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Affordable Care Act’s Basic Health Program

New York and Minnesota offer BHPs for low-income enrollees who earn too much to qualify for Medicaid

Reviewed by our health policy panel.

Under the ACA, most states have expanded Medicaid to people with income up to 138% of the poverty level. But people with incomes very close to the Medicaid eligibility cutoff frequently experience changes in income that result in switching from Medicaid to ACA’s qualified health plans (QHPs) and back. This “churning” creates fluctuating healthcare costs and premiums, and increased administrative work for the insureds, the QHP carriers and Medicaid programs.

(Note that during the COVID public health emergency, Medicaid disenrollments were paused from March 2020 through March 2023. But they resumed in April 2023, under the terms of the omnibus budget bill that was enacted in late 2022.)

The out-of-pocket differences between Medicaid and QHPs are significant, even for people with incomes just above the Medicaid eligibility threshold who qualify for cost-sharing subsidies.

The Basic Health Program (BHP) – section 1331 of the ACA — was envisioned as a solution, although most states did not establish a BHP. Under the ACA (aka Obamacare), states have the option to create a Basic Health Program for people ineligible for Medicaid and with with incomes up to 200% of the poverty level, and for legal immigrants who aren’t eligible for Medicaid because of the five-year waiting period.

The Basic Health Program was originally scheduled to begin January 1, 2014, but was postponed until 2015. And even then, only two states chose to implement a BHP: Minnesota‘s BHP was effective in January 2015 (see Minnesota’s BHP blueprint), and New York’s took effect in January 2016 (see New York’s BHP blueprint). New York has received federal permission to expand its BHP to cover people up to 250% of the poverty level; that change takes effect April 1, 2024.1

There has been some additional interest in the idea recently, and Oregon plans to have a BHP by mid-2024. Kentucky had been working on the creation of a BHP, but stopped that process in late 2022. It’s unclear whether they will revive it at a later date, but Kentucky lawmakers are considering legislation in 2024 that would create a task force to study the BHP idea and make recommendations. The legislation clarifies that the state would not be allowed to create a BHP without legislative approval.2

Why Minnesota and New York?

For several reasons, it made sense for Minnesota and New York to establish BHPs. With a BHP, the federal government pays the state 95% of what they would have paid in cost-sharing subsidies and premium subsidies if the BHP enrollees had instead enrolled in the second-lowest-cost Silver health insurance plan in the exchange. The state contributes additional funding as needed, and directs all the money to the managed care organizations that provide benefits under the BHP.

Coverage under the BHP is available to people who aren’t eligible for Medicaid, don’t have access to an affordable employer-sponsored plan, and whose household income doesn’t exceed 200% of the poverty level (a little under $52,000 for a family of three in 2024). New York, however, is increasing its BHP eligibility limit up to 250% of FPL as of April 2024, which is expected to result in 100,000 additional people becoming eligible for the program.1 BHP coverage is also available to legal immigrants with income up to 138% of FPL (and those with income up to 200% of FPL) who aren’t eligible for Medicaid because of the five-year waiting period.

Under the ACA, legal immigrants who are ineligible for Medicaid (because of the five-year waiting period) are eligible for premium subsidies in the exchange with income as low as $0. But starting in 2001, New York allowed low-income legal immigrants to enroll in state-funded (no federal matching funds) Medicaid. Since a BHP receives significant federal funding, switching to a BHP allowed New York to save money on the state-funded Medicaid they provide for low-income immigrants.

New York’s BHP (aka The Essential Plan) also presents a better deal for enrollees. NY Department of Financial Services noted that a person earning about $20,000/year would spend less than half as much in total healthcare costs on the BHP in 2016 (the first year the state’s BHP was available) than they would have on a subsidized private health plan in 2015.

The Essential Plan used to have a premium of $20/month for some enrollees, but that was eliminated as of 2021, and premiums are now $0/month for all eligible enrollees, including people with income up to 250% of the poverty level who will be eligible starting in April 2024. Total enrollment in the Essential Plan stood at nearly 1.2 million people as of early 2024.3 

In Minnesota, the state has operated MinnesotaCare since 1992. The state-funded program offered health coverage to residents who weren’t eligible for Medicaid, and the eligibility threshold extended as high as 275% of the poverty level for families with children, and 175% of the poverty level for adults without children. By converting MinnesotaCare to a BHP as of January 2015 (it’s still called MinnesotaCare), the state was able to take advantage of the much more generous federal funding that goes with a BHP.

Enrollees in MinnesotaCare also have far lower out-of-pocket exposure and premiums than they’d pay if they were enrolled in a private, subsidized plan through the exchange. MinnesotaCare’s copay for an inpatient hospitalization is $250 in 2024, and copays for prescriptions are $10 or $25, depending on the drug, up to a maximum of $70 per month. MinnesotaCare had more than 94,000 enrollees as of March 20244 (enrollment had been higher in mid-2023, reaching more than 109,000 people, but that was due to the pandemic-related pause on Medicaid disenrollments which also applied to MinnesotaCare; disenrollments resumed in mid-2023, for people who were no longer eligible or who didn’t complete necessary renewal paperwork).5

So by implementing BHPs, New York and Minnesota can utilize federal funding to provide coverage that they were previously offering under state-funded programs. And their residents can obtain coverage with lower premiums and lower cost-sharing than they’d get if they had to enroll in private health plans instead.

Massachusetts has a program called ConnectorCare that supplements exchange subsidies for enrollees with incomes up to 500% of the poverty level. It’s not a BHP though — ConnectorCare was created as part of an 1115 Medicaid waiver and uses Medicaid funds to supplement the subsidies.

Millions could benefit, but most states keep the status quo

Before 2014, a Kaiser Family Foundation analysis projected that nationwide, approximately 34% of total projected exchange enrollment would be people with incomes between 138% and 200% of the poverty level.

Among people who purchased private plans through the health insurance exchanges/marketplaces for 2023, about 55% — roughly 8.9 million people — had income between 100% and 200% of the poverty level. Of those, about 4.3 million had income between 100% and 138% of the poverty level, while about 4.6 million had income above 138% of the poverty level but not more than 200%.

For 2024 coverage, there are ten states that have not expanded Medicaid, which means they have a much higher percentage of enrollees with incomes from 100 – 138% of the poverty level. In Medicaid expansion states, Medicaid covers people in that category as long as they’ve been lawfully present in the U.S. for at least five years, since eligibility extends up to 138% of the poverty level; in non-expansion states, subsidy eligibility begins at 100% of the poverty level.

A 2012 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. To address the problem of churn, New York’s BHP eligibility is determined annually. That means BHP enrollees aren’t subject to churning between Medicaid, the BHP, and private health plans based on income fluctuations during the year. (As noted above, Medicaid churn was not an issue during the COVID pandemic, from March 2020 through March 2023. But disenrollments resumed in 2023, making churn a concern again.)

At least eight states were considering implementing a BHP in 2015, although Minnesota was the only state that moved ahead with its plans. New York joined Minnesota in offering a BHP starting in 2016, and has received federal permission to extend eligibility to 250% of the poverty level, allowing the program to cover more people. They are still the only states that have BHPs, although Oregon is working to implement one that is expected to be in effect by mid-2024.

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. States can create BHPs that contract with Medicaid managed care organizations and jointly administer BHPs with Medicaid, effectively creating seamless coverage for everyone up to 200% of the poverty level, with continuity of benefits and providers.

CMS established rules that require BHPs to be separate from a state’s individual market risk pool, and prevent BHPs from being included in the federal risk management programs (only federal risk adjustment is still in use, and BHPs are not part of it). But states have the option of combining BHP risk pools with exchange risk pools via state-administered risk-sharing programs, to avoid destabilization of the private market that might occur if too many people were shifted to a separate BHP risk pool.

Both New York and Minnesota have made their BHPs available through their state-run exchanges, and both have opted to have BHP enrollment run year-round, like Medicaid, rather than having defined open enrollment periods like QHPs.

Lower costs for enrollees

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 in reality, they’re likely to be far lower since BHPs are generally modeled on Medicaid and CHIP.

This is certainly the case in New York and Minnesota, where BHP enrollees face far less in out-of-pocket spending and premiums than they would if they had to purchase even heavily-subsidized QHP coverage in the exchange. Lower premiums and out-of-pocket costs in BHPs can lead to higher enrollment and coverage retention among the population with incomes up to 200% of poverty level (versus enrollment and retention if this population had to enroll in subsidized QHPs instead).

  • In New York, there’s no Essential Plan premium. (This is a change that took effect in 2021; previously, some enrollees paid $20/month for their coverage, and paid additional premiums for dental and vision coverage. New York had initially intended to impose a $15/month premium for Essential Plan enrollees with income between 200% and 250% of the poverty level, under the eligibility extension that takes effect in April 2024.6 But the final implementation eliminated this premium requirement, so everyone eligible for the Essential Plan can enroll without a premium.7)
  • In Minnesota, some groups don’t pay premiums for MinnesotaCare, and that has been temporarily expanded (through 2025) to people earning up to 160% of the poverty level as a result of the American Rescue Plan (ARP) and Inflation Reduction Act, which enhanced Marketplace subsidies. The normal sliding scale premiums range as high as $80/month (but average about $16/month), and that scale will continue to be used through 2025. Under the reduce premium scale, premiums range from $0 to $28/month.8

Louise Norris is an individual health insurance broker who has been writing about health insurance and health reform since 2006. She has written dozens of opinions and educational pieces about the Affordable Care Act for


  1. Governor Hochul Announces Federal Approval to Expand Access to High-Quality, Affordable Health Insurance” New York State Governor Kathy Hochul. March 4, 2024.  
  2. Kentucky HB734 and Kentucky SB34” BillTrack50. Accessed March 7, 2024. 
  3. Recipients Enrolled in QHP or EP – as of February 1, 2024 by County and Issuer” NY State of Health. Accessed March 4, 2024. 
  4. Managed Care Enrollment Figures” Minnesota Department of Human Services. Accessed March 7, 2024 
  5. Background: Resuming public health care program renewals” Minnesota Department of Human Services. Accessed March 7, 2024 
  6. New York proposal to extend Essential Plan eligibility” New York Department of Health. May 12, 2023. 
  7. New York: State Innovation Waiver under Section 1332 of the ACA” Centers for Medicare and Medicaid Services. March 1, 2024. 
  8. MinnesotaCare Premium Estimator Table” Minnesota Department of Human Services. Effective January 1, 2024 through December 31, 2024. 

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