Tucked into the Affordable Health Care Act signed into law last year by President Obama was a little-known but potentially significant option for states that allows the offering of basic health plans – quality coverage for as little as $30 per month – to low-income families and legal immigrants.
The basic health program would be run by the state government but financed by the federal government. It is targeted at low-income working adults who have incomes just above Medicaid levels ($15,000 to $21,800) as well as legal immigrants who are not eligible for Medicaid. These Medicaid-like plans would be an affordable alternative to buying federally-mandated insurance from the “Exchange” – the new marketplace of plans from which uninsured Californians will buy their health insurance coverage.
Senator Ed Hernandez, D-West Covina, has introduced legislation to have California lead the nation in the offering of the basic health program option. His bill, SB 703, passed the Assembly Health Committee last week and faces its next test in the Assembly Appropriations Committee. The legislation is sponsored by Local Health Plans of California, the association of non-profit plans that serve the state’s highest populated counties. It also has broad support from groups including SEIU, Planned Parenthood, and the California Association of Public Hospitals.
Offering basic health plans would be a win-win-win for consumers, the state, and health care providers.
The Basic Health Program would offer consumers lower premiums and co-payments than insurance sold on the Exchange. According to an independent study funded by the California HealthCare Foundation by Mercer, the Basic Health Program premiums would likely be as little as $10-$20 a month.
In addition, the percentage of health care paid for by insurance, instead of the consumer in the form of co-payments and deductibles, is estimated to be significantly lower in the Basic Health Program. The state would contract with health providers for plans that meet essential health benefit requirements.
In California, Mercer assumes that 70 percent of those eligible would buy these plans. These are individuals that will be required by the federal law to buy insurance (“the individual mandate”) but who may have difficulty being able to afford the price of a policy offered by the Exchange, and may have difficulty affording health care because of how much cost-sharing individuals must pay when receiving health care services.
Because premiums and cost-sharing in the Basic Health Program are estimated to be less than in the Exchange, more Californians will be able to pay for insurance and afford access to health care providers, compliance with the individual mandate will increase, and health care providers will have lower, uncompensated care costs.
The Mercer study also concluded that federal subsidies and subscriber premiums would be sufficient to cover the cost of the basic health plan. As a bonus, the study found it would also raise provider payments 20 to 25 percent over current Medi-Cal provider reimbursement rates at no extra cost to the state General Fund. Raising payment rates for the safety-net providers that provide services for the poor and uninsured in California is a priority.
There has been some concern that removing a significant number of Californians out of the Exchange would weaken it. But that’s unlikely, even with those taking advantage of the basic health plan removed from the exchange. Because of California’s sheer size, the Exchange would remain large and strong, with enrollment nearly doubling the size of the existing Healthy Families Program.
Putting a basic health plan into place now – as opposed to waiting years after the Exchange is up and running – would put the state in a strong position to provide health care to a population that needs it the most, and do it on time, since the law takes effect in 2014. It would give providers and the state the time necessary to successfully launch and market the program, secure contracts, and begin providing basic health care to a largely uninsured population.
Passing SB 703 would go a long way in making our state the leader in ensuring that every Californian gets the quality coverage they can afford.