After a one year delay, the federal government is giving states a framework to create insurance programs for low-income residents earning above the Medicaid eligibility threshold, potentially encouraging more experimentation with public payer policies.
The Centers for Medicare & Medicaid Services has released final rules for the Basic Health Program, an option under the Affordable Care Act that lets states insure residents under 65 earning between 133 percent and 200 percent of the federal poverty level.
Inspired by a Washington State program that ended up covering some 150,000 residents before being phased out, the Basic Health Program was added to the ACA as an additional option, with federal funding equivalent to 95 percent of the would-be costs of subsidizing the residents with tax credits and cost sharing support.
Lawmakers in several states, including Minnesota, Massachusetts and Oregon, have expressed interest in setting up the program. Washington State legislators are currently considering a bill directing the Washington Health Authority to craft a blueprint to set up the program and apply for federal funding.
With residents in the bottom 25 percent of the tax credit eligibility bracket removed from insurance exchanges, insurers in states that set up Basic Health Programs could see declines in their public exchange business -- and the exchanges themselves could face viability problems. According to Health Affairs, as many as one third of all Americans eligible for subsidized private exchange coverage have incomes below 200 percent FPL.
Between state budget uncertainties and the complexity of the funding formula, however, state lawmakers might be leery of taking on additional responsibility.
In any case, after a one year delay, CMS is offering states the ability to start submitting BHP blueprints and launch the programs in January 2015.
CMS regulators developed a base formula for calculating payments based on multiple "rate cells," with each cell representing a combination of age range, geography, coverage category, household size and income (states like Vermont without age rating would have slightly customized formulas).
Federal BHP payments for each rate cell will be calculated in two parts, the first equal to 95 percent of the estimated tax credits that would be paid if a BHP enrollee instead enrolled in an exchange plan, and the second equal to 95 percent of the estimated cost-sharing reduction payment that would be paid for an exchange plan enrollee. Those two rates will then be added together.
The goal is to eventually use 2015 exchange premium data as the basis for those calculations, although for states that want to go ahead with BHP programs earlier, by May 15, this year's exchange premium data will be used with projected changes.
CMS will also offer states a "retrospective population health status adjustment" option to account for residents with unpredictable health costs. Those states have to submit proposals to CMS that must be approved by the agency's actuary. BHP health plans, though, are not able to participate in the ACA's risk adjustment or reinsurance payment programs.