On April 2, the Centers for Medicare and Medicaid Services (CMS) issued a proposed rule modifying the federal funding methodology for the Basic Health Program (BHP) for 2019 and 2020. Under the proposal, technical changes – such as adding a metal-tier selection factor – to the formula could cause participating states to lose $300 million in federal funding, leaving them on the hook to make up the difference. CMS believes changing the methodology will increase administrative feasibility, reduce the likelihood of erroneous payments, and increase reliability and accuracy. Other stakeholders believe the move is an attempt by the federal government to “pick at [] programs that they don’t particularly like[.]” While funding for the programs is being debated, we checked in on how states’ BHPs are faring amidst federal uncertainty.
What’s a BHP?
Under the Affordable Care Act (ACA), BHPs were designed to give states the option to offer affordable coverage to residents between 133 and 200 percent of the federal poverty level (FPL). To participate in a BHP, individuals must be under 65 years old, meet the household income requirement, and be ineligible for other forms of coverage, such as Medicaid or affordable employer-sponsored coverage. Lawfully present non-citizens at similar income levels may also join a BHP. While these individuals would be eligible for premium tax credits (PTCs) and cost-sharing reductions (CSRs) for a qualified health plan (QHP) on the marketplace, BHPs aim to provide even cheaper coverage through significantly lower premiums and cost sharing.
The ACA funds BHPs by paying participating states a sum equivalent to 95 percent of the PTCs and CSRs that BHP enrollees would have received, had they selected QHP coverage. However, CMS has not always provided this funding in a consistent manner. For example, in 2017, when the Administration ended CSR payments to insurers, it also told states they would not receive the CSR portion of their BHP funding – triggering a $1 billion lawsuit. Annual changes to the funding methodology have also drawn attention before.
Offering a BHP can be advantageous, since it allows states to provide more affordable options, increase enrollment, establish similar networks across coverage programs, and coordinate standard benefits for those who churn between private and Medicaid coverage. However, to date, only two states – Minnesota and New York – have launched such programs.
Minnesota’s MinnesotaCare
In Minnesota, a program known as MinnesotaCare was first implemented in 1992 to provide coverage for working residents, and, over time, it evolved to serve children, parents, and pregnant women at lower income levels. The state transitioned the program to become a BHP in 2015 in order to secure the more generous 95 percent federal funding match. Since then, 88,305 individuals have enrolled in coverage. Enrollees pay no more than $80 per month in premiums, with individuals below 149 percent FPL paying as little as $0-25 per month. By comparison, Minnesota’s marketplace enrolled 124,000 consumers in QHPs during the 2019 open enrollment period, with average premiums of $280 per month, after financial assistance. Under the BHP, 2019 cost sharing for individuals over 21 years old is capped at a $25 copay for non-preventive visits, with no copay for mental health visits, and a $7-25 copay for prescription drugs. Traditionally, consumers in the BHP have had access to a broader provider network than marketplace policies, since BHP plans tend to include all Medicaid providers.
Despite this success, the future of Minnesota’s program remains uncertain. First, federal funding for the program – including that under the proposed rule – has been cut by over $350 million for 2018-2021. Second, the state is currently debating a number of policy proposals that could alter funding for the BHP. For example, the state imposes a 2 percent provider tax, which helps raise $700 million a year for healthcare programs like the BHP and the state’s reinsurance program; this tax is set to expire at the end of the year. Without such revenue, the state estimates that MinnesotaCare and other health programs will experience a $416 million deficit by 2022, and a $900 million shortfall by 2023.
New York’s Essential Health Plan
In New York, the BHP began in 2015, building on an earlier program, which had provided state-funded Medicaid to lawfully present immigrants. The program, known as the Essential Health Plan, offers four policies at increasing FPL levels, which all cover essential health benefits. Premiums vary from $0-20 per month and cost sharing on three of the plans is set at $0. Even for those at the higher end of the income scale, cost sharing for generic prescriptions is only $6 and primary care visits are $15. Consumers in most counties also have access to four or more insurers. As of February 2019, over 790,000 individuals were enrolled in the BHP, up from 738,000 in 2018, and nearly three times the number of individuals enrolled in QHP marketplace coverage (272,000). In light of this success, federal officials, including New York Senators Charles Schumer (D) and Kristen Gillibrand (D), introduced the Basic Health Program Expansion Act, which would allow states to expand BHP eligibility to individuals at higher FPLs.
Medicaid Buy-In Proposals – The BHP Concept by a Different Name?
Minnesota and New York’s BHPs have tapped into an underserved market. The programs provide affordable coverage for nearly one million consumers who make too much to qualify for Medicaid, but who struggle to afford the marketplace’s premiums and cost sharing, even with financial assistance. This is akin to another concept that has recently gained traction in a handful of states: the Medicaid Buy-In. Although the details of the Medicaid Buy-In proposals vary, most would allow individuals earning above Medicaid’s income levels to “buy in” to the program and access comprehensive benefits, rather than remaining uninsured. States have considered this approach as a way to improve insurer competition, to improve premium affordability, and to better align Medicaid and marketplace products. As states contemplate these proposals, it is worth noting the challenges and successes of the BHPs, which currently provide a similar safety net. BHPs may offer an avenue for accomplishing these goals, though New York and Minnesota’s experience demonstrate that the uncertainty of federal funding remains ever-present.
Take-Away: Minnesota and New York’s BHPs have been successful in attracting robust enrollment with the promise of cheaper premiums and comprehensive benefits. Both programs have filled a critical gap that would otherwise leave thousands of consumers uninsured. Despite these strides, states depend on federal funding to accomplish their aims, and the proposed cuts under the BHP methodology undermine these efforts. While these changes are only proposed, if finalized, the rule would make it more difficult for states to provide affordable coverage.