More on catastrophic options in the ACA

Joanne Kenen (@JoanneKenen) and Paul Houchens (@PaulHouchens) were tweeting about the Basic Health Plan (BHP) option provided to states for enrolling persons under 200% of the poverty level, pointing to this op-ed by Micah Weinberg raising questions about the wisdom of California’s plan to use a BHP for such persons. Micah’s most basic worry is that putting all Californian’s below 200% of poverty who are eligible for exchange subsidies into a BHP will pull out a large number of persons from the health insurance exchange (where consumers pick between Bronze, Silver, Gold or Platinum levels of cover, from different insurers) reducing the chance for competition between insurers for business to work.

One of the primary arguments for the BHP is to allow for unified insurance coverage (same insurance company) for a family that would be eligible for different plans. For example, at 150% poverty, a mom who was pregnant and a child would both be eligible for Medicaid, while the dad would not, but would be eligible for premium subsidies to defray the cost of private insurance sold in the state-based exchange. Paul Houchens tweeted out this document from Tennessee evaluating the use of the BHP v. other bridge product options available to states to unify family insurance coverage. This interesting document further expands on worries of providers (in Tennessee anyway, see pages 3-4) of low-income folks choosing the Bronze (catastrophic) level of private insurance coverage, which would have the lowest premiums but very high cost sharing, therefore not ameliorating the “bad debt” problem as viewed from the provider side of things. Several thoughts:

• The ACA has catastrophic coverage options available and always has.
• I have always thought of the BHP route as a baby step toward a state moving away from Medicaid for persons who were not dual eligibles or long term disabled, and eventually enrolling low income persons in private, subsidized insurance. A key issue is how/whether the federal BHP subsidies will be risk adjusted; there is still reg work to be done.
• The point of the op-ed is that removing such a large number of persons from exchanges could lessen the effects of competition between insurers on premiums. Alternatively, it could actually lessen the “average” premium if the morbidity of those in exchanges was less after removing persons below 200% of poverty. The relative impact of (1) morbidity of the entire pool and (2) competition on premiums in the exchange would seem to differ by state. The degree of spread around the average could also differ.
• I have further thought that BHP might be more likely to be taken up by “cold feet” states and/or states with one dominant insurer where concerns about lack of competition (because there weren’t many insurers offering products). However, the California story is not that one and it seems to be safety net providers calling for it. Perhaps in a “next round” of ACA implementation after the election that could ensue, and the lack of regs being finalized may be a source of flexibility.
• Estimating the relative impact of a BHP on an exchange needs to be done with counter-factual of how many low income persons will choose the Bronze level of coverage if they purchase coverage in the exchange. This would differ by state, I am sure.
• One question: could a state not allow low income persons to choose the Bronze level of coverage due to worries they “couldn’t afford it” if they provided extra resources, say to boost them to a Silver level? I do not know.

Lots of work to do at both the federal and state level.

very similar post cross posted at freeforall