Friday, March 13, 2015

Minnesota's "public option"

Ever since I read in fall 2013 that ACA bronze plan deductibles average over $5,000 per person, I have been concerned about the availability of such essentially catastrophic coverage at tempting low premium prices to low income ACA buyers -- who we now know are the vast majority of ACA private plan buyers (83% of buyers on have household incomes under 250% of the Federal Poverty Level).

Hence my preoccupation with Cost Sharing Reduction subsidies, available only with silver-level plans, which reduce out-of-pocket costs to less prohibitive levels.  A silver plan has an actuarial value of 94% for buyers under 150% FPL and 87% for those at 200-250% FPL. But silver plans are expensive for low income people. The benchmark second-cheapest silver plan costs 4% of income for buyers with incomes in the  138-150% FPL range and about  6% for buyers with incomes at 150-200% FPL. That's a lot --  $118 per month for a single person earning $23,000. And  a plan at that price may still carry a per-person deductible as high as $1,500 for those in the 150-200% FPL range.

The ACA allows for a more truly affordable option, but only one state has taken it -- in fact, has long had it. That's Minnesota, which since 1992 has had a program similar to Medicaid, MinnesotaCare, serving residents with incomes up to 200% FPL.  As of Jan. 1, 2015, MinnesotaCare was approved as a Basic Health Plan (BHP) under the ACA -- that is, a state-run plan serving residents with incomes between 138%  and 200% FPL (those below 138% qualify for Medicaid, known in Minnesota as Medical Assistance). Under ACA rules, the federal government pays 95 percent of the ACA subsidies to which enrollees in the plan would have been entitled if they enrolled in private QHPs.
MinnesotaCare costs enrollees far less than a silver-level private marketplace plan would. That single person earning $23k who would pay $118 per month for a benchmark silver plan on an ACA exchange pays $50 per month for MinnesotaCare. At 150% FPL, the premium is 25%. Copays and deductibles are appropriate for low-income people: A„ $2.85 monthly deductible;„ $3 copay for nonpreventative doctor visits; no copay for mental health visits; „ $3.50 copay for nonemergency ER visits; a „ $25 copay for eyeglasses; and a  $3 copay for prescription drugs.

From BHP to Public Option?

With the Supreme Court's pending ruling in King v. Burwell threatening to invalidate ACA private plan subsidies in the 34-37 states using the federal exchange,, there's been some talk of a compromise in which the GOP Congress would authorize the flow of subsidies through the federal exchange in return for giving states much more control over the structure of their private health insurance markets. States can already exercise such control by applying for innovation waivers that, if approved, would authorize a state to meet the ACA's coverage and affordability goals by alternate means. Conservatives like to talk about opening up state markets to allow more "choice" -- i.e., skimpier plans with still lower actuarial value than the 60% minimum authorized by the ACA, or plans freed from the constraints of providing Essential Benefit Benefits as defined by the ACA.  Just today a Hoover Institution scholar, Lanhee Chen, floated a post-King compromise that would essentially allow "innovation waivers" without the waiver -- i.e., free states to redesign their insurance markets without asking HHS for permission (I suggested something similar myself in January). Conservatives dream of making subsidies available to plans offered on private exchanges and perhaps abolishing a centralized state exchange.

For blue states, Minnesota points a different direction: making coverage truly affordable for people higher up the income scale.  A BHP, already authorized by the ACA, could be a stalking horse for a true strong "public option." Via innovation waiver, a BHP could be offered up to 300% or 400% FPL, with the state, again, being paid 95% of what private premium subsidies for the enrollees would have cost.

Would that be affordable for the state? MinnesotaCare contracts with managed care administrators to deliver care. I do not know (yet...checking) whether the program pays Medicaid rates, but the model contract seems to assume that the same managed care administrators will run  both Medical Assistance (Minnesota's Medicaid) and MinnesotaCare programs.

I was prompted to explore MinnesotaCare's role in the state's ACA lineup by a Twitter conversation with healthcare consultant and blogger Richard Mayhew, who asked what a liberal state's application for an ACA Section 1332 innovation waiver might look like.  Here is Richard's thumbnail sketch:

Richard's "MA +35%" means that the "public option" insurance program offered to those with incomes above 200% FPL would pay providers at Medicare Advantage rates plus 35%.  We liberals can dream, right?

Update: As of January, MinnesotaCare had average monthly enrollment of just shy of 89,000 (it's hard to pin down a number of new insured in the program, because when the ACA was enacted in January 2014, many in the program (those under 138% FPL) were shifted to Medical Assistance, the traditional Medicaid program).  There are at present a little over 61,000 Minnesotans enrolled in QHPs, 16% of them, or about 9,600, accessing Cost Sharing Reduction, who must have incomes in the 200-250% FPL range. Thus about 66% of Minnesotans obtaining subsidized insurance in the income range that would put them all in QHPs in other Medicaid expansion states (138-400% FPL) are under 250% FPL, compared to 83% in the 37 states using The presence of the BHP explains the state's apparently anomalous metal-level selection stats --just 39.8% in silver plans, compared to a national average of 67%, a very high 35.6% in bronze and a sky-high 24.6% in gold (16.7%) and platinum (6.9%).  If the state had no BHP, there'd probably be another 75,000 enrollees in silver plans.

Update 2: Charles Gaba reminds me that the Minnesota private plan exchange has been struggling; its largest insurer pulled out and QHP signups have fallen far short of projections.   Maybe the fact that 60% of the risk pool in the normal QHP income range is in MinnesotaCare has something to do with it? Republicans are calling for the MinnesotaCare population to be forced into the QHP pool -- which would add expense for the state as well as for the enrollees.

Others want to spend money on technical improvements to the state exchange, MNsure which suffers from poor coordination between the exchange and IT systems for the public programs. Its QHP shopping features also compare poorly with those of other exchanges.  For one thing, its "shop-around" feature, enabling a preview of plan features and prices prior to application, does not incorporate a subsidy estimate (based on a statement of household income), as does and many state exchanges.

The state experience does raise the question whether the QHP market can function well if eligibility starts at 200% FPL. Republicans of course want to privatize further. Progressives might look the other way, toward extending a public program like MinnesotaCare to 400% FPL -- or, on a sliding premium/and OOP scale, to all who lack access to employer-sponsored insurance. That raises questions as to quality of service and financial sustainability for the state and providers that I would like to explore further.

1 comment:

  1. On your question: "The state experience does raise the question whether the QHP market can function well if eligibility starts at 200% FPL. "

    Depends on the size of the state. California and New York are probably big enough to have a 200% to 400% FPL population pool to cover costs while Kentucky or Vermont or Rhode Island definately are too either too small or too poor to raise enough revenue to cover costs from only the 200% to 400% bracket. I don't know where the break-even point would be