Decision to Limit BadgerCare Eligibility Adversely Affects Private Coverage
A report issued Wednesday by Citizen Action of Wisconsin reveals that private health insurances rates are far higher in Wisconsin than in Minnesota. The new report found the following differences between the cost of unsubsidized plans purchased in the federal health insurance marketplace in Wisconsin, compared to the costs in Minnesota (which established its own insurance marketplace):
- For people who aren’t eligible for subsidies, the average cost of premiums for silver plans is 60% higher in Wisconsin, even though the WI plans have a $600 higher deductible.
- For individual metro areas, the lowest cost silver plans range from 20-89% higher in Wisconsin, compared to the average cost in Minnesota.
- The percentage differences translate into $480 – $2,125 more per person per year in Wisconsin for a 40-year-old, before Affordable Care Act tax credits.
The good news is that the current federal subsidies for marketplace insurance plans largely eliminate the cost differential – for people who qualify for those subsidies. However, the federal subsidies could be eliminated in Wisconsin if the U.S. Supreme Court rules in the pending King v. Burwell case that people aren’t eligible for subsides unless they live in a state like Minnesota that has created its own marketplace.
Citizen Action calculated that if the subsidies end in our state, Wisconsin consumers who are just over the poverty line would see rates as much as 24 times the rates paid by their Minnesota counterparts. That helps illustrate why Marketplace plans in Wisconsin would probably be shut down pretty quickly, because only the sickest participants would keep paying the premiums, and covering them alone wouldn’t be economically viable.
The report cites a number of policy choices in Wisconsin that are contributing to the sharply higher rates in our state for plans purchased through the federal health insurance Marketplace. Among those factors is the decision by Wisconsin policymakers to exclude from BadgerCare parents and childless adults with incomes between 100% and 138% of the federal poverty level (FPL). An analysis by the Rand Corporation concluded that not extending Medicaid coverage to 138% of FPL raises private insurance rates by 8% to 10%.
There are a couple of reasons why the decision to exclude low-income parents from Medicaid boosts the cost of private insurance plans. First, low-income adults tend to be less healthy and need more health care services. Second, since adults in the income range between 100% and 138% of FPL (i.e., $11,770 to $16,243 for a single individual) are exempt from the individual mandate and typically struggle to scrape together the premiums for private coverage, those who do purchase insurance tend to be sicker and more costly to serve.
According to the Citizen Action report, some of the other factors leading to higher rates for private health insurance plans in Wisconsin include the following:
- Rate Review: Wisconsin has not used its insurance rate review power to publicly challenge rate increases and block excessive increases.
- Substandard Plans: Wisconsin continues to allow the sale of substandard insurance plans that are not compliant with the Affordable Care Act, damaging insurance risk pools.
For a full list of health insurance cost disparity causes, as well as other policy proposals to remedy the problem, download the full research report.
Jon Peacock
