enter and be competitive in a new market.

Key Findings

Researchers spoke with stakeholders in six states with one or more Medicaid insurers participating in the marketplace for the 2020 plan year and found that previous concerns about the Medicaid insurers’ networks, pricing, and impact on other insurers’ participation have largely dissipated. Findings include:

• Medicaid insurers have started adopting commercial insurers’ practices, such as paying broker commissions, engaging in more marketing and advertising, and slowly increasing payments to providers.
• By employing tighter networks, leveraging lower provider rates, and keeping their administrative costs down, these insurers have taken their experiences from the Medicaid program and applied them successfully to the individual market. Commercial insurers have adopted cost-containment strategies employed by Medicaid insurers including narrowing networks for more favorable provider payment rates.

Conclusion

Overall, stakeholders credit Medicaid insurers with increasing choice and affordability in the individual health insurance market. Stakeholders also said there are no longer major distinctions between Medicaid and traditional commercial insurers in the marketplace.

About the Urban Institute

The nonprofit Urban Institute is dedicated to elevating the debate on social and economic policy. For nearly five decades, Urban scholars have conducted research and offered evidence-based solutions that improve lives and strengthen communities across a rapidly urbanizing world. Their objective research helps expand opportunities for all, reduce hardship among the most vulnerable, and strengthen the effectiveness of the public sector. Visit the Urban Institute’s Health Policy Center for more information specific to its staff and its recent research. 

About Georgetown University's Health Policy Institute–Center on Health Insurance Reforms

The Center on Health Insurance Reforms at Georgetown University’s Health Policy Institute is a nonpartisan, expert team of faculty and staff dedicated to conducting research on the complex and developing relationship between state and federal oversight of the health insurance marketplace.