How does matchmaking work in FFA?

Each "main" queue type has its own MMR. The queue types are Quickplay, Competitive, and Arcade. (I suppose Competitive Lucioball also had a separate MMR rating.) Since FFA is one of the Arcade modes, it uses the Arcade rating to determine who you get matched with. If you haven't played an Arcade game before, the system tries to make a guess where you should be based on your Comp/QP ranking - however, it usually guesses very conservatively, preferring to place you lower than your actual rank. The reason you're seeing people in a higher ranking than you is because sometimes a player can have a great competitive game sense but be absolutely awful in other modes. (For example, I'm in Plat in competitive but probably silver or bronze in Arcade thanks to my ~30% win rate there.)

We do not know how to calculate a person's MMR in any mode - that info is explicitly kept hidden. There are some websites that can estimate, but they only make an approximation.