On August 25, 2016, the Office of The Assistant Secretary for Planning and Evaluation (ASPE) released a report titled “The Effect of Medicaid Expansion on Marketplace Premiums.” ASPE concludes that Marketplace premiums are about 7 percent lower in Medicaid expansion states than in states that have not yet expanded Medicaid.

States that have expanded Medicaid under the Affordable Care Act (ACA) cover adults up to 138 percent of the federal poverty level (FPL) under their Medicaid programs. Financial assistance through advance premium tax credits and cost sharing reduction is not available in those states for individuals with incomes below that level except for lawful immigrants who have been in the United States for less than five years and are thus not eligible for Medicaid.

In states that have not expanded Medicaid, individuals with incomes between 100 to 138 percent of the FPL are not eligible for Medicaid but can access financial assistance through the marketplaces. In fact, in states that have not expanded Medicaid, individuals with incomes between 100 and 138 percent of FPL constitute 40 percent of marketplace enrollees, while in states that have expanded Medicaid, individuals in this income range make up only 6 percent of enrollees.

ASPE reports that the scientific literature shows a persistent connection between low-income and poor health. Most diseases are more common among the poor and near-poor of all ages. Poverty is connected with faster progression of diseases, more complications, and worse survival rates. About 20 percent of people with incomes between 100 and 138 percent of poverty report poor or fair health compared to 8 percent of individuals with incomes above 138 percent of poverty. It would thus be reasonable to expect that the share of enrollees with fair or poor health would be about 2 percentage points higher in non-Medicaid expansion states.

It is not surprising, therefore, that in 2015, as ASPE reports, marketplace premiums for the benchmark second-lowest cost silver plan were about 8 percent lower in states that had expanded Medicaid than in states that had not. There are many differences between expansion and non-expansion states, however, that could explain differences in premiums, so ASPE’s analysis went further.

ASPE paired bordering counties in expansion and non-expansion states. These counties were relatively homogenous in terms of demographic characteristics. Only states using the Healthcare.gov platform were included in the analysis. ASPE found 94 county-pairs in 19 states meeting its requirements.

ASPE then examined the differences in premiums between the paired counties, using regression analysis to control for population characteristics, state policies that might affect premiums (such as rating area design or allowance of transitional policies), and market characteristics (hospital concentration, number of insurers in the marketplace). ASPE weighted the regressions for marketplace enrollment. It had sufficient data on 91 of the county pairs to perform this analysis.

ASPE concluded from this analysis that Medicaid expansion was associated with 7 percent lower age-adjusted marketplace premiums for the second-lowest cost silver plan in the matched border counties. Results were consistent for analyses performed on the lowest-cost silver plan, average silver plan, lowest-cost bronze plan, and average bronze plan.

The ASPE results suggest that Medicaid expansions not only benefit individuals eligible for the expansions, including individuals with incomes below 100 percent of the FPL who are not eligible for financial assistance through the marketplaces and individuals with incomes between 100 and 138 percent of FPL who receive more affordable coverage with Medicaid; they also benefit state residents with higher incomes who obtain coverage through the marketplaces, or indeed in the individual market outside the marketplaces since the entire individual market outside of Medicaid is a single risk pool.

The press release accompanying the ASPE study also notes that Medicaid expansion improves the health of newly eligible residents in states that expand. It also reduces the uncompensated care burden of providers in those states and saves the states behavioral health costs.