The Impact of the Coverage-Related Provisions of the Patient Protection and Affordable Care Act on Insurance Coverage and State Health Care Expenditures in California

An Analysis from RAND COMPARE

by David I. Auerbach, Sarah A. Nowak, Jeanne S. Ringel, Federico Girosi, Christine Eibner, Elizabeth A. McGlynn, Jeffrey Wasserman

This Article

RAND Health Quarterly, 2011; 1(2):1

Abstract

The Patient Protection and Affordable Care Act (ACA) contains substantial new requirements aimed at increasing rates of health insurance coverage. Because many of these provisions impose additional costs on the states, officials need reliable estimates of the likely impact of the ACA in their state. To demonstrate the usefulness of modeling for state-level decisionmaking, RAND undertook a preliminary analysis of the impact of the ACA on five states—California, Connecticut, Illinois, Montana, and Texas—using the RAND COMPARE microsimulation model. For California, the model predicts that, in 2016 (the year that all of the provisions in the ACA related to coverage expansion will be fully implemented), the uninsured rate in California will fall to 4 percent; without the law, it would remain at 20 percent. The model projects that total state government spending on health care will be 7 percent higher for the combined 2011–2020 period because of the ACA.

For more information, see RAND TR-973/3-CSG at www.rand.org/pubs/technical_reports/TR973z3.html

Full Text

The Patient Protection and Affordable Care Act (ACA) contains substantial new requirements aimed at increasing rates of health insurance coverage. These include a mandatory expansion of Medicaid programs to cover individuals in households with incomes below 133 percent of the federal poverty level, a requirement that states develop and run health insurance exchanges through which individuals and small businesses can purchase health care coverage, a requirement that large and mid-sized employers—including state governments—provide qualifying coverage to employees or face the possibility of penalties, and a requirement that most individuals purchase or otherwise obtain coverage.* Because many of these provisions impose additional costs on the states, officials need reliable estimates of the likely impact of the ACA in their state. To demonstrate the usefulness of modeling for state-level decisionmaking, RAND undertook a preliminary analysis of the impact of the ACA on five states—California, Connecticut, Illinois, Montana, and Texas.

To estimate the ACA’s impact on coverage and health care spending in California, we used the RAND COMPARE (Comprehensive Assessment of Reform Efforts) microsimulation model.** The following represents our best estimates of the effect of the coverage-related provisions of the ACA, though there is, of course, considerable uncertainty associated with these projections. Unless otherwise indicated, all projections apply to the year 2016, the year that all of the provisions in the ACA related to coverage expansion will be fully implemented:

  • The proportion of California residents with insurance will increase from 80 to 96 percent—a reduction in the uninsured of nearly 6 million.***
  • The nature of employer-sponsored coverage will change slightly after implementation of the ACA: There will be 2 percent reduction in the number of employees offered coverage, but approximately 400,000 employees will be covered through the exchange.
  • By 2016, 17 percent of the insured, nonelderly population (roughly 6 million) will have coverage through the exchange.
  • Enrollment in Medicaid will increase by 58 percent (3.6 million), with the majority of the new enrollees being newly eligible adults.
  • Total state government spending on health care will be 7 percent higher for the combined 2011–2020 period because of the ACA—mostly from increases in Medicaid costs. In dollar terms, this amounts to roughly $2 billion in additional state spending in 2016, approximately $333 per year for each newly insured individual. In 2020, state spending will be $4 billion higher than it would have been without the ACA.

Reference

Girosi, Federico, Amado Cordova, Christine Eibner, Carole Roan Gresenz, Emmett B. Keeler, Jeanne S. Ringel, Jeffrey Sullivan, John Bertko, Melinda Beeuwkes Buntin, and Raffaele Vardavas, “Overview of the COMPARE Microsimulation Model,” Santa Monica, Calif.: RAND Corporation, WR-650, 2009. As of March 24, 2011:
http://www.rand.org/pubs/working_papers/WR650.html

Notes

* ACA also involves substantial changes to Medicare, insurance regulation, and other aspects of health care that could substantially impact state and private-sector costs and coverage—factors that are not included in this analysis.

** For a detailed description of the methods used in the RAND COMPARE microsimulation model, including a discussion of the parameters and assumptions used in the modeling, see Girosi et al., 2009.

*** The model does not account for undocumented immigrants, who are not legally permitted to access the exchanges or Medicaid, and thus this figure may overestimate the predicted reduction in the uninsured by up to 1.3 million (23 percent).

Related Resources

RAND Health Quarterly is produced by the RAND Corporation. ISSN 2162-8254.