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.

Breaking the BHP ring fence: New York's Hochul proposes Essential Plan eligibility to 250% FPL

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This significant tidbit, gleaned from New York Governor Kathy Hochul's State of the State Address, was reported in yesterday's Politico Pulse newsletter:

...Hochul proposed raising income eligibility for New York’s Essential Plan — which provides health insurance to New Yorkers who don’t qualify for Medicaid — from 200 percent of the federal poverty level to at least 250 percent, pending federal approval. The policy is estimated to reduce the number of uninsured New Yorkers by at least 14,000 and make health care more affordable for at least 92,000 people.

This initiative is not mentioned in the published text of Hochul's speech. I can't find any further written trace of it.  To extend eligibility beyond the current 200% FPL income threshold would appear to require the filing of a state ACA innovation waiver requesting federal approval.  [Update: this language is in the State of the State Book, page 34. The NY Dept. of Health confirms that the state will have to submit an innovation waiver proposal, and adds that there will be more detail in the executive budget proposal.]

If the proposal pans out, it could pave a state route to essentially replacing -- at least in large part -- the ACA marketplace with a program more cost-effective for enrollees and governments alike.

"Anyone without health insurance can apply now" -- way to keep it simple, NYSOH

I have criticized messaging on ACA exchanges that's likely to confuse the majority of people newly uninsured after being laid off in the current crisis.  The main problem is that the exchanges submerge information about Medicaid, which is likely to insure more than twice as many newly uninsured people as is the ACA marketplace for private plans. Many who are eligible for Medicaid are likely never to find that out on the exchange websites.

Having obsessed about this a bit (1, 2, 3), I was pleased to encounter a Twitter ad from the New York ACA exchange, New York State of Health, that IMO gets the messaging right:

Anyone without health insurance can apply now thru #NYSOH. Enrollment is open for all NY State of Health Programs: Medicaid, Essential Plan, Child Health Plus and Qualified Health Plans. Find out what you qualify for by calling 1-855-355-5777 or visiting: https://t.co/v3Ojbz5NCV pic.twitter.com/97t8pPIDSU

— NY State of Health (@NYStateofHealth) June 26, 2020

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.

Are New York's Essential Plan and Minnesota's MinnesotaCare threatened by CSR fund cutoff?

A question hath arisen on Twitter: if federal Cost Sharing Reduction (CSR) reimbursements to insurers are cut off, either by Trump administration fiat or court ruling, would New York and Minnesota's Basic Health Programs formed under the ACA lose the portion of their federal funding derived from CSR payments?

To review, the ACA gives states the option of establishing a Basic Health Program (BHP) for qualifying residents with incomes between 138% and 200% of the Federal Poverty Level -- the very population eligible for strong CSR in the ACA marketplace in a state with no BHP*.   A BHP is designed to have low premiums and high actuarial value -- though not necessarily higher than that provided by CSR. So far, Minnesota and New York are the only states to have formed BHPs.  New York's BHP, the Essential Plan, has minimal cost sharing and a maximum premium of $20 per month (for those in the 150-200% FPL range). MinnesotaCare premiums top out at $80 per month; the actuarial value is 94%, matching CSR for marketplace enrollees with incomes up to 150% FPL.

Section 1331 of the ACA provides for federal funding of BHPs according to this formula:

The amount determined under this paragraph for any fiscal year is the amount the Secretary determines is equal to 85 percent [amended to 95%] of the premium tax credits under section 36B of the Internal Revenue Code of 1986, and the cost-sharing reductions under section 1402, that would have been provided for the fiscal year to eligible individuals enrolled in standard health plans in the State if such eligible individuals were allowed to enroll in qualified health plans through an Exchange established under this subtitle.

An American road to single payer

Ezra Klein offers an astute political forecast:

...if Republicans leave Obamacare gutted and the political arguments that led to it in ruins, there’s not going to be a constituency for rebuilding it when Democrats win back power.

Instead, they’ll pass what many of them wanted to pass in the first place: a heavily subsidized buy-in program for Medicare or Medicaid, funded by a tax increase on the rich. A policy like that would fit smoothly through the 51-vote reconciliation process, and it will satisfy an angry party seeking the fastest, most defensible path to restoring the Affordable Care Act’s coverage gains.

A few thoughts:

1. If a Medicaid income-adjusted buy-in were offered only to nonelderly who lack access to employer-sponsored insurance or other government programs, it shouldn't require more funding than the ACA marketplace. OTOH, if the AHCA has passed, Democrats will need to replace the revenue provided by the ACA taxes Republicans will have repealed (close to $900 billion over ten years, rather than the $600+ billion Klein cites, if you include revenue from the repealed ACA mandates).

2. If a buy-in were subsequently offered to employers -- perhaps starting with small employers -- that buy-in would amount to a voluntary payroll tax.

Give PriceCare to the not-poor

As I noted last week, Tom Price's 2015 ACA repeal-and-replace bill, dubbed the Empower Patients First Act, is a grossly inadequate offering for the 20-plus million mostly poor and near-poor people who have so far gained health insurance through the Affordable Care Act.  Its limited premium subsidies for shoppers in the individual market, adjusted for age but not income, would leave coverage unaffordable for most of the 9 million subsidized enrollees in the ACA marketplace. Worse, by repealing the ACA's Medicaid expansion, it would un-insure virtually all of the roughly 12 million who have gained coverage through the ACA's expansion of eligibility.

Price's EPFA does, however, provide significant aid to those who earn too much to qualify for ACA marketplace credits -- which includes some younger buyers with incomes as low as 250% FPL and a considerable number in the 300-400% FPL range. Insurance seekers who are subsidy-ineligible (or close to it) but not wealthy fare worst under the ACA, as the Urban Institute's Linda Blumberg and John Holahan have highlighted:

Price's subsidies would cover, on average, about 40% of the premium for the average benchmark silver plan offered in the ACA marketplace, and a higher percentage of the premium for the skimpier plans that would be on offer in the deregulated individual market his replacement bill would create. Coupled with an HSA, and possibly with full tax deductibility for any plan purchased in the individual market (as Trump's campaign website proposed), and with continuous coverage protection, it's a program that could work for the modestly affluent (at least, with some compromise preserving essential health benefits as a broad outline while giving states more autonomy to flesh them out).

The public option is inside out

The public option is back in the ether, though it's hard to see a path by which it may walk this earth. Hillary Clinton has reiterated her verbal support for it as part of her package of Bernie mollifications. Obama has also floated a kind of public option ghost, to haunt only those ACA markets where competition is scarce. Democratic yearning is in high gear.

The public option is designed to mitigate the fact that a private, subsidized insurance marketplace expands the very sector of our healthcare system that pays healthcare providers the highest rates. While a "strong" public option would pay Medicare rates, private insurers typically pay probably more than 150% of that, at least in the employer-sponsored market (many do pay less, some much less, in the ACA marketplace).

Insurers understandably don't like a public option because it would put them up against a competitor that pays less for the care they retail than they typically do. That would seem, in many ACA markets, an impossible task. Competition can't force insurers to charge lower premiums when premium revenue is less than medical payments, as it is in some ACA markets.  Competition is great if it pushes insurers' medical loss ratios from 80% to 85%; it's futile if it pushes them from 87% to 92% or 102% or 120%.

Thus a public option is pushing on a string -- or at best, pushing insurers toward ever narrower networks.

Perhaps what's needed is for the government to set affordable rates, or take bids within a given rate range, and invite the insurers to compete on that basis. That's how Medicare Advantage works, and also how Medicaid managed care programs work, with some important differences in how bidding is structured.

What would it cost a state to offer something like Medicaid to all its uninsured?

At healthinsurance.org, I look back at a state-wide proposal to create what I've called an "all-public option" for the ACA -- that is, an exchange in which all the insurers operate like Medicaid managed care companies, paid directly  by government. Here I want to outline a few factors involved in funding such a plan.

Here's the basics from the healthinsurance.org post:

In November 2009, before the ACA was passed, a New York nonprofit, Community Service Society, produced a plan for the state that would have done just that -- and then some, as it would have given employers the option of buying in. (In 2013, CSS produced a plan outline and cost estimate for the state's BHP that did a good job scoping out the costs and target population as it actually played out, )

Authored by  Elisabeth Benjamin, CSS's VP of health initiatives, and Arianna Garza, the Cornerstone for Coverage Plan  would have used New York Child Health Plus plan (CHP), which was the prototype for the national Children's Health Insurance Program, as the building block of a low-cost public program available not only to the uninsured but to the underinsured. Here is the core proposition:

CMS Open Enrollment error in New York (updated, with CMS correction)

[Update 2/11/16: CMS has made  a correction -- see below.]

CMS's ACA enrollment snapshot for the final week of Open Enrollment 2016 contains an error, bolded below:

It is also worth noting that nearly 400,000 people signed up for New York’s new Basic Health Program, along with about 33,000 people who signed up for Minnesota’s Basic Health Program, during this Open Enrollment. Basic Health Programs are state based programs supported by the Affordable Care Act that provide health insurance coverage to low income individuals who would generally otherwise be eligible for qualified health plans [QHPs]. In fact, about 300,000 of the New York Basic Health Program enrollees for 2016 are people who enrolled in Marketplace coverage for 2015 and were included in last year’s Marketplace total plan selections.

Enrollees in New York's Essential Plan, the BHP formed under the auspices of  the ACA, come from two pools. The first is those who lack access to employer-sponsored plans and have incomes between 139% and 200% of the Federal Poverty Level (FPL). If the Essential Plan did not exist, these people would be eligible for subsidized QHPs in New York's private marketplace. Some of them were in fact enrolled in QHPs in 2015, but not 300,000.