Potential Outcomes of Basic Health Programs for States, Consumers

Basic Health Programs (BHPs) can streamline coverage and increase coverage continuity for certain populations, but the cost to states will vary, a report from the Urban Institute shared.

“The Affordable Care Act (ACA) included an option for states to run Basic Health Programs (BHPs) that replace subsidized coverage on the health insurance Marketplaces for individuals with incomes up to 200 percent of the federal poverty level (FPL),” the issue brief explained.

The program is intended to provide continuity of coverage for individuals with variable incomes that hover around Medicaid eligibility levels, according to the federal Medicaid website.

Two states have implemented BHPs: Minnesota and New York. The report reviewed results from these states’ BHPs and provided insight into what policymakers might expect when implementing this approach.

First, the researchers addressed the impact that BHPs can have on state health insurance marketplaces and the population of consumers eligible for BHP membership.

BHPs successfully decreased administrative complexity for administrators in New York and Minnesota, the report found. The programs also improved the affordability of coverage for individuals in the targeted income bracket.

For BHP-eligible populations, the program effectively lowered out-of-pocket healthcare costs. For example, BHP-eligible New Yorkers saved $1,600 or more annually and uninsurance in the state dropped by around 50 percent. Minnesota and New York also expanded the benefits they offered BHP members beyond what these consumers normally access through the Affordable Care Act marketplace plans.

The researchers warned that these results might be due to state-specific factors, such as the level of New York’s federal payments.

A BHP may also lower the financial risk that consumers experience and the complexity of the Affordable Care Act marketplace coverage. The programs do this by eliminating tax-related requirements—such as advance premium tax credits (APTCs)—and stripping down the overwhelming number of plan options.

Additionally, BHPs can impact coverage stability, but whether those results are positive or negative for the consumer may depend on the program's design.

“The BHP provides what is effectively a middle layer of coverage between Medicaid and the Marketplaces, creating a ‘bridge’ between Medicaid and the commercial insurance market,” the report explained. “Depending on how a state structures its program and eligibility rules, this can either reduce or generate administrative burdens for people who must shift between coverage programs.”

BHPs could also suffer from low provider participation because the reimbursement rates are lower than qualified health plans. However, New York and Minnesota did not see this outcome. States can observe their provider participation in Medicaid programs to determine whether lower reimbursement might be a challenge for establishing BHP network adequacy.

Individual health insurance marketplace consumers may see some side effects from BHP implementation. The new program could boost premiums for consumers who use APTCs.

BHPs draw their membership from the silver plan enrollee pool. There are fewer premium contributions and, thus, APTCs drop.

But subsidized Marketplace plan enrollees are not the only ones to feel the effects of a BHP. Unsubsidized enrollees also might experience a shift in their market premiums. Insurer participation could drop along with utilization levels, leading to higher premiums.

Finally, BHPs can impact state finances. The state budget impact of a BHP hangs on two factors: the richness of the program’s benefits and federal funding. Ultimately, the impact will vary state-to-state.

Innovative options like BHPs are coming to the foreground as experts seek to circumvent major coverage losses during the public health emergency unwinding.