What Will Happen to Medicaid Beneficiaries If Kentucky 'Dis-Kynects'?

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    Shutting down Kentucky's state-based marketplace will have a major impact on Medicaid enrollees
    The state-based marketplace Kynect, which may close, offers integrated Medicaid and marketplace enrollment

Kentucky Governor Matthew Bevin has proposed to end Kynect, his state’s highly popular health insurance marketplace, and replace it with the federal marketplace, HealthCare.gov. The U.S. Department of Health and Human Services (HHS) recently signaled that the federal government would decide whether the governor may proceed, and under what conditions, by June 1.

At first blush, it might seem that ending Kynect is a decision of only modest import. Like most Americans with marketplace coverage, Kentucky’s consumers will use HealthCare.gov rather than a state-run marketplace to shop for health plans, enroll in the plan of their choice, and find out if they are eligible for subsidies. But the true significance of the state’s move may have far more to do with Medicaid, because of Medicaid’s intimate connection with Kynect. In a state in which poverty is so deep that over four out of every five newly insured residents receives coverage through Medicaid—an estimated 550,000 people by the end of 2015—severing this connection takes on extraordinary meaning.

In our new Commonwealth Fund issue brief on streamlining Medicaid enrollment, we note the major role played by state-based marketplaces such as Kynect. Under federal rules, all state-based marketplaces must be able to fulfill the Affordable Care Act’s “no wrong door” policy, that is, they must be able to screen and enroll people into whatever insurance affordability program they are eligible for, whether that’s marketplace subsidies, Medicaid, or the Children’s Health Insurance Program. By contrast, states that rely on HealthCare.gov have an important choice to make about Medicaid. A state may choose to have HealthCare.gov determine Medicaid eligibility. Alternatively, the state may limit HealthCare.gov to assessing whether someone is eligible for Medicaid and then referring the applicant to the state agency for a full determination. This means that no formal eligibility determination or renewal of coverage happens until the state Medicaid program acts.

Our findings are unequivocal: states that have expanded eligibility for Medicaid and also operate their own marketplaces show far higher rates of Medicaid enrollment. One possible reason might be that states are better able to fully integrate Medicaid and marketplace enrollment functions when they oversee both systems. In fact, among all Medicaid expansion states using a state-based marketplace, Kentucky leads the pack in percentage growth in Medicaid enrollment, exceeding the next state by more than 10 percentage points.

States that opt for HealthCare.gov to make Medicaid eligibility determinations show a higher rate of enrollment than those that limit the federal marketplace to assessment and referral only, but the highest performing such state shows enrollment increases nearly 40 percentage points lower than that achieved in Kentucky. Simply by moving to HealthCare.gov, Kentucky stands to drive down Medicaid enrollment; by adopting an assess-and-refer approach, the state likely will reduce Medicaid enrollment further.

The Impact on Kentucky’s Poorest Residents

It remains to be seen, of course, whether in moving to HealthCare.gov, Kentucky will opt to become an assess-and-refer state. But it is not inconceivable that following establishment of Kynect, the state also reduced its Medicaid agency’s capacity to carry out a separate enrollment function. If this is the case, the federal government conceivably could require that state officials demonstrate renewed capacity to perform the Medicaid enrollments and renewals in a timely fashion and with minimal coverage disruption before allowing them to abandon Kynect.

Should HHS let the state abandon Kynect and adopt an assessment and referral approach for Medicaid eligibility in its relationship with HealthCare.gov, hundreds of thousands of residents could be affected, not only those applying for Medicaid for the first time, but also those who depend on Kynect to complete the annual renewal process. Severing the Kynect/Medicaid link carries particularly significant implications for people, such as seasonal workers, whose incomes tend to fluctuate across the Medicaid/marketplace tax subsidy divide. Research suggests that this population can experience multiple eligibility shifts in a single year.

At the very minimum, ending Kynect must be understood as a major challenge to Medicaid’s ability to function as effectively for Kentucky’s poorest residents. Governor Bevin is reportedly considering asking the federal government to permit restrictions on Medicaid eligibility via a §1115 Medicaid demonstration. Any further consideration of whether to permit the state to impose additional program constraints ought to take stock of the full impact of dismantling Kynect before proceeding.

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Publication Details

Publication Date: March 30, 2016
Authors: Sara Rosenbaum
Citation:
S. Rosenbaum, "What Will Happen to Medicaid Beneficiaries If Kentucky 'Dis-Kynects'?," The Commonwealth Fund Blog, March 2016

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