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

Author: Don Taylor

Don Taylor is an Associate Professor of Public Policy at Duke University, where his teaching and research focuses on health policy, with a focus on Medicare generally, and on hospice and palliative care, specifically. He increasingly works at the intersection of health policy and the federal budget. Past research topics have included health workforce and the economics of smoking. He began blogging in June 2009 and wrote columns on health reform for the Raleigh, (N.C.) News and Observer. He blogged at The Incidental Economist from March 2011 to March 2012. He is the author of a book, Balancing the Budget is a Progressive Priority that will be published by Springer in May 2012.

3 thoughts on “More on catastrophic options in the ACA”

  1. Seen from this side of the Pond, Obamacare is an (a) fantastically complicated way of (b) making the lives of lower-income Americans more comfortable and secure. Liberals object to (a) out of Utopian rationalism, conservatives object to (b) out of moralism and spite. This delightful Heath Robinson sketch (HR was an English contemporary of Rube Goldberg, but IMHO a better draughtsman) nicely captures both criticisms:

    1. Nice picture. Lots of tricky issues trying to put together multiple approaches and systems when there is a general objection to the concept of having a system.

    2. It sounds like it may be more like *slightly* more comfortable and secure. Why is a BHP even a good idea? Are people supposed to be excited about this? There is no good reason to have separate pools at all. The DP is so weak it’s just disgusting.

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