Income volatility and the design of insurance exchanges

If you read one article this morning on income volatility and the design of health insurance exchanges, this is the one.

If you read one piece of health policy wonkery today, you should read this article by Benjamin Sommers and Sara Rosenbaum. Rosenbaum is a familiar national voice in Medicaid and health reform. You may not know Sommers as well, but you will. He is a health services researcher who has done great work on CHIP transitions and takeup (e.g. here).

Their article goes public about a technical but important, issue that’s been kicking around below the public’s radar screen in the health policy community. How do we serve people whose incomes vary over the year? You may be snoozing already, but if you stay awake for a moment, you’ll see why this is both important and complicated to address. And why health reform needs some Midrash that has yet to be written.

Suppose that you are a single mom who earns about $30,000 per year. Maybe you are a waitress. Maybe you work in a retail outlet and are given fluctuating hours by your employer. On average, you earn about $2,500 per month. Only you don’t earn that every month. You earn a lot around the holidays and during peak vacation periods. You don’t earn much in other months when hours are scarce or tips are fewer.

Based on your monthly income, you are sometimes eligible for Medicaid, and you sometimes earn more than that and belong on a health insurance exchange. Depending how these issues are handled, you could be placed into one of these arrangements or the other. Worst of all, you could churn back and forth as your personal circumstances push you above or below the line for Medicaid eligibility. Such income volatility poses administrative challenges for the people insuring you. This may also disrupt your healthcare if Medicaid and your plan within the health insurance exchange have different provider networks or different policies regarding your care.

Sommers and Rosenbaum use longitudinal data from the Survey on Income and Program Participation (SIPP) to examine how common such volatility really is. (I’m annoyed at myself that I didn’t write this paper, since my colleagues Luke Shaefer, Colleen Grogan, and I have used SIPP to examine somewhat related issues.

Sommers and Rosenbaum’s numerical findings speak for themselves.:

We estimate that within six months, more than 35 percent of all adults with family incomes below 200 percent of the federal poverty level will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse; within a year, 50 percent, or 28 million, will.

States need to account for this in their design health insurance exchanges, and to allow a more permeable boundary between the new exchanges and Medicaid. Sommers and Rosenbaum provide some pretty sensible policy suggestions. I’ll let you read their take and decide for yourself.

The Affordable Care Act is pretty silent about how these issues should be handled. For all the juvenile criticisms of passing a many-paged bill, a few-thousand pages provides only a basic structure and roadmap for health reform. Much of the hard work resides in the yet-to-be-written administrative and regulatory Midrash that goes along with it.

The federal government and the states had better be talking. 2014 is not so far away.

Author: Harold Pollack

Harold Pollack is Helen Ross Professor of Social Service Administration at the University of Chicago. He has served on three expert committees of the National Academies of Science. His recent research appears in such journals as Addiction, Journal of the American Medical Association, and American Journal of Public Health. He writes regularly on HIV prevention, crime and drug policy, health reform, and disability policy for American Prospect,, and other news outlets. His essay, "Lessons from an Emergency Room Nightmare" was selected for the collection The Best American Medical Writing, 2009. He recently participated, with zero critical acclaim, in the University of Chicago's annual Latke-Hamentaschen debate.

8 thoughts on “Income volatility and the design of insurance exchanges”

  1. I think the fairest way is to have people pay based on their lowest monthly income from the previous year. Otherwise, you’re just nickel-and-diming people who don’t make much to begin with. And these are probably not the people using a lot of resources anyway, under-using them if anything.

  2. Kill me now!!

    How many more examples justifying the need for a national health care system do we have to see before we find a way to get it done. All of these boundary conditions go away if you just provide health care for everyone.

  3. Real problems are hard enough without pre-occupying yourself with problems you’ve created by “compromising” with people acting in bad faith.

  4. Bruce, huge problems have been created by not compromising. The anger on the right about Obamacare means they are trying to destroy it and will allow no perfecting legislation. If some program which had some buy in from the right had been put in place, there would have been some possibility of going forward. As it is, I expect the whole thing will likely topple.

  5. Dave Schutz,

    If some program which had some buy in from the right had been put in place, there would have been some possibility of going forward.

    The program that was put in place had substantial buy in from the right, until the exact second it became Obama’s proposal.

    In other words, there is no animal of the type you describe.

  6. @dave schutz: “. . . huge problems have been created by not compromising.”

    It seems to me that there was a great deal of compromise, in the shaping of both the proposals given serious consideration and the final program. If we cannot agree on the facts, I don’t see that there’s much else to discuss.

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