New York's ACA alchemy: marketplace silver to Essential Plan platinum

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Greener pastures for New Yorkers of a certain income

New York has a pending ACA Section 1332 updated waiver proposal to CMS that would extend eligibility for the Essential Plan, the state’s zero-premium, low-out-of-pocket cost health insurance program, to applicants with incomes up to 250% of the Federal Poverty Level ($36,450 for an individual, $75,000 for a family of four) in April 2024.

The economics of the program appear to defy gravity, and perhaps suggest lessons as to the public funding of health benefits in the United States.

Shedding “Medicaid-ish” payment rates

As currently structured, New York's Essential Plan is a Basic Health Program, an option for states established by Section 1331 the Affordable Care Act. A BHP is a health coverage program for state residents with incomes up to 200% FPL offered in place of standard ACA marketplace coverage. The implicit premise of Section 1331 is that BHPs will pay lower rates to providers and plow those savings into reducing premiums and out-of-pocket costs for enrollees — rather like Medicaid.

The Essential Plan currently provides coverage with an actuarial value of 98% to enrollees with income up to 150% FPL, compared to 94% for benchmark silver coverage in conventional marketplaces, and an AV of 92% to enrollees in the 150-200% FPL income bracket, compared to 87% in the marketplace. The plan has no deductibles at any income level and includes dental and vision coverage. Plan benefits are standardized.

Covering the newly uninsured in New York: The BHP advantage

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My last post noted that Medicaid enrollment in New York spiked 2.6% in May and is up 4.2% since March. That's about mid-range among states for Medicaid enrollment growth since Covid-19 triggered mass layoffs.   Total enrollment in New York's mainstream managed Medicaid programs (about two thirds of total Medicaid enrollment in the state) increased by 177,858 from March to May, to 4,363,873.

New York's unemployment rate hit 14.5% in April. At 15% unemployment, the Urban Institute calculates that Medicaid enrollment in New York should eventually increase by between 641,000 and 1.1 million from pre-crisis levels, an increase of about 11-20%.  If a 4% increase as of May seems like a slow start, a new report by the United Hospital Fund analyzing Medicaid enrollment in New York during the Great Recession provides important context. 

From December 2007 to November 2009, as unemployment in New York more or less doubled from 4.8% to 8.9%, Medicaid enrollment increased by 10%, or 400,000. But Medicaid enrollment growth lagged behind job loss: "the fastest average increases in enrollment occurred approximately seven months after the fastest average increases in unemployment."*  

While Medicaid enrollment growth in New York so far seem modest compared to growth in Kentucky and Minnesota, the UHC report, citing growth in March and April, notes, "as the pandemic accelerated, Medicaid’s average monthly growth rate was four times as large as the average monthly growth rate during the Great Recession’s first twelve months."

Medicaid, moreover, is not the whole story. The Urban Institute estimates that approximately half as many of those who lose job-based insurance will find coverage in the ACA marketplace as in Medicaid. New York may do better than that, thanks to its Basic Health Program, the Essential Plan.

Boosting ACA coverage in a time of mass unemployment: State options

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In the past five weeks 26 million Americans have lost their jobs. Could national impoverishment prepare a path to universal health coverage?

When tens of millions of household incomes shrink toward the poverty level, tens of millions will become eligible for Medicaid. If double-digit unemployment persists for many years, the program may be upgraded by popular demand and its eligibility threshold may creep up by degrees.

All bets are off if Trump is reelected, as Republicans are sworn enemies of Medicaid. Their 10 years' war against the ACA has at bottom been a drive to defund Medicaid -- roll back the ACA eligibility expansion, impose block granting or per capita caps on remaining Medicaid programs, and throw up barriers to enrollment like work requirements and frequent "redeterminations" of eligibility.  If Republicans regain control of Congress as well as the presidency any time soon -- or neutralize Congress under authoritarian rule -- they'll doubtless succeed in shrinking and hollowing out the program.

If they don't, Medicaid will remain funded, and it stands ready to catch a hefty proportion of the newly unemployed in the 36 states that have enacted the ACA Medicaid expansion. Total enrollment is likely to increase by 16.5 million to about 87 million according to the mid-range estimate in an analysis by Health Management Associates. With no end to our coronavirus exposure in sight, we are probably looking at double-digit unemployment for the foreseeable future. Elevated Medicaid enrollment may persist.

If Democrats win the presidency in 2020, but lack power or will to enact sweeping new coverage expansions, Medicaid coverage, perhaps under different names, will likely expand further.

Blue states looking to avoid (or roll back) massive increases in their uninsured population should look closely at existing state programs that extend Medicaid-like coverage up the income ladder.  There are two existing models that states might follow.

Medicaid is cheaper. Ergo...

In Inside National Health Reform (2012), John McDonough, a former Senate aide who was in at the birth of the ACA, recounts how the ACA's threshold for expanded Medicaid eligibility came to be set at 133% of the Federal Poverty Level (de facto 138% FPL, as everyone gets 5% of income discounted). In so doing he highlights a rather obvious fact about Medicaid: it's cheap.

The decision to go higher than 100 percent of the federal poverty level in the Senate and the House were driven by dollars. The Congressional Budget Office, the nonpartisan congressional advisory body, estimated much higher costs to cover individuals through an exchange rather than through Medicaid because the latter pays medical providers much less than private insurers can get away with and because Medicaid administrative costs are much lower. In the early summer of 2009, when Senate Majority Leader Harry Reid and the White House pressured Baucus to abandon plans to tighten the federal health insurance tax exclusion as a financing source, Senate Finance leaders and staff scrambled to find new revenues and to hold down costs—moving from 100 to 133 percent of the FPL for Medicaid eligibility was one important step in that direction. Why not 150 percent? Finance officials knew there were existing Medicaid populations at 133 percent of the FPL, including children up to age six and pregnant women, while there were none at 150 percent of the FPL—it would be a more difficult and complex change. Further, governors and some Democratic senators felt going higher than 133 percent of the FPL was a line they were not willing to cross: 133 was it.

Bill Clinton's other "craziest thing in the world"

I have a post up at healthinsurance.org that looks at an apparent slip from Bill Clinton's political id regarding Obamacare. No, not that "craziest thing in the world" slip -- the one about allowing those who earn too much to qualify for subsidies in the ACA marketplace to buy into Medicaid.

To buy into what? Who suggested that? Certainly not Hillary. But it -- or something very like it  -- might not be such a bad idea. Please take a look.

My last several posts at healthinsurance.org explore outside-the-box ideas for strengthening and/or amending the ACA. They include a Medicare buy-in that Republicans might like and a way to get public option pricing into the ACA marketplace without the 'public' part. Also pointing possible alternate paths: a close look at the Basic Health Programs and proposals to expand them in Minnesota and New York.