How Disruptions in Coverage Can Be Minimized for Medicaid and CHIP Enrollees Due for Renewal

Abstract

• Issue: Adults and children enrolled in Medicaid and the Children’s Health Insurance Program (CHIP) generally must renew their coverage every 12 months. For people who remain eligible for these programs or become eligible for marketplace premium tax credits (PTCs), it’s important to minimize coverage losses due to administrative issues.
• Goal: To estimate the number and characteristics of those still eligible for Medicaid/CHIP and those who become eligible for PTCs one year after enrolling and to estimate the impact of automatic enrollment of former Medicaid enrollees now eligible for PTCs.
• Methods: We enhanced our Health Insurance Policy Simulation Model with new analysis of longitudinal survey data.
• Key Findings and Conclusions: About 87 percent of Medicaid and CHIP enrollees are still eligible one year later. Among the groups most likely to still be eligible are people who enrolled with a near-$0 income, children in families with income below 100 percent of the federal poverty level, and single-parent families. About 2.5 million Medicaid/CHIP enrollees are eligible for PTCs one year later, and we estimate 1.3 million people would enroll in marketplace plans if left to individual responses. A nationwide automatic enrollment and effectuation program would increase enrollment to 1.8 million.

Introduction

People in Medicaid and the Children’s Health Insurance Program (CHIP) must generally renew their coverage 12 months after they enroll.¹ People can be disenrolled for two main reasons. First, some lose eligibility due to increased income from job changes or other circumstances. Low-income working families often have a fluctuating income.² Second, some people are procedurally disenrolled for reasons such as necessary forms not being received in time, even though some of them remain eligible.

Keeping eligible people enrolled is desirable, since disenrollment from Medicaid or CHIP can lead to losses of health coverage, which, even if temporary, can be a problem for beneficiaries and state Medicaid agencies. Research has shown that health coverage reduces mortality³ and improves financial stability.⁴ Disruptions in health coverage may result in delayed care and higher program costs for Medicaid and CHIP.⁵ Keeping children insured has been shown to have continuing benefits into adulthood.⁶

The challenge for state and federal policy is how to maximize renewals and prevent disruptions in coverage without lowering the accuracy of renewal, which could lead to larger numbers of ineligible people having their coverage extended. Two types of Medicaid policies designed to minimize disenrollment among those who remain eligible are 1) continuous eligibility and 2) automatic (ex parte) renewal through data matches. Starting in 2024, states were required to give children 12 months of continuous eligibility. In addition, a growing number of states have obtained waivers to extend continuous eligibility beyond this period for children and to extend it for adults as well. Automatic renewal strategies were important in many states during the Medicaid unwinding, when the federal government granted states temporary flexibilities to expand the scope of automatic renewals. There is interest in making some of these strategies permanent.

A third approach to the dual problem of minimizing coverage disruptions while maintaining enrollment accuracy is to target former Medicaid and CHIP enrollees who are found eligible for marketplace premium tax credits (PTCs) at their 12-month renewal for assistance with the transition to marketplace coverage. One study estimated that only about 3 percent of those losing Medicaid or CHIP coverage enrolled in the marketplaces.⁷ Some people eligible for PTCs do not enroll because either they do not know they are eligible or they consider the premiums and cost sharing of marketplace coverage unaffordable. The study also found that about 70 percent of those transitioning from Medicaid to marketplaces experienced a gap in health coverage.

To address this problem, two states recently introduced automatic marketplace enrollment for former Medicaid enrollees. In California, Medicaid and CHIP enrollees who become eligible for PTCs are automatically enrolled in the marketplace under a plan selected for them, but each person must manually complete (or “effectuate”) their enrollment by paying the first month’s premium. Rhode Island goes further, automatically selecting a plan and effectuating the enrollment of people with an income up to 200 percent of the federal poverty level (FPL) by paying their first two months of premiums.⁸

Key Findings

In this brief, we combined the Urban Institute’s Health Insurance Policy Simulation Model (HIPSM) with new machine learning analysis of the Survey of Income and Program Participation (SIPP) to estimate the eligibility of Medicaid and CHIP enrollees 12 months after enrolling. (For more details, see “How We Conducted This Study.”) The SIPP data add a longitudinal dimension to our analysis, allowing estimates of change in eligibility over time. We show the number of those who retain eligibility and the number of those now eligible for PTCs along with demographic characteristics useful for designing important state and federal policy options for improving continuity of coverage. We also estimate the impact of policies that automatically enroll Medicaid enrollees who have become eligible for PTCs.

Most research on eligibility changes among Medicaid recipients is years old, often predating the Affordable Care Act. We are not aware of other work recent enough to consider current Medicaid eligibility rules and state policy options, the latest marketplace take-up rates, and the introduction of enhanced PTCs. This is also the first 50-state analysis of automatic enrollment policies for former Medicaid enrollees.

Children

We estimate that about 36.8 million children will be enrolled in Medicaid or CHIP during the average month of 2025 (Exhibit 1). About 32.0 million of these (87%) will still be eligible for Medicaid or CHIP at the time of their renewal 12 months after enrolling. About 1.3 million children (3.4%) will be eligible for PTCs, and 3.6 million will not be eligible for PTCs due to affordable offers of coverage in their family.

The overwhelming majority of children (95%) who were enrolled with a family income below 100 percent FPL remain eligible one year later (Exhibit 2). The federal Centers for Medicare and Medicaid Services (CMS) temporarily allowed states to automatically renew the enrollment of those whose last recorded income was below this level, and many states have interest in making this change permanent.⁹ Our estimates suggest that automatic renewal could improve overall accuracy of redetermination, considering the substantial reductions in the disenrollment of eligible children that would result.

Other groups of children extremely likely to still be eligible for Medicaid include those in single-parent families, those in families with less than a high school education, and children age 5 and younger. As of November 2024, Oregon, Hawaii, Minnesota, New York, and Pennsylvania had obtained waivers to extend continuous eligibility to children up to age 5 or 6; our results support this option.¹⁰

Groups of children who are less likely to still be eligible for Medicaid 12 months later are also more likely to become eligible for marketplace PTCs, including those who enrolled with a family income above 100 percent FPL, non-Hispanic white people, families with multiple adults, and children older than age 6. The last of these includes 18-year-olds who age out of the child eligibility group.

Adults Under Age 65

Of the 35.6 million adults under age 65 whom we estimate will be enrolled in Medicaid in an average month of 2025, 30.8 million (87%) will still be eligible at the time of renewal (Exhibit 1). About 1.2 million will become eligible for PTCs, of whom 221,000 live in states that have not expanded Medicaid eligibility. About 3.6 million will not be eligible for Medicaid or PTCs, with 615,000 living in nonexpansion states.

Nearly all the adults who enrolled with no or very little income will still be eligible 12 months later (Exhibit 3). One of the temporary flexibilities the Centers for Medicare and Medicaid Services granted to states during the unwinding allows those who enrolled with zero income to be automatically renewed. There is interest in making this renewal permanent; our findings support that. Others likely to still be eligible for Medicaid include non-Hispanic Black adults, single parents, families without workers, and adults with less than a high school education. Groups less likely to still be eligible for Medicaid and more likely to be eligible for marketplace PTCs include those who enrolled with an income above 100 percent FPL, adults living alone, families with at least one full-time worker, and families with some college education.

Automatic Enrollment for Former Medicaid and CHIP Enrollees Eligible for PTCs

We now focus on the estimated 2.5 million Medicaid and CHIP enrollees who become eligible for PTCs (Exhibit 1). Based on current marketplace take-up patterns, we estimate that 1.3 million former Medicaid and CHIP enrollees newly eligible for PTCs will enroll in the marketplaces (Exhibit 4).

If enhanced PTCs are allowed to expire after 2025, this enrollment number will be notably lower.¹¹ If all the states adopted a policy like the one introduced in California — automatic enrollment, but with the requirement that individuals begin paying premiums to start their coverage — we estimate that 101,000 more people would enroll in the marketplaces. While this is an improvement, individual effectuation would be a barrier to enrollment because it still places an administrative and financial burden on the individual. Under a policy like that in Rhode Island, we estimate that 1.8 million former Medicaid and CHIP enrollees will enroll in the marketplaces, 539,000 more than under current law. In Appendix Table 1, we show these changes in marketplace enrollment by state. In Appendix Table 2, we show the states’ costs of paying the first two months of premiums for those with an income up to 250 percent FPL. These costs are modest, only $41.2 million nationwide.

Discussion

Our findings highlight a variety of actions that state and federal governments can take to improve continuity of health coverage as people’s circumstances change while maintaining or improving the accuracy of renewal:

Medicaid and CHIP

• States and the federal government can extend continuous eligibility for Medicaid and CHIP.¹² Twelve-month continuous eligibility is now mandatory for children. The federal government could require 12-month continuous eligibility for adults as well, and states can extend continuous eligibility for longer periods of time through waivers. Three states currently have multiyear continuous eligibility for children up to age 5 or 6 years, and nine more states and the District of Columbia have waivers pending approval.¹³ We found that 95 percent of children in this age group are still eligible one year after enrollment.
• The federal government can expand the number of people automatically renewed by making temporary waivers permanent for those who enrolled with $0 income and children who enrolled with an income below 100 percent FPL. A number of studies have found that automatic (ex parte) renewal reduces disenrollment and saves administrative costs.¹⁴ We found that the large majority of both groups are still eligible one year after enrollment, so these automatic renewals can be made permanent without reducing the accuracy of renewal.
• States can conduct more targeted individual outreach and assistance. Extending individual support to those we found are very likely to still be eligible — including single-parent families, Black people, Hispanic people, and those with less than a high school education — can reduce disruptions in coverage, as some studies have found.¹⁵ Assistance for those we found are more likely to become eligible for PTCs — including those who enrolled at a higher income, adults living alone, and families with a full-time worker — can reduce coverage gaps as people transition to the marketplaces.

Medicaid, CHIP, and the Marketplaces

• States can follow the lead of California and Rhode Island and introduce automatic enrollment of former Medicaid enrollees in the marketplaces. We found that enrollment increased under these policies, particularly that of Rhode Island, which automatically effectuates coverage for former Medicaid enrollees with an income up to 200 percent FPL and pays two months of premiums. Note that this includes 18-year-olds who age out of child Medicaid and CHIP.
• States currently using a federally facilitated marketplace can establish a single eligibility determination system for Medicaid, CHIP, and the marketplaces through a state-based marketplace.¹⁶ In the absence of automatic enrollment, such a system can increase marketplace enrollment among former Medicaid enrollees.
• States can lower the cost of marketplace premiums and cost sharing through additional state subsidies or a Basic Health Program. Even with PTCs, marketplace coverage often has notably higher premiums and cost sharing than Medicaid, which can be a barrier to enrollment. New York recently obtained a waiver to extend free, comprehensive coverage to people with an income up to 250 percent FPL and to reduce cost sharing for many with a higher income.
• Congress can extend enhanced PTCs, which are set to expire after 2025. If they are not extended, the number of uninsured people will increase substantially.¹⁷ Notably fewer former Medicaid enrollees will enroll in marketplaces than we estimated.

Conclusion

We found that 87 percent of Medicaid and CHIP enrollees would still be eligible at renewal one year later. By identifying the groups of people most likely to retain eligibility, we provide evidence supporting several policy options to reduce coverage gaps. We also estimated that 2.5 million Medicaid and CHIP enrollees would be eligible for PTCs one year later and found that automatic enrollment and effectuation programs could substantially increase enrollment.