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April 8, 2014

Marketplace Virginia Could Reduce Health Coverage ‘Churn’

UPDATED: April 8, 2014 5:25 pm

As Virginia lawmakers head back to the health care negotiating table, they have one more reason to support ideas like the Senate’s bipartisan Marketplace Virginia proposal. New research shows how using private-sector options to close the coverage gap – like the one being debated in Virginia – can be a key part of a solution to one of the biggest challenges in health insurance: abrupt changes in coverage known as “churning.”

Churning happens when a family’s income changes enough that their access to health coverage changes, too. Get a pay raise and you might no longer qualify for Medicaid. Lose some hours and there goes your tax credit to help pay for private health insurance in the federal marketplace. The result is you bounce – or churn – from one insurance carrier to another.

These transitions can cause long gaps in coverage and disrupt continuous health care. Changes in coverage can force families to find new health care providers or change their current treatments based on what different insurance policies cover. These can be jarring disruptions that hurt families and weaken our health care system. This is a real problem, especially for people stuck in the coverage gap.

And states like Virginia suffer even more from this problem. The study found that states with less poverty have more churning because  more of their residents hover right around the eligibility cutoffs for Medicaid or private health insurance tax credits and subsidies, rather than firmly below. 

Using federal funds to help people afford private health insurance coverage could be done in ways that would reduce these problems for families.

If people could remain covered in private health plans regardless of whether their coverage came via a tax credit in the federal marketplace or a Marketplace Virginia-type approach, churning could be reduced.

Ideas like Marketplace Virginia can reduce churning by up to two-thirds, especially in states with less generous Medicaid programs, previous research has shown. And  only a handful of states make it harder to get Medicaid coverage than Virginia. 

Ideas like this also save Virginia money, close the coverage gap, leverage the private sector, and reduce churn. The House now needs to get on board, and quickly. Otherwise, Virginians stuck in the coverage gap will be left to churn in the wind.

–Mitchell Cole, Research Assistant

The Commonwealth Institute

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