Basic Health Plan details slowly emerging

February 1, 2014

Just above Medicaid eligibility, the plans could stabilize coverage for low-income members

States continue to raise concerns about the growing burden of Medicaid costs, which often outpace other budget items such as infrastructure and education.

Jeff Myers “Medicaid is going to be the center of the universe in healthcare reform this year as implementation happens,” says Jeff Myers, CEO of Medicaid Health Plans of America (MHPA) in Washington, D.C. “You’re likely to see some legislative efforts next year and certainly at the federal and state level this year as they grapple with Medicaid populations.”

Many programs are increasing their reliance on managed care, even among states that chose not to expand Medicaid eligibility under the Affordable Care Act (ACA).

Myers says one of the emerging issues to watch in the Medicaid segment this year is the Basic Health Plan (BHP).

What is the BHP?

Under the ACA, at state option, insurance carriers would operate quasi-Medicaid plans for low-income people in the narrow space just above Medicaid eligibility. The population is composed largely of the individuals and families often referred to as the “working poor.”

The BHP has a unique funding model that redirects federal subsidies.

Under the BHP option, a state receives an annual lump-sum equal to 95% of the projected cost of the subsidies for individuals and families between 139% and 200% of the federal poverty level-funds which would otherwise be used in the exchanges. It is the state’s responsibility to finance one or more BHPs that meet or exceed the value and scope of benefits available in the exchange. All basic plans must offer, at a minimum, the package of essential health benefits in each state that chooses to establish a program.

“One of the big concerns is how the funding mechanism is actually going to work,” Myers says. “States don’t have clear guidance on what’s covered and what’s not.”

In essence, the BHP is a hybrid. While it is a state-facilitated plan for low-income people (like Medicaid), it uses exchange subsidy dollars (like commercial segments).

It is expected that a state would offer enrollees better value by using a publicly operated competitive process that would leverage the state’s bargaining power, and thus produce better prices. Affordability is one of the key advantages the architects of the ACA envisioned for the BHP.

Lawmakers also envisioned continuity of care advantages for what is likely to be a very transitional subpopulation-today’s low-income population often experiences gaps in care and disruptions in coverage through changes in income and other circumstances that mean switching in and out of Medicaid. Participating states would need to create a process for enrollees to transition from Medicaid to the BHP and/or from the BHP to the exchange seamlessly. The transition should ideally be invisible to the members.

Uncertainties remain

One of the uncertainties is whether the BHP would help stabilize coverage within its fairly narrow membership pool and whether states will choose to adopt the program. Managed care plans would also need to have some assurance that offering such plans would make financial sense and allow them to meet the requirements of caring for this segment of the population.

Proposed federal rules were published in December 2013 on how the BHP would operate, and final rules are expected in March. By applying collaborative standards created with feedback from health plans, CMS could better ensure participating plans maintain viability and member access to comprehensive, coordinated care services.

Also, BHPs will have risk adjustment on payments even though the plans would not be part of the larger exchange risk pool.

Regulators must better define what counts toward MLRs, Myers says. The 85% rule, which is the typical MLR for a large group plan, doesn’t adequately take the uniqueness of the near-Medicaid population into account, he says. Defining what counts in the MLR numerator and denominator will affect a plan’s ability to invest in worthwhile programs that benefit enrollees.

Care continuity

Myers says plans must devise strategies for how to best provide service to individuals who are more difficult to manage than a typical commercial population. Additionally, the subpopulation of members that would qualify for a BHP would experience churning-frequent changes in income, and therefore, eligibility for the program-so the administrative burden alone could be costly enough to make the model difficult to execute.

States must carry out an array of eligibility and oversight functions, but can't access any exchange funding for these activities. Likewise, the Obama administration failed to identify any grant funding or Medicaid administrative matching funds that would have made this option more feasible for states.

MHPA members have been working with federal and state officials to work through the questions. The issues are especially urgent in New York, Washington and Minnesota, where there’s an interest in starting up BHPs for 2015 enrollment.

Meanwhile, plans are equally concerned about the high-touch health management that will be required for the BHP members.

“The BHP population tends to look like the lower end of the uninsured commercial population,” Myers says. “Those folks tend to have neglected health needs because they aren’t going to a doctor on a regular basis but they’re a little bit more manageable because the population tends to have a job. That implies a certain level of healthiness.”