Decision on Basic Health Program Is Complex

States’ deliberations about whether to offer optional coverage through Basic Health Programs (BHPs) are complex, and those that do decide to offer BHPs will want to design programs that minimize their financial exposure and reduce negative impacts to the effectiveness of state Health Insurance Exchanges. These were just a few of the conclusions drawn in a new paper from the Henry J. Kaiser Family Foundation that assesses the BHP and its potential risks and advantages to states if it is implemented. The paper is titled The Role of the Basic Health Program in the Coverage Continuum: Opportunities, Risks, and Considerations for States. BHPs are part of a continuum-of-care option available under the Patient Protection and Affordable Care Act (ACA). These BHPs—which would be financed through federal tax subsidies—would provide subsidized coverage for those with incomes between 139% and 200% of the federal poverty level. According to the paper, the possible advantage of this coverage option is that it could help reduce the cost of coverage for individuals with low or modest income levels, who would otherwise be eligible for coverage through the state exchanges. In addition, they could provide continuity of care for individuals whose income levels fluctuate just above and below Medicaid requirements by aiding in an easier transition between the 2 programs and possibly increase coverage of individuals who may otherwise drop coverage due to financial constraints. Despite the potential benefits, the BHP option is also accompanied by risks for states, especially if federal funding proves to be inadequate to cover the cost of the program. As states try to assess whether to adopt the BHP option, they will have to determine the effect such a program could have on the viability and effectiveness of state exchanges, how to best ensure continuity in coverage between coverage options, and how to estimate cost implications for establishing a BHP. During a discussion with policymakers and state and federal officials, several key considerations were identified for considering the BHP. First, the delivery model that is adopted could influence the cost and how successfully individuals can transition to Medicaid or qualified health plans. States could use established Medicaid managed care plans to offer coverage since infrastructure is already in place through these organizations and they are more likely to accept lower reimbursement rates; however, providers may need to increase provider rates so that plans can offer comprehensive provider networks. In addition, the BHP could have significant impacts on state exchanges and could reduce the exchange population by about one third. According to the paper, this decrease could weaken purchasing power, undermine the administrative viability of the exchange, or change the exchange’s risk profile. To minimize the effects of these possible impacts, states may consider combining risk across markets, integrating the BHP procurement with the exchange, or integrating BHP functions with the exchange. Before establishing BHPs, states will also need to evaluate the costs of a BHP and determine whether federal funding will be enough to pay for the program or whether anticipated program costs will outweigh available funding. To do this, states will need to use actuarial modeling to determine the value of the benchmark plan in the exchange and subtract individual contributions to the premiums, also noting that any funding states receive will be subject to year-end reconciliations. Even with these estimations, additional guidance from the federal government is needed to determine how the program will be financed, administered, and certified. The authors of the report concluded by saying that each state will need to decide whether a BHP is a viable option or whether other alternatives will need to be used to provide coverage.