What Employers Need to Know About Medicaid Redetermination

Federal government relief enacted at the start of the COVID-19 pandemic is ending, impacting those enrolled in Medicaid and the Children’s Health Insurance Program (CHIP) potentially leaving individuals without medical coverage.

Understanding the Medicaid redetermination process and its potential impact on their workforce can help employers prepare for possible benefits changes in the upcoming months. This can also help them better support their employees who may experience a loss of health coverage. By being prepared, employers can ensure they’re complying with applicable employee benefits laws and regulations.

Background

To receive additional, temporary federal funding, many states maintained continuous enrollment for individuals enrolled in Medicaid during the COVID-19 pandemic, despite any changes in eligibility status. Medicaid’s continuous enrollment requirement ended on March 31, 2023. The additional, temporary funding is being gradually reduced and phased down, and will end on December 31, 2023.

States must, over time, return to normal eligibility and enrollment operations. The Centers for Medicare and Medicaid Services (CMS) has provided states with up to 12 months following the end of continuous enrollment to initiate renewals for individuals currently enrolled in Medicaid or CHIP in a process referred to as Medicaid redetermination or Medicaid “unwinding.” This gradual unwinding means that those individuals no longer eligible for Medicaid or CHIP will lose their coverage over the span of approximately one year, depending on each state’s unwinding timeline.

Why Would Employees Lose Medicaid Coverage?

Medicaid eligibility is dependent upon a few factors. Employees may lose coverage if they:

• Earn too much income
• Fail to report a family status change (e.g. getting married)
• End a pregnancy
• Receive a gift or inheritance
• Move to a state with different Medicaid income requirements
• Changes to the state’s eligibility rules

4 Options for Those Who Lose Medicaid

1. Consider Appealing or Reapplying for Medicaid

As many as 3 out of 4 people who lost Medicaid coverage had it terminated due to procedural reasons. Procedural disenrollments are cases where people are disenrolled because they did not complete and return the renewal packet timely. This can be due to the individual not understanding the paperwork or perhaps they didn’t even receive the paperwork if the state has outdated contact information on the individual.

High procedural disenrollment rates are concerning because many people who are disenrolled for these reasons may still be eligible for Medicaid coverage. CMS has reported that several states have had to pause terminating certain individuals from Medicaid and restore coverage (at least temporarily) due to concerns of people losing coverage solely due to procedural reasons. Individuals who lose Medicaid coverage can appeal the decision and/or reapply through the state Medicaid agency or appeal the denial of Medicaid eligibility.

Medicaid qualifications are dependent on the individual’s state of residence, so it’s important they follow any procedures provided by the appropriate state Medicaid agency.

2. Health Insurance Marketplace through the Affordable Care Act (ACA)

If an individual no longer qualifies for Medicaid, they may be able to obtain health coverage through the ACA Health Insurance Marketplace (healthcare.gov). CMS released a letter announcing a temporary special enrollment period allowing eligible individuals who lose Medicaid or CHIP coverage to enroll in the Marketplace by visiting healthcare.gov on or before July 31, 2024. Often, these plans will include a subsidy to reduce the monthly cost.

3. Employer-Sponsored Coverage

Losing eligibility for Medicaid or CHIP coverage is considered a qualifying life event, giving affected individuals the opportunity to enroll in their employer-sponsored health plans via a special enrollment period as required by the Health Insurance Portability and Accountability Act (HIPAA). Employers will need to offer impacted employees a minimum of 60 days to enroll in their health plans.

Note that in CMS’s letter announcing the temporary special enrollment period for coverage in the Marketplace, they also stated they are encouraging employers to offer a special enrollment period longer than the minimum requirement of 60 days. Employers considering this approach should be mindful of Section 125 requirements (if a Section 125 plan is in place) and seek prior approval from their carrier or stop loss carrier before proceeding.

At this time, we anticipate most employers will comply with the 60-day requirement since enrollment in the Marketplace is available through July 31, 2024.

4. Medicare

Medicare may be an option for some individuals to consider. Medicare is the federal health insurance program for:

• People who are 65 or older
• Younger people with certain disabilities
• People with End-Stage Renal Disease (permanent kidney failure requiring dialysis or a transplant, sometimes called ESRD)

For more information, individuals can be directed to medicare.gov.

Impact on Employers

Throughout the public health emergency, continuous coverage increased Medicaid enrollment by approximately 30%, adding 18 million participants, according to the Center on Budget and Policy Priorities. Since millions of U.S. workers may no longer qualify for Medicaid because of the redetermination process, affected individuals will need to find coverage elsewhere.

As a result, many of these individuals may seek health coverage from their employers’ health plans. According to the Centers for Medicare and Medicaid Services, nearly 40% of individuals currently receiving Medicaid will be eligible for employer-sponsored healthcare, which could represent a 4% increase in the total amount of individuals currently enrolled in employer-sponsored health plans.

Increased enrollment in employer-sponsored health plans will likely raise many organizations’ healthcare costs. However, this will likely vary depending on the employer’s situation. For example, the industries most likely to experience increased enrollment are those employing workers most impacted by the pandemic, such as the service industries.

Additionally, some workers may decide to waive health coverage if they’re no longer eligible for Medicaid instead of enrolling in their employer-sponsored health plan. As a result, some workforces may experience an increase in negative health outcomes, which could lead to increased absenteeism and decreased productivity among workers.

What Can Employers Do?

Unfortunately, there’s little data to help employers determine how many of their employees are currently enrolled in Medicaid. However, employers might find it beneficial to review the rate of their workforce that waived health coverage before the pandemic compared to the percentage currently waiving coverage. If more employees waived coverage before the pandemic, this could signal that employers will see an increase in new enrollees due to the Medicaid redetermination process.

Employers should consider communicating information and details regarding Medicaid redeterminations to their workforce and explain how employer-sponsored coverage, or coverage under the Health Insurance Marketplace, can provide continued health coverage should any worker lose their Medicaid coverage. The Department of Labor (DOL) has issued this poster employers may choose to display and/or distribute.

Employers can also educate eligible employees on their benefits options and help them prepare for the special enrollment period by providing enrollment materials including the Summary of Benefits and Coverage (SBC) for employees to review. Additionally, be prepared for this to potentially impact your next annual enrollment since employees who were not previously covered may seek coverage at that time.

The above information does not constitute advice. Always contact your employee benefits broker or trusted advisor for insurance-related questions.