Health Insurance Companies See ObamaCare Medicaid Boon

Despite controversy over the Affordable Care Act, Congress and lawmakers at state capitols across the country have allowed more Medicaid patients to enroll in managed health plans. (Photo credit: Glyn Lowe Photoworks, 2 Million Views, Thanks)

As the Obama administration touts the need for uninsured Americans to sign up for private coverage via exchanges under the Affordable Care Act, the insurance industry sees growth in an expanded Medicaid program for the poor under the health law.

This week, the chief executive of the nation's largest health insurance company and a new analysis indicate m ajor growth ahead for health plans that have contracts with state Medicaid programs thanks in large part to President Obama's signature legislative achievement.

As state budgets have been hurt by the stagnant economy, lawmakers have turned more patients eligible for Medicaid over to privately-contracted insurance companies. Now, the health law provides a cash infusion of more than $900 billion in federal dollars from 2014 to 2022 to expand Medicaid programs for states interested in the proposition.

'We expect to realize strong growth by serving in several ways: as established Medicaid programs grow through the ACA expansions; as eligible Medicaid prospects are identified through the federal and state exchange markets; and as the inevitable dual eligible ...initiatives begin to form and are implemented,' UnitedHealth Group (UNH) chief executive officer Stephen J. Hemsley said on the company's 2013 fourth-quarter and full-year earnings call earlier this week.

Helmsley has reason for optimism.

Enrollment in health plans that have contracts with Medicaid will rise by 20 percent this year and by nearly 40 percent from last year to 2016, according to a report this week from Avalere Health, a research and advisory services firm on health policy issues tracking the Affordable Care Act.

Other major players in the Medicaid managed care market include Aetna (AET), Centene (CNC), Humana (HUM), Wellpoint (WLP) and its Americagroup (AMG) as well as a host of Blue Cross and Blue Shield plans.

'The continuing shift toward Medicaid managed care presents a significant growth opportunity for health plans that specialize in managing these low-income populations,' said Avalere executive vice president Matt Eyles said in a statement accompanying the analysis. 'Plans that currently operate in Medicaid could see significant membership growth, and those outside of the Medicaid market until now could gain market share by moving into this space.'

This Medicaid funding under the Affordable Care Act is unlike past efforts to expand Medicaid in that the federal government will pick up the full tab for the first three years. The state gradually has to pick up some costs in 2017 but by 2020 the federal government is still picking up 90 percent or more of the Medicaid tab.

It's a much better funding proposition than the existing Medicaid program that essentially shares the cost between the states and the federal government. The federal government traditionally picks up a little more than half of the cost of Medicaid.

Avalere said 38 states and Washington, D.C. contract with private managed care plans 'to provide care to some or all of their Medicaid beneficiaries.'