Basic health program aligns with Medicaid

June 1, 2011

A little noticed provision of the Patient Protection and Affordable Care Act offers opportunities for Medicaid managed care.

A LITTLE NOTICED PROVISION of the Patient Protection and Affordable Care Act offers opportunities for Medicaid managed care. The Basic Health Program provision was put into the law to allow states the flexibility to cover the uninsured who might not qualify for Medicaid.

"It is completely voluntary at the state level," says Jeremy Palmer, principal and consulting actuary at Milliman, who has written a briefing paper on the Basic Health Program.

The new option permits states to create a health plan serving primarily uninsured people with incomes between 133% and 200% of the federal poverty level, people who would otherwise receive premium subsidies in the exchange. The plan must provide at least the same essential health benefits as plans in the exchanges, and there are limits on premiums and cost-sharing.

"The Basic Health Program offers states a degree of flexibility they don't have in conventional Medicaid, while still meeting certain core standards," says Mark Reynolds, CEO of Neighborhood Health Plan of Rhode Island, a not-for-profit HMO founded by the state's community health centers.

When a state decides to implement this option and designs its Basic Health Program so it follows the same pattern as its Medicaid program, that opens up a significant market opportunity for managed care Medicaid plans.

"Currently we serve 68% of the Medicaid managed-care lives in Rhode Island," says Reynolds. "We would expect to have a significant share of the population enrolled in the Basic Health Program."

If a state does not opt for the model, then people at 133% to 200% of the federal poverty level will obtain subsidized insurance through the health exchanges. In that case, because more insurers will be involved in the exchange, plans like Neighborhood Health Plan are likely to have a much lower share of that segment, Reynolds says.