The U.S. Department of Health and Human Services (HHS) said 30 states must pause disenrollments from their Medicaid and Children's Health Insurance Program (CHIP) programs and reinstate coverage for people who lost it due to a glitch uncovered in August.

Medicaid said nearly 500,000 children and other individuals who lost coverage due to a problem affecting automatic renewals will regain their insurance.

Numerous states employed automated verification software to confirm ongoing eligibility by cross-referencing government databases for income-level verification. 

However, federal authorities confirmed that 30 states had been incorrectly assessing eligibility statuses.

Congress had required state Medicaid programs to keep people continuously enrolled during the COVID-19 public health emergency, which officially ended in May.

According to HHS, the glitch was causing states to inappropriately disenroll children and families, even when they had information that they remained eligible for coverage.

CMS sent a letter on August 30 to all states, the District of Columbia, Puerto Rico, and the U.S. Virgin Islands requiring them to determine and report whether they have a systems issue that inappropriately disenrolls children and families, even when the state had information indicating that they remained eligible for Medicaid and CHIP coverage.

William Blair writes that most (72%) of Medicaid beneficiaries disenrolled were for procedural reasons, with only 28% found ineligible. 

This percentage only slightly improved from the end of August to 74%. The pause in disenrollment for procedural reasons is seen as a modest positive, likely reducing the number of disenrolled beneficiaries. This development may benefit Managed Medicaid organizations and Evolent Health Inc (NYSE:EVH).