Adopting some of the practices of commercial insurershas brought Medicaid managed care plans participating in ACAmarketplaces in line with more traditional insurers. (Photo:Shutterstock)

Competition in the Affordable Care Act public insurancemarketplace has been something of a roller coaster over the pastfew years, with some experts concerned the markets would collapse completely. But insurerson both the commercial and Medicare sides are starting to see thebenefits of participating in the public exchanges.

With people losing jobs during the COVID-19 pandemic, they willlikely be turning to the marketplace to purchase insurance plans.As they do, they'll have a harder time distinguishing betweenMedicaid and commercial insurers. Adopting some of thepractices of commercial insurers — such as paying brokercommissions — has brought Medicaid managed care plans participatingin ACA marketplaces in line with more traditional insurers,according to a new study.

Related: UnitedHealth eyeing return to ACAmarkets

"Entry by Medicaid managed care organizations has been thedominant mode of increased participation in the marketplace inrecent years, and that trend will likely continue as enrollmentgrows in these sectors," says Katherine Hempstead, senior policyadviser at the Robert Wood Johnson Foundation.

Researchers at the Urban Institute and Georgetown's Center onHealth Insurance Reforms, with funding from the Robert Wood JohnsonFoundation, interviewed stakeholders in six states that have atleast one Medicaid insurer in the ACA marketplace for that state in2020. These stakeholders said that the Medicaid plans offered areno longer any major distinctions from the more traditional plansbut in fact have adopted some of the successful strategies of ACAplan providers.

Some key points of differentiation noted in the study:

• Leveraging providerrelationships: Medicaid insurers have been ableto use existing business relationships, working with providers tonegotiate rates for both Medicaid managed care and individualmarket plans–providing greater volume to the provider.
• Lower administrative costs: Medicaid plansspend less on developing different plan designs than theircommercial counterparts, nor do they spend as much on marketing.Their narrow networks also result in a less resource-intensiveclaims process.
• Broker commissions: In the states included inthe study, Medicaid plans were actually paying a higher commissionthan commercial providers. As noted by study authors, "Someinterviewees indicated that the higher commission intended to getbrokers' attention, reporting that brokers had virtually ignoredMedicaid insurers in the early years ofmarketplace operations.
• Familiarity with a low-incomepopulation: Medicaid insurers have a wealth ofexperience serving lower-income populations, similar to manymarketplace enrollees, As one provider told RWJF, "Our traditionalinsurance companies, they were a little panicked. They hadno idea how to even plan for taking care of a population they hadnever paid any attention to. I think that probably meant that theyhad higher premiums. [By comparison, the Medicaid insurer's]premiums have been lower…because their business model helpedthem know better how to plan for this population."

Commercial providers, for their part, are adopting some ofMedicaid's practices as well, such as narrowing their networks. Inturn, Medicaid insurers have been slowly expanding theirnarrow-network models, possibly in response to network adequacyrequirements of the ACA.

Overall, the news is good for those shopping on the individualmarkets for insurance. The stakeholders interviewed said that fearsthat the entry of Medicaid insurers would impact insurers'networks, pricing and participation have dissipated. Onerespondent, speaking about the Florida market, said, "We've had alot of big carriers coming in…none of the bigcarriers…have been leaving, they have beenincreasing."

Steve Salkin is a managing editor forBenefitsPRO parent company ALM. He can be reached [email protected].

Read more: 

• Limited competition drives up ACA premiums in ruralareas
• Medicaid expansion cheaper than ACAsubsidies
• When it comes to health care costs, number ofmarketplace competitors matters less than type