5 Ways Basic Health Programs Benefit States

The Affordable Care Act extends the promise of greater access to healthcare, but it also raises many financial questions, such as who will pay, and how.

The ACA expands Medicaid eligibility to 133% of federal poverty level or $29,726 for a family of four. It also requires states to set up by January 2014 health insurance exchanges where individuals and small businesses can compare and purchase private health insurance plans.

One question states are struggling with as they explore HIEs is whether the program can manage the health needs of a low-income population, especially residents with incomes between 133% and 200% of the FPL or between $29,726 and $44,700 annually for a family of four.

That’s a population that is generally considered to have special coverage needs and is particularly vulnerable to economic shifts that can often leave its members unable to pay for health insurance. There is concern that an HIE, with its broader membership mix, will not be attuned to these special considerations.

The ACA offers a second option, the basic health program, to serve the low-income population. The BHP is not as well-known as the HIE but just like that program, the federal government will provide states with a lump sum payment of 95% of what the feds would have spent on tax credits and subsidies for out-of-pocket healthcare costs for this group.

Meg Murray of the Association of Community Health Plans is worried that the BHP is losing ground to insurance exchanges and that states will embrace exchanges without considering a BHP. "We're concerned that states aren't considering both options as they develop plans for serving low-income people." She adds that although states may see this as an either/or proposition "the BHP can be a bridge between the Medicaid population and an insurance exchange."

And she suggests that states allow established Medicaid providers to handle this population. “They will have in place the infrastructure to provide for this population.” It’s system that expands well past health insurance to include translators, transportation, special needs care coordination, and housing and food assistance.

The BHP isn't a silver bullet. It isn't going to resolve provider reimbursement issues so prevalent in the care of the low-income population, for instance, but creating a BHP does hold the promise of helping to reduce state healthcare costs while stabilizing benefits and coverage, and reducing the number of uninsured. That's good news for hospitals, physicians and others who struggle to provide care for a population that often falls in and out of the insurance market.

States still have plenty of time to consider creating a basic health program. Like the HIE, the BHP will be required to cover what the ACA terms “essential benefits.” The Department of Health and Human Services is expected to finalize the list of benefits later this year.

Here's a look at some of the specific reasons states ought to consider adding a basic health program to their list of options for low-income populations:

1. A BHP could specifically address the medical needs of the low-income population.
   The low income population often has special coverage needs. A BHP could be set up to make sure the right providers, services, and benefits, such as transportation and mental health benefits are available.


2. A health insurance exchange would be  disruptive to a vulnerable population.
   The beneficiary mix will probably be more diverse for exchanges so there could be a broad membership with different needs and ailments. The low-income population has needs that extend beyond insurance and can be difficult to meet. Shifting the low-income population from Medicaid straight into an exchange would be a major move that could involve a different plan, different providers and increased healthcare costs. Even with an income of 200% of FPL the population could struggle to meet the new costs; making the shift to an exchange with an income of 133% of FPL would be even difficult.
    
3. A BHP could reduce churning.
   According to a Health Affairs article, How Changes In Eligibility May Move Millions Back And Forth Between Medicaid And Insurance Exchanges, more than 50% of all adults with family incomes below 200% of the FPL will experience a shift in eligibility from Medicaid to an insurance exchange, or the reverse; within one year. That's called churning. It creates administrative headaches for states, coverage lapses for families, and increases the likelihood that hospitals and physicians will not be reimbursed for their services.
    
4. A BHP could stabilize coverage.
   A BHP could be set up so enrollees can remain with the same health plan if their income increases above 133% of FPL and they move from Medicaid to the BHP. That would make it easier for this population to remain with familiar providers and maintain their familiar coverage. It would also help reduce the administrative costs incurred by providers for processing insurance changes.
    
5. A BHP could reduce the number of uninsured.
   A state will receive a lump sum payment to cover healthcare for the low-income populations. If the lump sum is more money than the state needs, the excess funds can be used to reduce some of the out-of-pocket costs, like copayments, for this group. Making care affordable for this population will make it more likely that health insurance will be maintained.