Introduction
The Basic Health Option is a state option under national health reform. While federal guidance regarding implementation of the Option is still to be issued, it is important for advocates to understand this Option and to begin investigating, now, whether it would be a positive feature of health reform in your state. This Short Paper provides an overview to the Option and discusses a number of issues for advocates to consider when deciding whether and how to support state implementation of the Basic Health Option.
In order to understand the Basic Health Option, you need to be familiar with three key concepts in the Patient Protection and Affordable Care Act (ACA). First, the ACA creates Health Insurance Exchanges for individuals buying commercial coverage. Only ?qualified health plans? as defined in the law are permitted to sell products in the Exchanges. Second, the insurance products are standardized, so that every plan must contain a set of essential health benefits. There are five ?metallic? benefit levels ? Platinum, Gold, Silver, Bronze, and Catastrophic ? that are geared to the level of point-of-service cost sharing, with platinum covering the highest percentage of the cost of care (90%). Third, people with income below 400% of the federal poverty level will qualify for premium and cost-sharing subsidies in the form of tax credits. These limit premiums to a percentage of household income (pegged to the cost of the silver level plan) and substantially reduce cost-sharing if the individual selects a silver plan.1
What is the Basic Health Option?
The ACA §1331 allows states to offer one or more ?Basic Health? insurance plans to low- to moderate-income individuals instead of offering them coverage through a Health Insurance Exchange. Plans must provide at least the essential health benefits, and individual premiums may be no greater than the corresponding Silver plan on the Exchange. Plans may be offered by licensed HMOs, licensed health insurance insurers, or networks of health providers formed for this purpose. It is expected that a state would offer enrollees better value than an individual market plan by using a publicly administered, competitive process to negotiate premiums, cost- sharing and benefits. States electing to offer coverage through the Basic Health Option will receive tax credit subsidies to cover costs for individuals who would have been covered through the Exchange. This provision was introduced by Senator Cantwell of Washington, a state with a similar, successful program.
Who is eligible for Basic Health?
In a state that offers Basic Health, residents under age 65 with income above 133% and up to 200% of the federal poverty level would be eligible, as well as lawfully present aliens with income below 133% and ineligible for Medicaid.2 That is, the individual must be eligible for a premium tax credit. Basic Health is not available to employees whose employers offer at least the ?minimum essential coverage? that is considered ?affordable,? just as in the Exchange.
Moreover, in a state electing the Basic Health Option, eligible individuals may not purchase coverage through the Exchange.
How do premiums and cost-sharing subsidies compare to the Exchange?
Premium subsidies for Basic Health enrollees must be at least as generous as those in the Exchange. One provision in § 1331 suggests that a state may charge slightly higher cost-sharing in Basic Health.3 However, this provision is inconsistent with another subsection, and appears to be due to a drafting error.4
How will the tax credit subsidies be distributed to states?
The federal government transfers to the state 95% of the premium credits and cost-sharing reductions that individuals would otherwise have received if enrolled in the Exchange. This amount considers a variety of factors such as age, income, health status, and geographic differences in average spending for health care. This methodology is designed to offset any additional risk borne by serving this population through a separate program.5
What are the features of Basic Health plans?
Basic Health states are required to negotiate for certain plan features: innovation features (such as care coordination, incentives for use of preventive services, and patient-centered decision making), consideration of differing health care needs and resource differences, managed care attributes, and performance measures focusing on quality of care and improved outcomes. States are encouraged to offer a choice of plans and may have regional compacts with other states.
Coordination with Medicaid and Children?s Health Insurance Program (CHIP) is required to maximize efficiency and continuity of care. Basic Health plans are only available to Basic Health enrollees.
How does a person enroll in Basic Health?
The ACA §1413 provides for streamlined, coordinated enrollment procedures that apply to Medicaid, CHIP, a state Basic Health program, and subsidies in the Exchange. A single enrollment form will serve as an application for all these programs.
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