Part Three in Health Reform Series: Federal Basic Health Program

This is the third in a series of posts on health care reform and its impact on our state.

State policymakers must soon decide whether or not to adopt a Federal Basic Health Program. This option in the health care reform law has the potential to provide better quality, more affordable health insurance to more than 160,000 low-income individuals and families.(1) Such a plan would allow us to build upon our state’s own Basic Health Plan which was established in 1987 to provide affordable health coverage for low-income, working adults.

Often, explanations of how health care reform will expand insurance coverage to millions of Americans focuses on two elements of the law: the expansion of the Medicaid program and the Health Benefit Exchanges.

But there’s another element that often gets less attention: the Federal Basic Health program, an option that states can choose starting in 2014.  It is designed to serve people who will earn too much to qualify for Medicaid under the new health care reform law but who may still struggle to afford insurance in the exchanges – even with the help of tax credits. 

Specifically, The Federal Basic Health Program would be offered in lieu of the exchange for households with incomes between 138 and 200 percent of the Federal Poverty Level, or between about $26,300 and $38,000 for a family of three.(2) Legal immigrants with low incomes would be eligible as well.(3)

The figure below illustrates how a Federal Basic Health Program will help give low income Washingtonians access to health insurance.

A recent state-specific study estimated the cost of two different Federal Basic Health Program insurance plans. As the table below shows, Federal Basic Health Program recipients could save significant amounts of money each year on premiums and cost-sharing.

Federal funding for the Basic Health Program could help states further improve affordability, benefits, and access. States offering a Basic Health option receive 95 percent of what the federal government would have spent on premium tax credits and cost-sharing reductions for individuals who would otherwise be enrolled in the exchange.(4) Washington state could receive up to $1,100 per enrollee per year in revenue beyond the cost of the plan which can improve the program in various ways, including reducing premiums and cost-sharing, increasing rates paid to providers of health care, or covering additional health benefits.(5) 

The concept of a Basic Health Program is home grown.  Our state’s Basic Health Program served as the model for health care reform’s federal version. It’s an idea that has worked well in Washington state and policymakers should take advantage of this option to continue its success.

Coming up: Look for our last post in the series tomorrow, where we will examine the impact Medicaid expansion will have on covering the uninsured.

See Part I, Part II, and Part IV in this series for more information.

1. Enrollment is estimated to be between 75,000 and 110,000.                                                 

Matthew Buettgens and Caitlin Carroll, The ACA Basic Health Program in Washington State (The Urban Institute, April 2012). http://www.urban.org/UploadedPDF/412572-The-ACA-Basic-Health-Program-in-Washington-State.pdf   

2. Eligibility for Medicaid is up to 133% FPL. In addition, there is an income disregard of 5 percent, effectively increasing eligibility up to 138% FPL. The increased Medicaid eligibility results in eligibility for Federal Basic Health at incomes greater than 138% FPL.

3. Legal immigrants under 138% FPL are eligible if they do not have an affordable offer from an employer and are ineligible for Medicaid because they have been a resident less than five years.

4. Federal guidance on the Federal Basic Health Program has not been released, so there are many unanswered questions about how states will receive payments and whether or not the 95 percent applies to cost sharing subsidies as well as the premium tax credits.

5. Matthew Buettgens and Caitlin Carroll, The ACA Basic Health Program in Washington State (The Urban Institute, April 2012). http://www.urban.org/UploadedPDF/412572-The-ACA-Basic-Health-Program-in-Washington-State.pdf   

Exact projections on increased provider rates must wait until we have more guidance from the federal government, but estimates by The Urban Institute show that rates could be increased by 4-5 percent higher than Medicaid, or even as high as 27 percent higher than Medicaid, making them comparable to commercial rates.