Basic Health Plan – Another Complication

By Greg Scandlen

Whenever a new program is designed by a small group of ambitious policy wonks sitting around a table in Washington, you can bet it will be hopelessly complex.  Especially when their swell ideas are not even tested by two-party scrutiny, but are rammed through with a partisan majority.

This has perhaps never been better illustrated than by a provision that has entirely escaped scrutiny until now. This is the “Basic Health Program” (BHP) option that is part of ObamaCare. Don’t be surprised if you haven’t heard of this before. No one has. But thanks to a new paper by Stan Dorn of the Urban Institute and funded by the Robert Wood Johnson Foundation, you now have an opportunity to find out a lot about it – if you are feeling masochistic today.

The Basic Health Plan is sort of a “public option” in sheep’s clothing. As you know, ObamaCare will put everyone up to 133% of the federal poverty level in Medicaid, and it will offer the subsidized “insurance exchange” for everyone else who does not get employer-sponsored coverage.

In addition to all that, it creates a Basic Health Plan the states may implement to provide coverage for people between 133% and 200% of poverty and non-citizen legal immigrants who are not eligible for Medicaid. The paper doesn’t say how many people this might include, though it estimates it would cover two percent of the under-65 population.

If a state opts for a BHP, those people will no longer be eligible for coverage under the Exchange.  If the state decides to extend Medicaid coverage to this population, it will get a higher federal subsidy than it does under normal Medicaid, because the federal subsidy is based on the premiums in the Exchange, which pay providers 29% higher than Medicaid does and is therefore more costly on a per capita basis.

States may put BHP coverage out to bid, but only to managed care plans They must provide coverage that meets or exceeds the Exchange requirements for covered benefits and cost-sharing, and the private plan will be subject to an 85% loss ratio standard. That should be quite a trick, considering the small population involved and the extraordinary reporting required.

The paper lists five different approaches a state might use when designing a BHP program:

  • Create a whole new program.
  • Provide Expanded Medicaid.
  • Extend the existing CHIP program to adults.
  • Create an integrated single program for Medicaid, CHIP, and the BHP population, that varies in covered benefits, cost sharing and provider payments for the various populations.
  • Use BHP as a two-way bridge between Medicaid and Exchange coverage.

Whichever a state decides, there will be substantial development and administrative costs, which are not covered by federal funds.

The paper takes it on faith that cost-sharing of any kind is bad, so it touts reduced cost sharing as one of the advantages of the BHP program – it will be less than required under the Exchange. The paper notes that under the Exchanges premiums and “actuarial value” of coverage will vary by income, and offers this table as a reminder –

Poverty           Monthly          Actuarial Value

Level %          Premium        of Coverage

150                 $54.15             94%

175                 $81.34             87%

200                 $113.72          87%

225                 $145.70          73%

250                 $181.63          73%

Now you may wonder how in the world they can determine what the premiums will be years before the benefits have been defined and even longer before they have the least idea of how many people will enroll or how much services will be consumed.

Simple. Prices no longer have any meaning. The price of coverage will be whatever that table full of policy wonks says it will be. And people will pay according to how much sympathy the policy wonks have for their condition.

In this case, the paper notes that –

In the past, premium and OOP costs such as those imposed by ACA have deterred many low-income consumers from enrolling into coverage and from using necessary care, sometimes with adverse effects on health status.

Indeed, but of course the same thing could be said for Medicaid enrollment which is absolutely free of either premiums or cost-sharing. About one-third of the uninsured are already eligible for Medicaid, but haven’t enrolled. So, just maybe there is something going on other than fear of costs. But we wouldn’t want to confuse the wonks, would we?