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The Affordable Healthcare Option Most States Don’t Use

The Affordable Healthcare Option Most States Don’t Use
May 19
08:23 2016

This year, more than 300,000 lucky New Yorkers started paying less than $20 a month for a comprehensive health insurance plan that featured low copayments and no deductibles.

This type of coverage was made possible through the federal healthcare law. Minnesota has a similar program, with over 125,000 members.

New York and Minnesota are utilizing a provision of the healthcare law to create what they call a basic health program for low-income consumers. These plans are far better than marketplace options – even if those plans have cost-sharing subsidies and a premium tax credit.

“Even though marketplace subsidies are incredibly generous, at 175 to 200 percent of poverty, [some people] don’t have an extra $100 a month to spend on health insurance,” explains Elisabeth Benjamin, the vice president of health initiatives for a New York advocacy group.

The basic health program option is aimed at families and individuals just above the cutoff for Medicaid, with incomes up to 200% of the poverty level ($23,540 for a single consumer). Legal immigrants at the same income level who are not eligible for Medicaid because they have lived in the US for less than five years are also eligible.

Basic health programs must be just as affordable as marketplace plans and adhere to the ACA’s list of 10 essential health benefits.

To fund basic health programs, the federal government pays participating states 95% of the amount it would have otherwise paid to marketplace insurers in cost-sharing subsidies and premium tax credit for those consumers. This coverage is far more affordable than a subsidized marketplace plan.

Here’s an example from New York’s Essential Plan: John makes just over $23,000 a year. His insurance covers him for just $20 a month and his copays are an affordable $15. In addition, John’s out-of-pocket expenses are capped at $2,000 per year.

If John chose the cheapest silver-level marketplace option in New York available to someone at his income level, he would be paying over $130 per month. His copayments would be $30 after deductible and the cap for annual out-of-pocket spending would be $5,450.

So why aren’t more states utilizing this option? First, implementation makes more sense in Minnesota and New York because those states were already offering Medicaid coverage to many individuals now eligible for the new program. With Medicaid, the state pays about 50% of the coverage cost. Switching to the basic health program, where the state pays only 5%, is an attractive option.

But even this small responsibility makes some states turn away. Meanwhile, other states are cooking up their own strategies to improve the healthcare system and are considering using the state innovation waiver program next year, which would give the state 100% of marketplace subsidy amounts.

Furthermore, individuals with incomes lower than 200% of the poverty level make up as much as 2/3 of marketplace members in some states. A downsized marketplace might be less attractive to insurers and could result in fewer and more expensive options.

“If you pull those people out, you’ve decreased the size of the marketplace significantly, and that has the potential to change the way the insurers look at it,” says Linda Blumberg of the Urban Institutes’ Health Policy Center.

 

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April Kuhlman

April Kuhlman

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