What Is a Basic Health Program?

Only New York and Minnesota Have Established BHPs

Senior woman having medical paperwork explained
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Section 1331 of the Affordable Care Act allows a state to establish a Basic Health Program (BHP) to provide health coverage to people who earn too much to qualify for Medicaid, but who still need more assistance than the ACA would otherwise provide. Any state can establish a BHP, but only New York and Minnesota have done so.

The cost of the BHP is covered by state and federal funding, combined with modest premiums and cost-sharing from members. The ACA simply requires BHPs to ensure that members don't have to pay more in premiums and cost-sharing that they would pay under a qualified health plan (specifically, the second-lowest-cost silver plan in terms of premiums, and a platinum or gold plan—depending on income—in terms of out-of-pocket costs) in the exchange, but enrollees in the BHPs in New York and Minnesota have significantly lower total costs than they would have with a qualified health plan.

Who Is Eligible for Basic Health Program Coverage?

Basic Health Programs are optional for states. But if they are implemented, eligibility is defined in the text of the ACA:

  • Most individuals are eligible for BHP coverage if they have income between 133 percent (in practice, it's 138 percent with the built-in income disregard) and 200 percent of the federal poverty level. For 2018 coverage, the upper income limit for a single individual is $24,120. As the ACA was written, people with income below 133 percent of the poverty level were expected to have Medicaid coverage, so the BHP coverage would pick up where Medicaid left off. However, there are 19 states that have refused to expand Medicaid, resulting in a coverage gap in 18 of them (most people with income below the poverty level are ineligible for premium subsidies in the exchange). But the only states that have implemented a BHP have also expanded Medicaid.
  • Lawfully present immigrants who have not been in the US for at least five years are eligible for BHP coverage if they have income below 133 percent of the poverty level. This is because recent immigrants are not eligible for Medicaid (even in a state that has expanded Medicaid) regardless of income, until they've been lawfully present in the US for at least five years.

    Two States Have Established Basic Health Programs

    Two states—New York and Minnesota—have established Basic Health Programs.

    New York

    New York's BHP is called The Essential Plan, and it became available at the start of 2016. Summaries of The Essential Plan's coverage and costs are available here and here. There are no premiums for enrollees with income up to 150 percent of the poverty level, unless they want to add dental and vision coverage. Those with income between 150 and 200 percent of the poverty level pay $20/month for their coverage.

    Under The Essential Plan, enrollees with income up to 150 percent of the poverty level ($18,090 for a single individual in 2018) do not have copays or other cost-sharing for most services, although there are modest $3 copays for prescription drugs. Those with income above 150 percent of the poverty level have copays for most services, although there is no deductible and the total cost-sharing is far less than it would be on a private plan through New York State of Health (the state-run exchange in New York).

    The Essential Plan benefits are provided by private insurers that contract with the state of New York. There are 16 insurers that participate in the plan, although most only offer The Essential Plan in a few areas of the state (this chart shows where each insurer offers The Essential Plan).

    New York residents can sign up for The Essential Plan via New York State of Health. The exchange determines eligibility for Medicaid, The Essential Plan, and qualified health plans (with or without premium subsidies), depending on income and other relevant factors.

    As of December 2017, there were about 720,000 people enrolled in The Essential Plan for 2018.

    Minnesota

    Minnesota's BHP is called MinnesotaCare, and it's been a Basic Health Program since 2015 (MinnesotaCare is a program that has existed in Minnesota since 1992, but it was converted to a BHP under the ACA guidelines as of January 2015, the earliest date allowed under federal rules).

    A summary of MinnesotaCare coverage is available here. People under 21 do not pay cost-sharing, but there are copays for enrollees age 21 and older, along with a deductible of $2.95 per month (the deductible only has to be paid if you need medical services during the month).

    Premiums for MinnesotaCare are based on income, and can be as high as $80/month per person for those with income at the top end of the eligibility range (200 percent of the poverty level, which is $24,120 for a single individual, and $49,200 for a family of four; note that a family of four with this income level would qualify for MinnesotaCare for the parents, but the children would qualify for Medicaid if they are 18 or younger).

    As is the case in New York, Minnesota contracts with private insurers to provide benefits under the Basic Health Program. As of 2017, there are seven insurers with state contracts to provide MinnesotaCare coverage. Minnesota residents can sign up for MinnesotaCare via MNsure, the state's exchange. The exchange makes eligibility determinations for Medical Assistance (Medicaid), MinnesotaCare, and qualified health plans (with or without premium subsidies), depending on income and other relevant factors.

    As of November 2017, there were about 93,000 people enrolled in MinnesotaCare for 2018.

    How Are Basic Health Programs Funded?

    Under the ACA, the federal government will provide states with BHP funding equal to 95 percent of the amount that the federal government would have spent on premium subsidies and cost-sharing reductions in that state (for people who end up being eligible for the BHP rather than the second-lowest-cost silver plans in the exchange, with premium subsidies and cost-sharing reductions).

    Prior to 2015, MinnesotaCare was a state-funded program that provided coverage to people who didn't qualify for Medicaid, and who had income as high as 275 percent of the poverty level. Switching to a BHP was financially advantageous for Minnesota, as it allowed for significant federal funding rather than relying entirely on state funds (people in Minnesota who earn between 200 and 275 percent of the poverty level are now on qualified health plans via MNsure, as the ACA requires BHPs to cap eligibility at 200 percent of the poverty level).

    It was financially beneficial for New York to establish a BHP as well. Since 2001, New York had provided state-funded Medicaid coverage to recent immigrants (who were not eligible for Medicaid coverage funded jointly by the state and federal government, since federal Medicaid funds cannot be used to cover recent immigrants who have been in the US for under five years). Since BHP coverage is available to recent immigrants, New York's switch to the BHP model meant that they no longer had to rely fully on state funds to cover low-income recent immigrants.

    The Trump Administration's decision in October 2017 to eliminate federal funding for cost-sharing reductions will reduce the amount of federal funding that BHPs receive going forward, but total federal funding for BHPs is predominately money that the federal government would have spent on premium subsidies—the money that would have been spent on cost-sharing reductions is a smaller portion of the total. The elimination of cost-sharing reduction funding is still a pressing concern for both New York and Minnesota, although both states are continuing to operate their BHPs and 2018 coverage is available for eligible residents with the same program guidelines that were used in previous years.

    Will Other States Establish BHPs?

    The BHP program is available nationwide, but it's unlikely that many other states will end up establishing one. In general, a state needs to have expanded Medicaid and established its own health insurance exchange in order for a BHP to be a realistic option. And while qualified health plans in the exchange do not rely at all on state funds, a BHP does put the state on the hook for potential funding outlays, if the federal funding is not sufficient (both New York and Minnesota have had to cover some of the cost of their BHPs, and the elimination of federal funding for cost-sharing reductions further increases the gap between what the program costs and what the federal government pays).

    But individuals and families with income a little too high for Medicaid are well served by BHPs. In states without a BHP, there's a fairly substantial "cliff" in terms of premiums and cost-sharing between Medicaid and private plans in the exchange, even with premium subsidies and cost-sharing reductions on on the private plan (cost-sharing reduction benefits are still available, despite the fact that the federal government is no longer paying insurers to provide those benefits).

    A person with Medicaid coverage will pay little or nothing in premiums, and cost-sharing is limited to modest amounts under federal regulations. If that person gets a small raise and her income grows from $16,600 to $16,700 (in 2017), she'll lose eligibility for Medicaid (assuming she's in a state that has expanded Medicaid). If she's in a state with a BHP and her income becomes too high for Medicaid, she'll be eligible for BHP coverage instead, for which she'll pay a nominal premium (or none at all, in New York, based on her income), and her out-of-pocket costs will continue to be modest.

    But if she's in a state without a BHP, she'll have to purchase a qualified health plan in the exchange. Depending on where she lives, she may qualify for a premium subsidy large enough to cover the full cost of a bronze plan premium, but those plans come with substantial out-of-pocket costs (generally at least $6,500 in 2018, and typically as high as the maximum-allowed $7,350). If she chooses instead to pick a silver plan (which will include cost-sharing reductions, and thus have lower out-of-pocket costs), she'll pay about 3 percent of her income in premiums. And even with the cost-sharing reduction benefits, she'll pay more in deductibles and copays than either of the two existing BHPs require their enrollees to pay.

    In other words, a state's use of a BHP helps to smooth out the difference between Medicaid coverage/costs and private plan coverage/costs, and it results in more manageable health care costs for people whose income is a little too high for Medicaid eligibility. But establishing a BHP does potentially require a state utilize its own funds, and would also involve transitioning currently insured people (who have coverage under qualified health plans) to a new program, which is potentially confusing for state residents and medical providers, and potentially disruptive in terms of continuity of care.

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