How will Californians’ health coverage sources change when the public health emergency ends?

Laurel Lucia, Tynan Challenorand Miranda Dietz

Medi-Cal enrollment has grown by nearly two million since the start of the COVID-19 pandemic, from 12.6 million Californians enrolled in February 2020 to 14.4 million in November 2021, and enrollment continues to grow. This is primarily due* to the federal continuous coverage requirement, which has paused the regular Medi-Cal redetermination (or “renewal”) processes during the public health emergency (PHE). As a result, many more individuals newly enrolled in Medi-Cal than disenrolled—only those who died, moved out of California, asked to be disenrolled, or had other rare circumstances were discontinued. This blog post summarizes (1) the available estimates of the potential reduction in Medi-Cal enrollment once the PHE is unwound and redeterminations have been completed, and (2) the likely eligibility for and enrollment in private coverage among those losing Medi-Cal.

Projected reduction in Medi-Cal enrollment

The California Legislative Analyst’s Office projects that approximately two million fewer Californians will be enrolled in Medi-Cal by the time redeterminations are complete if the PHE ends this summer. The California Department of Health Care Services (DHCS) projected a similar decline in November 2021 budget estimates and DHCS stated in a recent news release that as a result of re-starting the redeterminations process “two to three million beneficiaries could no longer be eligible for Medi-Cal.”

The reduction in Medi-Cal enrollment is highly uncertain and will depend on a range of factors including:

  • PHE end date: The Biden Administration recently extended the PHE through July 15, 2022. It remains to be seen whether the PHE will be extended further, but the Administration will provide at least 60 days’ notice before it ends. Once redeterminations begin, states will have up to 12 months to initiate redeterminations and another two months to complete all pending actions, under federal guidance. The later the PHE ends, the higher Medi-Cal enrollment will peak, and the greater the potential decline in Medi-Cal enrollment once redeterminations are processed.
  • Economic/ labor market trends: The number of Californians eligible for Medi-Cal during the redetermination period will partly depend on how employment and wages change as the state recovers from the COVID-19 induced recession. California employment was 1.5% below pre-pandemic levels as of March 2022; this may mean greater Medi-Cal eligibility and demand due to more people with low income and fewer people with job-based coverage, though the reduction in job-based coverage enrollment early in the pandemic was much smaller than the change in employment. Conversely, some Medi-Cal enrollees have likely experienced wage increases during the pandemic that exceeded the growth in the Medi-Cal upper income threshold, which could reduce the number of eligible workers. For example, nominal wages in California’s leisure and hospital sector grew by 16% between December 2019 and December 2021, while the Federal Poverty Levels used as the basis for Medi-Cal income eligibility limits grew by 7% between 2020 and 2022. In some cases, wage increases resulted from increases in state and local minimum wages. The net impact of these trends is unknown and will continue to evolve as economic circumstances change.
  • Administrative barriers in renewal process: As Medi-Cal redeterminations get underway, some Californians could lose Medi-Cal in spite of continued eligibility due to administrative barriers. These could include enrollees not receiving a renewal packet due to an address change during the pandemic; enrollees encountering difficulties in submitting required information; and administrative errors caused by the volume of redeterminations potentially exceeding the capacity of county eligibility staff and systems to process them. Given that over 14 million Californians are currently enrolled in Medi-Cal, barriers or errors affecting even just a fraction of enrollees could translate into large numbers of eligible individuals being disenrolled. Barriers in the renewal process could disproportionately impact Latinos and other enrollees of color given that Latinos make up a disproportionate share of Medi-Cal enrollment (49.1% vs. 39.4% of California population), and Latino, Black, and other people of color in the U.S. experience more volatility in housing and employment, which can make the redetermination process more challenging. Additionally, even before the pandemic, Latino and Black children in the U.S. were more likely to experience a gap in coverage than white children.

Transitions to job-based coverage and Covered California

Among Californians who lose eligibility for Medi-Cal, the vast majority will be eligible for job-based coverage or subsidized insurance through Covered California. (The Urban Institute estimates that nationally between 92.5% and 98.4% of non-elderly adults losing Medicaid will be eligible for job-based coverage or subsidized Marketplace coverage, depending on whether temporary enhanced federal subsidies enacted by Congress under the American Rescue Plan are extended beyond 2022.) The extent to which Californians will transition to new sources of coverage without gaps in coverage or becoming uninsured will depend on their ability to afford coverage and the ease with which they can navigate employer- or Covered California-based enrollment processes.

Eligibility for and enrollment in job-based coverage

The Urban Institute estimates that among U.S. adults under age 65 who lose Medicaid, 65% will be eligible for job-based coverage. Similarly, we estimate that 63% of all Californians under age 65 with income between 139 and 400% of the Federal Poverty Level (FPL) are projected to have an affordable offer of job-based coverage through their own job or a family member’s job in 2022, according to estimates from the California Simulation of Insurance Markets (CalSIM) model. (This California estimate is not specific to those projected to lose Medi-Cal but is focused on the income range in which most Californians losing Medi-Cal are likely to fall.)

Under usual circumstances, the vast majority of Californians (97%) eligible for affordable coverage through their own job or a family member’s job are projected to enroll in that coverage if they do not have Medi-Cal or other coverage in 2023 (CalSIM). The take-up rate for employer coverage is bolstered by what is often a simple and assisted enrollment process that occurs when workers start a new job, but some of those losing Medi-Cal may have difficulty navigating their employer’s mid-year enrollment process so the take-up rate for this group might be lower than the usual rate. Additionally, Californians transitioning from Medi-Cal are likely to have income that is lower than the typical person with job-based coverage and may face greater challenges affording the premium contribution. National research shows that enrollment among eligible workers is lower at firms with larger low-wage workforces, likely due to affordability concerns.

Some Californians losing Medi-Cal may already be enrolled in job-based coverage. Approximately 6.8% of Californians under age 65 with Medi-Cal, or more than 600,000, reported also having job-based coverage in 2019, according to our estimates of American Community Survey data. Medicaid is generally the payer of last resort, meaning providers must bill private insurance for covered services before billing Medi-Cal when patients have both insurance types. There are a number of specific circumstances under which someone may decide to enroll in both types of coverage. One common reason is to access Medi-Cal benefits that are not typically covered by private insurance, such as transportation, dental, vision, long term supports and services, wheelchairs and certain other DME, or extended occupational, speech, or physical therapy. Another reason is that in some cases copayments or other types of cost sharing may be reduced with enrollment in both types of coverage. As the PHE is unwound, Medi-Cal enrollees who have job-based coverage will not be at the same risk of a gap in coverage or becoming uninsured as others who are discontinued from Medi-Cal.

Eligibility for and enrollment in Covered California

Nationally, the Urban Institute estimates that 27.5% of U.S. adults under age 65 who lose Medicaid will be eligible for subsidized Marketplace coverage and have income of up to 400% FPL. An additional 5.9% who have income over 400% FPL will be eligible for subsidized Marketplace coverage if American Rescue Plan (ARP) enhanced premium subsidies are extended beyond 2022.

Not all individuals eligible for Covered California will enroll; some may have affordability concerns while others may not realize they are eligible for subsidized coverage or understand how much financial assistance is available. Among all individuals eligible for Covered California (with or without subsidies), an estimated 70% to 76% are projected to be insured in 2023, depending on whether Congress extends the enhanced federal subsidies (CalSIM). Under Senate Bill 260 (2019), Covered California is preparing to make transitions from Medi-Cal to Covered California more automatic starting in July 2022, which is likely to help ensure strong enrollment levels as Californians lose Medi-Cal.

Conclusion

The Medicaid continuous coverage provisions during the COVID-19 pandemic have been critical to keeping Californians insured during the PHE. The Medi-Cal program has features that existed prior to the pandemic which will help mitigate disenrollment of eligible Californians; these include having a combined Medi-Cal/CHIP program and a policy of 12 months continuous coverage for children, and the practice of renewing coverage, when possible, using existing data sources through an ex parte process that does not require the beneficiary to take action . DHCS is adopting practices that will support keeping eligible individuals enrolled, such as taking up to 12 months to initiate redeterminations and starting an outreach and education campaign to help ensure that Californians remain enrolled in Medi-Cal or successfully transition to other sources of coverage.

There are additional steps the state can take to help ensure that those who maintain Medi-Cal eligibility also maintain coverage, and to make the transition to other sources of coverage as easy and seamless as possible for those who lose Medi-Cal eligibility. Examples of recommended actions from a blog post by the California Health Care Foundation include: ensuring that county offices have the capacity to provide sufficient and language-appropriate support to enrollees, using available data from other state benefit programs to renew coverage automatically when possible, establishing clear processes for enrollees to update their contact information now and in the future, partnering with local organizations and schools to develop effective messages and conduct outreach, and having a system in place for monitoring redetermination data in real time to support course corrections as needed. The federal government also encourages states to work closely with Medi-Cal managed care plans and providers during the unwinding period. Additionally, federal or state action to extend the enhanced premium subsidies through Covered California beyond 2022 will be critical to ensuring that those transitioning from Medi-Cal to Covered California find coverage affordable and enroll.

As the PHE is unwound over the next year and beyond, the actions California takes will determine whether the state continues to move forward with increasing the number of Californians who have coverage and improving health equity, or whether instead it moves backwards.

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* In national analysis, the Urban Institute found that “much of the increase in Medicaid enrollment was caused by the continuous coverage requirement, rather than by pandemic-related job losses.” A national study by Frenier, Nikpay, and Golberstein found no systematic relationship between the increases in Medicaid enrollment and the job losses in each state early in the pandemic and another national study by Khorrami and Summers unexpectedly found that enrollment growth was actually greater in states with smaller changes in unemployment in 2020. In California specifically, the level of new enrollment and re-enrollment in Medi-Cal in March through December 2020 was similar to or lower than enrollment in the same months of 2019, according to DHCS enrollment data, contrary to what would be expected with a large increase in enrollment due to economic trends.

Acknowledgements: We would like to thank Beth Capell, Ken Jacobs, David Kane, Edwin Park, Terri Shaw, and Emory Wolf for their review of this blog post. Thanks to Jenifer MacGillvary for her help in preparation of the blog post.