This month, Minnesota will be the first state to submit its blueprint for a Basic Health Program to the federal government for approval. This is the first blog in our series encouraging states to consider Basic Health as a strategy for providing health coverage to low-income residents. Other blogs in this series:
For background on Basic Health, see Basic Health Program: State Requirements.
This week, Minnesota will likely submit its plans for a Basic Health Program (to be called MinnesotaCare) to the U.S. Department of Health and Human Services for approval. In January 2015, Minnesota hopes to launch its Basic Health Program to provide health coverage to low-income families that is more affordable than marketplace coverage. New York is also on the path to implementing its Basic Health proposal in January 2016. In addition to extending health coverage, the two states see several other potential advantages to the Basic Health Program.
Reason 1: The states can make premiums and cost-sharing more affordable to residents.
Minnesota’s premiums max out at $50/month
Minnesota’s draft Basic Health blueprint establishes a premium scale where monthly premiums range from $0 to $50 depending on the person’s income. This is much more affordable than marketplace coverage, where the benchmark silver plan will cost an individual at 200 percent of poverty about $123 per month.
Monthly premiums paid by individual in the marketplace vs. MinnesotaCare premiums
(one person household)
|Income as a percent of poverty||Silver plan premiums
(second-lowest cost Marketplace plan)
MinnesotaCare does not charge premiums to:
- Individuals under age 21
- American Indians and their family members
- Members of the military who have completed a tour of active duty within 24 months nor to their family members for a period of 12 months
- Enrollees with income below 35 percent of the federal poverty level
New York may charge no premium for consumers earning under 150 percent of poverty
New York legislators approved a Basic Health Program in the 2014-2015 state budget. Under the legislation, there will be no premium for people under 150 percent of poverty. And people between 150 and 200 percent of poverty will be subject to premiums of only up to $20 per month (as opposed to $123 in a marketplace silver plan).
Minnesota to charge lower levels of cost-sharing
Minnesota plans to charge adults nominal cost-sharing. This will include monthly rather than annual deductibles. The monthly deductible is only $2.75, and copays for most services range from $1- $3.50. In contrast, the average cost-sharing required by marketplace silver plans includes an average deductible of $217 for consumers with incomes between 100 and 150 percent of poverty, and average copays of $12 for doctor visits.
Cost-sharing in the marketplace vs. MinnesotaCare for people with incomes between 100-150% poverty
|Typical silver CSR plan in federally facilitated marketplace nationally||MinnesotaCare|
|Doctor visit (not preventive)||$12||$3|
|Eyeglasses for adults||Not covered||$25|
New York will likely keep cost-sharing at the same levels as its marketplace cost-sharing reduction plans
New York may charge Basic Health consumers the same level of cost-sharing that it now uses in its marketplace silver cost-sharing reduction plans (the special silver plans for low-income consumers). New York already tries to limit up-front charges in these plans. Currently, New Yorkers with incomes between 100 and 150 percent of poverty have no deductible in a silver plan, and the deductible for an individual between 150 and 200 percent of poverty is $250. The state’s standard benefit chart lists other cost-sharing that the state seeks to replicate with Basic Health.
Lawful immigrants gain or maintain affordable coverage
Lawful immigrants are among the populations that benefit from the Basic Health Program. This is important because lawful permanent residents do not qualify for Medicaid for the first five years after they establish residency. While lawful immigrants may qualify to buy coverage in the marketplace with premium tax credits, that cost can be prohibitive for low-income people. Though Minnesota and New York already have affordable coverage programs for these populations and will benefit from Basic Health financing (discussed below), in other states, Basic Health will provide new coverage to immigrants who could not afford it before.
Benefits of Basic Health Programs
- Lower costs for enrollees
- Provide vital coverage to lawful immigrants who do not yet qualify for Medicaid
- Help people maintain continuous coverage as their incomes fluctuate
- Reduce the “churn” (frequent switching between plans as income changes) from Medicaid to private plans
- Encourage innovations that better coordinate and deliver care
Reason 2: States may save money on health care
In numerous ways, Basic Health could save Minnesota and New York money.
States may be able to deliver care for less than the price of marketplace plans: Based on experience with other public managed care programs, researchers believe New York can deliver care at less than the cost of silver level plans in the marketplace. The Urban Institute considered the costs of Basic Health in New York if plans reimbursed providers both at rates the state currently pays providers in its “Family Health Plus” public program, and at rates 25 percent higher than that. It concluded that even with a payment increase, Basic Health was financially viable.
States may see an increase in federal funds flowing to the states: Both states already operate health coverage programs for some segments of the population that would be served by Basic Health. Minnesota operates “MinnesotaCare” and New York operated the “Family Health Plus” up until 2014. While the “Family Health Plus” program has ended, the state continues to subsidize New York marketplace premiums for those who would have been eligible for the program. The states currently claim 50 percent in federal Medicaid matching funds for part of the population in those two programs. Researchers calculate that in New York, Basic Health will likely bring in more federal money than is currently available. (In Minnesota, it is not yet clear whether Basic Health payments will increase federal funding over previous Medicaid levels in 2015, because Minnesota’s initial marketplace premium charges have been low, and they are the base for calculating federal Basic Health payments.)
States may experience a reduction in uncompensated care: When consumers cannot afford their hospital bills, the costs of their care falls on hospitals, states, and privately insured consumers. Without additional assistance, consumers could fall into a “bronze plan trap”—that is, they may decide they can only afford bronze plan premiums, but then discover that when they need care, they cannot afford the deductibles and fall into medical bankruptcy. Or, consumers may go without coverage entirely.
States free up funds currently used to cover lawful immigrants: The states will be able to claim federal funding for many lawful immigrants who are not eligible for federally matched Medicaid benefits. Most low-income immigrants are not eligible for federal Medicaid benefits until they have been lawful residents for five years. Minnesota and New York currently cover immigrants with state-only funds during this 5-year period. Since these low-income lawful residents are eligible for premium tax credits, the states can receive federal funding for them in a Basic Health Program.
Reason 3: The states can simplify administration, while helping residents maintain continuous coverage, and avoid “churn”
Many low-income people lose and gain jobs or experience other income changes during the course of a year that causes them to lose eligibility for Medicaid and become eligible for premium credits in the marketplace, or vice versa. When this happens, consumers have to report the income changes, states have the administrative task of signing them up for Medicaid or terminating their Medicaid coverage, and health care can be disrupted as the consumer switches to a new plan. To minimize this “churn,” for 2015, Minnesota will use the same plans to serve consumers in Basic Health and in the Medicaid programs alike.
Reason 4: The states can build on and improve their public coverage infrastructures, encouraging innovation and coordinated care
Both states are using their existing public health programs as a basis for implementing Basic Health Plans.
Minnesota’s current public coverage program, MinnesotaCare, uses a managed care model to cover some low-income residents not eligible for regular Medicaid or CHIP benefits. The program has a long history. Portions of it are funded out of state dollars, and portions of it are funded under a Medicaid 1115 waiver. To comply with the Affordable Care Act and prepare for a transition to Basic Health, Minnesota made some changes in the MinnesotaCare program. For example, it eliminated an annual cap on its inpatient hospital coverage for childless adults beginning in the 2014 coverage year
Minnesota is thus able to use the structure of its existing MinnesotaCare program, with some enhancement to its benefits, to deliver Basic Health to adults under the age of 65. The state plans to continue using state funding to provide similar coverage to low-income adults over age 64 who do not qualify for federally funded Basic Health due to their age, and who are not eligible for premium-free Medicare Part A or Medicaid.
For its part, New York provided Family Health Plus coverage to parents with incomes up to 150 percent of poverty, and provides an entirely state-funded Medicaid benefit to lawful immigrants. It also has a history of other coverage initiatives that strived to make insurance more affordable to small businesses and individuals. Advocates and state officials see Basic Health as a possible way to build on past initiatives to offer affordable coverage to New Yorkers.
Both states are innovators who strive to provide coordinated care through their public coverage programs. MinnesotaCare contracts require plans to establish “health care homes” that coordinate care for chronically ill patients, and to reach out to frequent emergency room users to ensure that they are well connected to good non-emergency care. Similarly, New York has established health homes to ensure communication and care management for Medicaid beneficiaries.
Oregon Considering the Advantages of Basic Health
Oregon is in the midst of an effort to determine whether Basic Health would extend health coverage to communities that have historically had poorer health outcomes and poorer access to health care. Driving this effort is a coalition of community organizations, including Asian Pacific American Network of Oregon, Oregon Center for Public Policy, and women’s health advocates, along with health and insurance allies. Oregon is not likely to achieve the magnitude of state savings expected in New York because it does not currently finance coverage programs that serve legal immigrants who do not qualify for Medicaid. However, should the state enact BHP, a state-commissioned study by Urban Institute and Wakely Consulting, shows that 10,000 low-income Oregonians would gain health insurance—and tens of thousands more would see sharply reduced health insurance costs.
The study also documents other areas of state savings, including in coverage for pregnant women and in mental health and substance abuse services. Advocates point out that Basic Health is a cost-effective means to extend health coverage to women in low-wage jobs, legal residents from Micronesia under the Compact of Free Association, and many others who cannot now afford coverage.