New York: Health Dept. formally submits request to expand Essential Plan to up to 100K more New Yorkers

New York's implementation of the ACA's Basic Health Plan provision (Section 1331 of the law) is called the Essential Plan. It currently serves over eleven times as many people as Minnesota's "MinnesotaCare" program does (around 1.1 million vs. 100K). Part of this is obviously due to New York having a larger population, but that's only part of it (NY has 19.84M residents, just 3.5x higher than MN's 5.71M).

Whenever I write about BHPs I always throw in a simple explainer about what it is, with an assist from Louise Norris:

Under the ACA, most states have expanded Medicaid to people with income up to 138 percent of the poverty level. But people with incomes very close to the Medicaid eligibility cutoff frequently experience changes in income that result in switching from Medicaid to ACA’s qualified health plans (QHPs) and back. This “churning” creates fluctuating healthcare costs and premiums, and increased administrative work for the insureds, the QHP carriers and Medicaid programs.

The out-of-pocket differences between Medicaid and QHPs are significant, even for people with incomes just above the Medicaid eligibility threshold who qualify for cost-sharing subsidies.

The Basic Health Program (BHP) – section 1331 of the ACA — was envisioned as a solution, although most states did not establish a BHP. Under the ACA (aka Obamacare), states have the option to create a Basic Health Program for people with incomes a little above the upper limit for Medicaid eligibility, and for legal immigrants who aren’t eligible for Medicaid because of the five-year waiting period.

In short:

  • If you earn up to 138% FPL, you enroll in Medicaid.
  • If you earn 138 - 200% FPL, you enroll in a Basic Health Plan policy (BHP).
  • If you earn 200% FPL or higher, you enroll in a Qualified Health Plan policy (QHP).

Federal funding for BHP programs is supposed to be equal to 95% of the total amount of advance premium tax credits (APTC) and cost sharing reduction (CSR) assistance that the enrollees would otherwise have been eligible for had they otherwsie enrolled in a QHP using the ACA exchange.

Of course, the state itself can also throw in additional funding to make the BHP plans more generous if they wish...which is a key point to keep in mind. The coverage has to be at least as affordable and at least as good as a benchmark silver plan with Cost-sharing reduction benefits applied.

I don't know how many of New York's "Essential Care" enrollees fall into the "legal immigrant under the 5-year waiting period" category, but my guess is that it's a lot, likely making up the bulk of the disproportionately higher BHP enrollment in the state vs. Minnesota's version.

As I noted back in March, NY's BHP program has a massive funding surplus for a variety of reasons: 

As Bill Hammond reports at Empire Center:

The accumulated surplus of the state-run Essential Plan had ballooned to $9.9 billion by the end of December, putting it on track to break $10 billion before the close of the fiscal year on March 31, according to newly released records from the comptroller’s office.

...Due to a quirk in its funding formula, the program generates far more federal funding than it needs to pay expenses – resulting in an operating surplus that has grown to almost $3 billion per year.

Awesome! New York has an extra $10 billion to play around with, right? Well, not quite:

Federal law bars the state from diverting the money for any other purpose, causing a $9.9 billion cash balance to build up in the program’s trust fund.

Despite this snafu, the Hochul administration is seeking even more federal aid to finance an expansion of the program, which would lift the income eligibility threshold from 200 percent to 250 percent of the poverty level.

If the proposal is approved, the state projects that the program's annual surplus would get half a billion smaller – but the cash balance would continue to mount.

Since the Essential Plan can't really be made any more generous to existing enrollees, that leaves either expanding the program to undocumented immigrants or expanding it up the income scale. The former isn't really feasible, so NY is going the latter route:

Proposed Essential Plan Expansion Will Increase Access to High Quality, Affordable Health Insurance for Low to Middle Income Earners 

ALBANY, N.Y. (May 15, 2023) – The New York State Department of Health today announced it has submitted a proposal to the federal government to expand the Essential Plan, a public health insurance program offered through NY State of Health, the state’s official health plan Marketplace.  The application for a final Section 1332 State Innovation Waiver, which was submitted to the U.S. Departments of Health and Human Services and Treasury, requests that eligibility for the Essential Plan be extended to New Yorkers with incomes between 200 and 250 percent of the Federal Poverty Level (FPL). Presently, eligibility is limited to New Yorkers with incomes up to 200 percent of the FPL who are ineligible for Medicaid. 

The Essential Plan currently covers over one million New Yorkers.  It provides comprehensive benefits with no deductible and minimal cost sharing, for those who qualify. If the waiver application is approved, nearly 100,000 additional New Yorkers are expected to gain access to the Essential Plan. The State’s application submission follows the review of community input submitted during the public comment period from February 9 through March 11. 

“During the Public Health Emergency, federal regulations allowed the state to expand access and lower the cost of health insurance,” Acting State Health Commissioner James McDonald said. “As the PHE ends, we are working tirelessly to maintain coverage options that protect all New Yorkers. This waiver helps uninsured, lower- and moderate-income consumers by ensuring quality health insurance remains in reach for everyone who needs it.”   

“The Marketplace is driven by the commitment to keep New Yorkers healthy, by providing them access to a variety of health insurance plans that will best fit their care needs,” NY State of Health Executive Director Danielle Holahan said. “Under the 1332 Waiver, expanded eligibility for the Essential Plan would help even more consumers afford health insurance, and improve health equity across the state.” 

If approved, the 1332 Waiver will expand upon the existing Essential Plan by providing newly eligible consumers (with incomes between 200 percent and 250 percent of the FPL), health insurance with no deductible and low out-of-pocket costs, for a $15 monthly premium, which is significantly more affordable than what is available to them today.  Current Essential Plan enrollees (with incomes up to 200 percent of FPL) will continue to have no premiums, no deductibles, and current maximum out-of-pocket contribution levels. 

The waiver will have the added benefit of smoothing the affordability “cliff” for many New Yorkers who transition from Medicaid, as the state implements the end of continuous coverage requirements under the Consolidated Appropriations Act. 

The submitted 1332 waiver application is available for review on the Department of Health’s website. 

For individuals with limited online access and/or who require special accommodation, please call (518) 486-9102 to access paper copies. 

Hammond says that even if this goes into effect, the Essential Plan funding surplus would continue (at a slower rate).  The obvious question is why they don't propose raising the threshold even further (275% FPL? 300%?), but there are several reasons why I can see proceeding with caution:

However, the expansion would have ripple effects on the commercial market for direct-purchase coverage – removing a group of younger, healthier people from the risk pool and increasing premiums for those left behind by an estimated 3 percent. The state's application projects that 3,000 people will drop their insurance as a result, leaving a net coverage increase of about 20,000, or about 2 percent of the state's uninsured population.

In effect, the proposal would save additional money for people who already qualify for subsidized coverage while driving up insurance costs for those who buy it on their own.

In addition, there's also the fact that the expanded federal subsidies included in the American Rescue Plan & extended in the Inflation Reduction Act are currently scheduled to end at the end of 2025. While the NY BHP program already had a large surplus prior to the ARP/IRA subsidy expansion, if that expansion isn't extended beyond 2025 the current surplus rate would presumably drop significantly, and there would also be a significant ripple effect on the individual market from that as well.