Improving the Affordability of Coverage through the Basic Health Program in Minnesota and New York
To date, Minnesota and New York are the only states to have adopted a Basic Health Program (BHP), an option in the Affordable Care Act (ACA) that permits state-administered coverage in lieu of marketplace coverage for those with incomes below 200% of the federal poverty level (FPL) who would otherwise qualify for marketplace subsidies. BHP covers adults with incomes between 138-200% of FPL and lawfully present non-citizens with incomes below 138% FPL whose immigration status makes them ineligible for Medicaid. States implementing BHP receive 95% of what the federal government would have spent on subsidies if BHP enrollees had received marketplace coverage. Both states covered much of the BHP-eligible population prior to the ACA, which facilitated their adoption of BHP. Minnesota, in particular, adopted BHP to retain this prior coverage while saving state dollars. Based on semi-structured interviews with key stakeholders and policymakers in each state as well as reviews of policy documents and reports, this brief examines implementation of the BHP as of Summer 2016. It assesses the impact of BHP on consumers, the marketplaces, and state costs and financing. Although the 2016 election results create uncertainty around the future of the ACA (including BHP), BHP implementation provides important lessons about structuring coverage programs for low-income uninsured consumers for consideration in future reforms. Key findings include the following.
BHP programs in both Minnesota and New York provide coverage with lower premiums and cost-sharing compared to subsidized marketplace coverage. In New York, BHP enrollees with incomes at or below 150% FPL do not pay premiums while those with incomes between 150 and 200% FPL pay $20 per month. Sliding-scale premiums in Minnesota are higher than in New York but lower than for subsidized marketplace plans. According to stakeholders, an important feature of both programs is the absence of deductibles. Copayments are also generally lower than for QHPs. Both programs cover services in addition to essential health benefits for all or some BHP enrollees.
More affordable coverage led to increased enrollment in New York. When New York adopted the BHP in 2016, enrollment rose by 42% among those whose eligibility shifted from federally-subsidized QHPs to BHP. Enrollment increased by only 4% among subsidy-eligible adults unaffected by BHP implementation. Officials and stakeholders attributed the enrollment growth to BHP’s lower premiums and out-of-pocket cost-sharing compared to subsidized QHP coverage. Minnesota officials and stakeholders reached similar conclusions about the impact of affordability on enrollment. In both states, new enrollees attracted by more affordable coverage were described as relatively young and healthy. According to stakeholders, consumers also reported preferring the greater simplicity and predictability of BHP, compared to the marketplace.
BHP did not appear to affect marketplaces’ stability. New York officials reported that BHP implementation did not affect marketplace stability or carrier interest. Minnesota officials felt that the instability experienced in the state’s marketplace resulted from factors other than BHP; however, carriers suggested that BHP may have contributed by shrinking the marketplace’s size.
Most BHP insurers also participated in Medicaid and/or the marketplace. Minnesota conducted a joint procurement for Medicaid and BHP; carriers wishing to participate in one program had to join both, and many offered QHPs as well. In New York, 11 of 13 BHP plans participated in all three programs. This overlap helped consumers retain continuous coverage arrangements when income changes moved them between programs.
BHP enrollees whose incomes rose above 200% FPL experienced steep cost increases when they moved to QHPs. BHP’s more affordable coverage for enrollees ended at 200% FPL, so costs increased for those whose income rose above 200% FPL. Minnesota is exploring ways to smooth this “cliff” by expanding BHP eligibility above 200% FPL. Advocates in New York have called for a similar discussion of policy options.
Both states experienced fiscal gains from BHP, but state financing was needed. Both states achieved administrative efficiencies by using existing state agencies to run BHP. Both states also realized significant net savings by using BHP to fund populations previously covered with state funds—lawfully present immigrants in New York, who had been receiving Medicaid funded entirely by the state; and the general BHP population in Minnesota, which previously covered them through a Medicaid waiver with standard federal matching rates. However, the federal BHP payments did not fully cover program costs in either state, requiring the states to finance a share of the costs. For fiscal year 2017, Minnesota expects to pay 26% of BHP costs while New York will fund 15%.
While the outcome of the 2016 election has created uncertainty around the future of the ACA, including BHP, the experiences of Minnesota and New York with BHP suggest broader lessons about coverage for low-income consumers. Chief among these lessons is the importance of affordability, both in terms of premiums and out-of-pocket costs. New York’s natural experiment shows with particular clarity that affordability improvements can yield significant enrollment gains and risk-pool improvements among the lowest-income consumers qualifying for marketplace subsidies. In addition, stakeholders reported that many consumers preferred the simplicity of state-administered coverage that offered consistency in premiums, cost-sharing, and benefits across participating plans over the complexity of marketplace plans. Encouraging a common set of plans and providers to participate across programs, including public programs and the private market, can promote continuity of coverage and care for consumers who move between programs when household circumstances change. Finally, relying on existing infrastructure to administer new coverage programs creates efficiencies and can help to avoid duplication.