Medicaid redeterminations may impact group health plans

State Medicaid eligibility reviews have resumed after a temporary pause initiated near the beginning of the COVID-19 pandemic. As a result, millions of people could lose their eligibility for Medicaid starting in April 2023. Employees and their dependents who lose access to Medicaid may turn to their employer-sponsored group health plans for coverage, leading to a potential increase in group health plan enrollment — and an increase in plan costs for employers.

The Centers for Medicare & Medicaid Services (CMS) have given states up to 12 months to initiate the redeterminations and 14 months to complete them; however, the redetermination process has already begun.

Background

At the start of the COVID-19 pandemic, the federal government took various relief measures to ensure individuals continued to have access to health coverage. In March 2020, under the Families First Coronavirus Response Act, the annual process used by states to review Medicaid eligibility was temporarily paused, allowing individuals who may otherwise have lost eligibility to stay enrolled. The Consolidated Appropriations Act, 2023, changed the end date for this continuous enrollment requirement to March 31, 2023. This means that starting in April 2023, states will be permitted to resume participant disenrollment from Medicaid. (More information about each state’s redetermination process can be found on the CMS website.)

HIPAA special enrollment rights

Under the Health Insurance Portability and Accountability Act (HIPAA) special enrollment rules, group health plans must allow eligible employees, as well as their eligible dependents, to enroll in employer-sponsored coverage if the employee or dependent is covered under Medicaid but the coverage is terminated due to a loss of eligibility. In those circumstances, the employee must be given at least 60 days to request special enrollment.

Note that the COVID-19 Outbreak Period rules, which provide certain relief during the COVID-19 national emergency, extended the special enrollment period to request enrollment in a group health plan and currently still apply. Under these rules, group health plans must disregard “the Outbreak Period” (defined as the period beginning March 1, 2020, and ending 60 days after the end of the COVID-19 national emergency) in determining the deadline for requesting enrollment during a special election period. The COVID-19 national emergency declaration ended on April 10, 2023, resulting in the Outbreak Period ending June 9, 2023 (or a later date if announced by the departments of Labor and Treasury).¹ After this date, the normal time frame for exercising HIPAA special enrollment rights will resume.

Individuals losing Medicaid coverage as a result of state redeterminations may also be eligible for subsidized coverage on the Affordable Care Act marketplace, but only if they are not offered affordable, minimum value coverage by their employer. When reviewing the affordability of the coverage being offered, the “family glitch” fix rules may also come into play.²

Next steps

Employers should consider the following actions as Medicaid redeterminations resume:

• Prepare for a potential increase in the number of eligible employees and their dependents seeking to enroll in the employer-sponsored group health plan due to a loss of Medicaid eligibility.
• Ensure that their group health plan is administered in accordance with the HIPAA special enrollment rules.
• Discuss with their plan actuaries the financial impact the increase in enrollment might have on their group health plan.

Footnotes

¹ See “What the end of the COVID-19 emergencies will mean for group health plans,” Insider, February 2023.

² See “’Family glitch’ fix updated to include calendar-year cafeteria plans,” Insider, November 2022.