Few states take up ACA basic health coverage option

The Basic Health Program, designed for patients at the edge of Medicaid eligibility, offers both financial risks and benefits to states, a new report concludes.

By — Posted Nov. 30, 2012

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An Affordable Care Act coverage option for low-income populations has caught the attention of only three states, according to a Robert Wood Johnson Foundation report published online in Health Affairs on Nov. 15. Many states want more direction from the federal government before establishing a Basic Health Program as authorized by the statute, the report says.

Such programs are designed to capture beneficiaries who are expected to migrate back and forth, a phenomenon known as churn, between Medicaid and the upcoming health insurance exchange plans as their income levels change. It specifically would offer public coverage to individuals who don’t qualify for Medicaid but whose incomes fall below 200% of the federal poverty level, which in 2012 is about $46,000 for a family of four. Starting in 2014, states that choose to take up the full ACA Medicaid expansion provision will offer coverage to everyone up to an effective rate of 138% of poverty.

Several analyses highlighted in the Health Affairs report suggest that a Basic Health Program could help mitigate the churning effect among lower-income populations.

Setting up such a program and administering it in conjunction with a Medicaid program could help eliminate churn between exchange and Medicaid plans for those below 200% of the federal poverty level, according to one Urban Institute study. To promote continuity of care, Basic Health Programs are expected to adopt benefit design and payment structures similar to Medicaid.

But the voluntary program has yet to gain much interest among states. Some are deciding whether to expand their Medicaid programs first before contemplating a Basic Health Program, and others want more specific details about the program, the report said (link).

Just a handful have done studies or approved legislation calling for an analysis of this option, and only three are taking legislative measures to put such a program in place. Washington, for example, already operates a program of this type and passed a bill to ensure that its model complied with the terms of the federal health system reform law. California plans to enact enabling legislation in December or January 2013, according to the {i}Health Affairs{i} report.

The third state, Massachusetts, approved legislation but is awaiting federal guidance on the Basic Health Program, said Alec Loftus, communications director with the Massachusetts Executive Office of Health and Human Services. The state has worked closely with its partners on the state’s health insurance exchange and with the Centers for Medicare & Medicaid Services “to ensure that Massachusetts provides accessible, affordable coverage to low-income adults as defined by the ACA,” he said.

In Massachusetts, the Basic Health Plan essentially is geared toward households earning up to 200% of poverty that otherwise would go into the state’s exchange to purchase qualified health plans with federal tax credits, said Jon Kingsdale, PhD, managing director of the Boston office of Wakely Consulting Group, a health care strategy and actuarial consulting firm. The rationale is that the state could cover these populations for a lower cost by imposing reduced fees on participating physicians and hospitals, while providing extra benefits and lower premiums to beneficiaries, he said.

These programs have the potential to save money by decreasing the numbers of uninsured, but states also could face additional costs if federal funds don’t end up covering the spending for the program, the report stated.

To pay for this basic option, states could draw down 95% of the estimated federal funds that would have gone toward subsidizing the purchase of private insurance by those enrollees through the exchanges. “The federal government is supposed to make a determination before the fiscal year begins about how much money it should give the state, based on projected enrollment and other factors,” the report stated.

But states face uncertainties about how the federal government will calculate this figure, Kingsdale said. “If it turns out that the way they calculate it does not reach what the state spends in the Basic Health Program, the state is at financial risk for that.”

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