Both Minnesota and New York are on the path to setting up a Basic Health Program (BHP) that will provide more affordable coverage for low-income families than they may find on the marketplace. Minnesota passed BHP legislation that was signed into law in May 2013. In New York, BHP was included in the Governor’s budget and the state legislature’s budget that passed both houses just a few days ago on March 31, 2014. States cannot begin BHP coverage until January 1, 2015.
HHS released final BHP regulations on March 12, 2014. They are mostly good news for low-income families. Below are a few key questions about the program that we can answer now that the regulations are final:
Who does BHP cover? BHP covers state residents age 64 or younger with incomes that exceed 133 percent but do not exceed 200 percent of the federal poverty level. BHP is also a great option for states looking to cover legal immigrants who are not eligible for Medicaid because of waiting requirements. BHP covers lawfully present non-citizens who are ineligible for Medicaid or CHIP due to immigration status, with incomes between zero and 200 percent of the FPL.
Who does BHP not cover? Federal BHP funds cannot be used to cover people who are eligible or enrolled in other minimum essential coverage or affordable employer sponsored insurance. (Yes this means that spouses and dependents in the “family glitch” are not eligible for federal BHP funds). However, states could choose to use state funds to cover this group in their BHP program. The basic health program is also unlikely to provide coverage for children in the short term, because children at this income level are already eligible for Medicaid or CHIP in most states, but covering parents is always good news for kids.
What kind of federal financing does the program offer to states? The federal government pays states 95 percent of the premium tax credit for which the eligible individual would have qualified had he or she been enrolled in a QHP. It also pays 95 percent of the cost-sharing reductions that the individual would have been qualified if enrolled in a QHP through an exchange. Since APTC and CSR are based on the second-lowest cost silver plan, so is the federal financing for the Basic Health Program. So essentially the federal share is 95 premium of the premium and cost sharing reduction for the second-lowest cost silver plan.
Both New York and Minnesota already covered most of the population that would be eligible for BHP with Medicaid matching funds through waivers and state funds. One study done in New York predicted $954 million in state savings in using federal funds for legal immigrant coverage and a higher federal match for people currently enrolled in their Medicaid waiver. The Minnesota Department of Human Services, which administers MinnesotaCare, estimates that federal dollars will cover about 85 percent of the program up from a 50 percent match in MinnesotaCare, saving the state $157 million in fiscal years 2016 and 2017.
Will plans in the BHP be more affordable than the marketplace? BHP premiums cannot exceed the monthly premium the enrollee would have paid in a plan with equal premium in the marketplace. However, a state can negotiate with plans or supplement premiums with state funds to lower the cost of premiums and other cost-sharing. Enrollees in the BHP will receive cost sharing reductions under the ACA, which will raise the actuarial value of the BHP to 94 percent for enrollees with incomes below 150 percent of poverty and to 87 percent for enrollees with incomes above that level.
Can BHP help to limit churn? The hope is that BHP can be set up to smooth transitions for the group from 133 to 200 percent of the federal poverty level where incomes are most volatile. To do this effectively, BHP may want to follow the Medicaid policy of continuous open enrollment throughout the year rather than those of the marketplace. States may also choose to work with plans that also offer coverage in Medicaid and the marketplace for continuity of coverage. A BHP can also choose to do 12-month continuous eligibility, where individuals do not have to report changes in income more than once per year. BHP cannot cap coverage or create waiting periods for coverage.
How do states make decisions about BHP and is there an opportunity for public input? Because of the state budget implications, states will likely have to pass legislation to authorize the Basic Health Program. Once a BHP is established, a state has to assemble a blueprint to be approved by HHS. The final regulations require a state to provide an opportunity to comment on the BHP blueprint and significant subsequent revisions, and that federally recognized tribes have to be included in the comments. However, the regulations set no specific timelines for this input, so those interested in providing input will need to stay abreast of their state’s plans.
What kind of plan choices and benefits will be offered? The BHP has to offer at least two standard plans or justify their failure to do so. BHPs also need to contract with standard health plans under a competitive contracting process that includes negotiation of premiums, cost-sharing, benefits, and inclusion of innovative features (except during 2015, when a state can request a waiver from the competitive contracting requirement and leverage existing contractual arrangements). Standard health plan coverage must include, at a minimum, essential health benefits, and states have the ability to negotiate for additional benefits through the competitive procurement process. States can also supplement those benefits with additional benefits for BHP enrollees using BHP trust fund dollars.
What about other consumer protections and appeals? The BHP has to be accessible to people with limited English proficiency or disabilities, and must make timely eligibility determinations according to Medicaid rules. BHP standard plan networks must be sufficient in number, mix, and geographic distribution to meet the needs of enrollees to the same extent as would be required under Medicaid or exchange rules and must include essential community providers. Standard health plans that are insurer based (and not health maintenance organization or provider network based), also have to meet an 85 percent medical loss ratio standard.
We’ll continue to watch Minnesota and New York and report back on how their Basic Health Programs are taking shape. We’ll also be on the lookout for other states considering this approach in the coming months.