New York modifies BHP expansion waiver to reimburse carriers for premium impact

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 1.1 million New Yorkers, or over 5x as many residents as ACA exchange plans do.

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.

As I've written about several times this year, New York has decided to pursue expanding the population eligible for the Essential Plan up the income scale:

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.

...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.

Today, as Amy Lotven of Inside Health Policy noted at the time, the BHP expansion would impact around 90,000 New Yorkers, including ~20,000 who were previously uninsured. They also plan on automatically transitioning those currently losing Medicaid coverage via the unwinding process over to the program if eligible once it kicks in starting in January...along with current ACA exchange enrollees who are eligible. This would drop New York's ACA exchange enrollment from roughly 210,000 people to just 120,000 or so.

One downside of this proposed plan is that shifting 38% of the total ACA individual market (57% of the on-exchange market) over to the Essential Plan is projected to increase ACA indy market plan premiums by an additional 0.5 - 2.2% on top of the already-steep ~20.7% requested rate increases carriers are already asking for for other reasons:

As far as affordability, the state expects the population that moves from an exchange plan to the Essential Plan will save $4,200 a year or $1.4 billion over the life of the waiver. Premiums for enrollees earning more than 250% of poverty who are ineligible for subsidies or buy off-exchange would increase by about $259 per year or $129 million over the life of the waiver.

Yesterday, Lotven reported that New York State is modifying their waiver request to account for that 0.5 - 2.2% additional rate hike:

New York is amending its 1332 waiver request to mitigate concerns that the state’s aim to expand eligibility for its Essential Health Plan will raise individual market premiums, and it is now planning to reimburse health insurers for setting rates that don’t account for the waiver -- an approach supported by the state’s health plans that encourage CMS to approve the application.

...After looking at options, New York decided to use some of the surplus pass-through money it expects to collect each year to reimburse insurers in lieu of approving higher rates requested due to the waiver.

The Insurer Reimbursement Implementation Plan (IRIF) has several benefits, the state says. First, consumers will not see an increased premium, meaning there is no longer a difference in affordability for consumers that remain in the market and those moving to the BHP, and the drop in individual market coverage is no longer expected. The IRIF will also make insurers whole for the loss of revenue. Finally, the state says, the expected federal spending on tax credits will be lower due to the IRIF, which means the pass-through funding would not need to be offset.

To implement the program, insurers will submit their rate increase requests with and without the waiver. The state will approve the “without waiver” premiums and then reimburse insurers the difference. Although final payments will not be sent until 2025, the state intends to calculate and distribute partial payments to the plans in the first quarter of 2024 based on plan estimates; payments will then be reconciled with actual data and transferred to plans by July 2025. The same process will be used in future years.

Oddly (and ironically) this proposed plan sounds an awful lot like the ACA's original implementation of the Cost Sharing Reduction (CSR) subsidy reimbursement program before the Trump Administration cut off reimbursement payments back in late 2017. Huh.

Meanwhile, I'm still waiting for the final, approved 2024 rate filings for both the New York individual and small group markets.