For millions of Americans whose income level might have made them hesitant – or unable – to purchase health insurance coverage in the past, the Affordable Care Act is providing great relief. Coverage on the ACA’s health insurance exchanges comes with generous income-based subsidies for millions who earn too much to qualify for Medicaid.
The problem: people with incomes very close to the Medicaid eligibility cutoff frequently experience changes in income that will result in switching from Medicaid to ACA’s qualified health plans (QHPs) and back. This creates fluctuating healthcare costs and premiums, and increased administrative work for the insureds, the QHP carriers and Medicaid programs.
In addition, network variation between QHPs and Medicaid can mean a break in continuity of care for people who shift back and forth between Medicaid and a QHP during the year.
The Basic Health Program (BHP) is a possible solution.
In addition to Medicaid expansion and a host of consumer protections and reforms, the ACA also includes a provision that allows states to create a Basic Health Program for people with incomes a little above the upper limit for Medicaid eligibility.
The Basic Health Program was originally scheduled to begin January 1, 2014, but was postponed until 2015. In states that are expanding Medicaid, its coverage will extend to 138 percent of poverty level. In the exchanges, private qualified health plans with subsidized premiums will cover people with incomes from 139 percent to 400 percent of poverty level.
There is concern, however, about churning that will occur when incomes fluctuate around the Medicaid eligibility level and people shuffle back and forth between Medicaid and QHPs. It’s expected that half of the population with incomes below 200 percent of poverty level will move from Medicaid to a QHP or vice versa each year due to small fluctuations in income that result in eligibility changes.
This is disruptive to the insured and can hinder continuity of care, since the doctors in the Medicaid network are often not the same as the ones in the private QHP networks. It also places additional administrative burden on the exchanges and state Medicaid systems as they process enrollments.
The goals of the BHP are to limit churning between Medicaid and subsidized QHPs, to allow states an alternate method of providing low-income residents with high-quality coverage, and to smooth the various transitions that occur when people switch from one policy to another as a result of income fluctuations.
Offers help to 34% of possible enrollees
BHPs are state-run (but largely federally funded) health plans for people with incomes from 139 percent to 200 percent of federal poverty level (FPL). Nationwide, this is approximately 34 percent of total projected exchange enrollment. The lower-income threshold was intended to mesh with the upper limit for Medicaid under the ACA. But half of the states have opted against Medicaid expansion – to the detriment of all of their residents.
It’s still unclear how states that are not expanding Medicaid would operate a BHP. But given that those states were unwilling to accept federal dollars to provide health care for the poorest of their residents, it’s highly unlikely that they would be interested in accepting federal funds to provide improved access to health care for people who are slightly better off than those on Medicaid.
A Health Affairs study found that if all states were to implement BHPs, 1.8 million fewer adults would churn between Medicaid and QHPs each year. At least eight states are considering implementing a BHP in 2015, although more may do so over the next few years. HHS issued proposed guidelines in September, with final rules to be published in March. States that wish to establish a BHP in 2015 will submit their proposals to HHS by May 2014.
The ACA requires states that operate a BHP to coordinate BHP eligibility and enrollment with Medicaid, CHIP (Children’s Health Insurance Plan), and QHPs in the exchange, but states are given plenty of leeway in designing their BHPs within the basic guidelines established by HHS.
Although it’s likely that BHPs will be somewhat similar to Medicaid, states can arrange their plan so that the BHP is obtained through the exchange, and can work to align provider networks for continuity of care between Medicaid, BHPs and private plans in the exchange.
States can create BHPs that contract with Medicaid managed care organizations and jointly administer BHPs with Medicaid, effectively creating seamless coverage for everyone under 200 percent of poverty level, with continuity of benefits and providers. States also have the option of combining BHP risk pools with exchange risk pools in order to avoid destabilization of the private market that might occur if too many people were shifted to a separate BHP risk pool.
A BHP must limit premiums and cost-sharing to no more than the amounts that insureds would otherwise have paid in the exchanges with the regular premium and cost-sharing subsidies, but they will probably be far lower since BHPs are expected to be mostly modeled on Medicaid and CHIP. Lower premiums and out of pocket costs would likely lead to higher enrollment and coverage retention among the population with incomes under 200 percent of poverty level.
Funding for BHPs would come from a combination of state and federal money, as well as some cost-sharing for enrollees. Federal funding would equal 95 percent of the subsidies that the enrollees would have received if they had been in a regular exchange plan instead of a BHP, and states may add additional funding if necessary.
It’s likely that several states will move forward with plans for 2015, although more might join in 2016 after watching to see how things go in the first year. There are still many unanswered questions, and states will need to use caution to avoid destabilizing their exchanges or exacerbating – rather than minimizing – transitional difficulties between plans.
States that have created their own exchanges and expanded Medicaid are the ones most likely to pursue BHPs as they continue taking an active role in improving access to healthcare for some of their most vulnerable residents.