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March 2011 St@teside

SCI Releases Basic Health Program Issue Brief

State Coverage Initiatives recently released a new issue brief, The Basic Health Program (BHP) Option under Federal Health Reform: Issues for Consumers and States. A must-read for states considering a BHP, this report outlines both the potential benefits and possible pitfalls of establishing a BHP.

The BHP is an option under the Patient Protection and Affordable Care Act (ACA) that allows the states the option to develop insurance plans for individuals with incomes between 133 and 200 percent of the federal poverty level (FPL), and for low-income legally resident immigrants whose immigration status prevents them from receiving Medicaid. Under the law, states could opt to receive 95 percent of the federal subsidy amount that would have been offered in the health insurance exchange to devise a state-run program.

A few reasons states might consider the BHP:

  • It is likely that a state-purchased plan could provide richer benefits to those eligible for the program than would be available in the exchange;
  • A BHP could be designed to mitigate the negative effects of churning (when people switch frequently from being eligible for Medicaid and the exchange); and
  • BHP could target the needs of low-income individuals in its selection of providers and provision of add-on services (like transportation or mental health benefits, for example).

The brief also notes that states could encounter several difficulties when implementing the BHP. Continuity between Medicaid and the BHP will be greatly shaped by how a state implements the new program. If a state covers BHP adults through health plans that do not overlap with Medicaid—for example, if a state enrolls adults in a separate CHIP program that uses non–Medicaid plans—continuity might not improve and could even worsen. In addition, many consumers could experience a serious disadvantage if a state used BHP to extend existing public programs to additional low-income adults—namely, they would typically have much more limited access to providers than they might have through the exchange. In most states, Medicaid pays low reimbursement rates that greatly limit participation by many types of providers. Provider payment levels, hence participation problems, could easily worsen during the next few years as states continue to grapple with severe budget deficits.