Health reform choice: For those just above Medicaid limit, private insurance or a state-run plan?

Advocates for low-income residents want the state to create a new health program for poor adults who don’t get Medicaid coverage, and they say legislators must commit to doing so this year to make it work as part of federal health reform.

“We should take this opportunity and we need to take it now,” Jane McNichol, executive director of the Legal Assistance Resource Center of Connecticut, told legislators, advocates and members of the board that oversees the state’s health insurance exchange Tuesday.

Katharine London

Katharine London

McNichol said the plan, an option available to states under federal health reform, could provide affordable health care coverage to 75,000 to 95,000 low-income residents and, if structured right, be affordable for the state.

Supporters of the option, known as the basic health program, include Rep. Peter Tercyak, D-New Britain, co-chairman of the legislature’s Human Services Committee, who said getting it passed this session is his top priority.

But others say policymakers need more information before making a decision and should not rush into a commitment.

“Conceptually, I think the basic health plan is an excellent idea,” said Jeannette DeJesús, special adviser to the governor for health reform. “I would proceed with an abundance of caution.”

A similar effort failed to pass last year, and critics took issue with its potential cost. Health care providers also raised concerns about the idea of covering more people through a government insurance program rather than private insurance, which tends to pay more.

The options

Under federal health reform, every state will have to provide Medicaid coverage to adults earning up to 133 percent of the poverty level, starting in 2014.

For people earning just above that level, states have two options.

One is to have them buy coverage through the health insurance exchange, a state-based marketplace that is expected to sell mostly private insurance plans. People just above the Medicaid threshold would get federal subsidies to help cover their costs.

Alternatively, the state could create a basic health program to cover people earning between 133 percent and 200 percent of the poverty level, who then wouldn’t be eligible for the exchange. The federal government would give the state 95 percent of what it would have spent on subsidies for those adults to buy coverage.

Effectively, it’s a choice between using private coverage or a state-run plan.

The fiscal impact of a basic health program will depend on factors that include how much it costs to cover the people who qualify, how much the federal government pays the state, how the state designs the benefits package and how much it pays health care providers, according to consultants from the Center for Health Law and Economics at UMass Medical School, who analyzed the option on behalf of the Legal Assistance Resource Center. Their work was funded by the Connecticut Health Foundation.

Based on multiple projections, consultants Katharine London and Robert Seifert estimated that the basic health plan would cost the state between $3,500 and $7,400 per member, while the state would collect between $5,200 and $7,800 per member in revenue.

Previous estimates have varied considerably. Last year, the legislature’s nonpartisan Office of Fiscal Analysis projected that a basic health program would cost hundreds of millions of dollars more to run than the federal government would pay. An analysis performed on behalf of the backers of SustiNet, a proposed state-run insurance plan that included a basic health program, projected that the state would save money because the federal payments would exceed the cost of coverage.

Maintaining coverage

One key concern for advocates supporting the plan is how adults currently covered by HUSKY, the state’s Medicaid program, will fare under health reform. The state covers children and their parents earning up to 185 percent of the poverty level, and gets reimbursed by the federal government for half of the costs. Nothing in the federal reform law prevents the state from maintaining that coverage, but advocates fear that the state won’t keep footing the bill when those adults gain coverage options through the exchange that cost the state nothing but would require premiums and copayments from members.

“The advocates who are working on this want to really emphasize that one of the goals needs to be to make sure that people who are currently in Medicaid don’t lose anything in the transition to federal health care reform,” McNichol said. “The point of federal health care reform was not to get HUSKY parents to lose coverage.”

One benefit of a basic health program would be to make things simpler for adults whose incomes fluctuate above and below the Medicaid limit, Seifert said. Without a basic health program, they would have to choose an insurance plan on the exchange, potentially find a new doctor and face out-of-pocket costs whenever their incomes rise above 133 percent of the poverty level, he said. By contrast, if the state creates a basic health program that mimics Medicaid’s benefits and provider networks, those adults could move between it and Medicaid more seamlessly, without disrupting their access to medical care.

That could also save the state from the administrative expenses of moving people on and off state coverage, Seifert said.

Advocates want the basic health plan to mimic Medicaid as much as possible to avoid problems for people whose incomes rise just above the Medicaid limit.

But McNichol acknowledged that would mean health care providers treating basic health program patients would get paid what they get in Medicaid. Those rates tend to be lower than what private insurers pay, and some physicians opt against treating Medicaid patients, leading some patients to struggle to find a doctor who will see them.

The Connecticut Hospital Association has opposed the basic health program, saying it wouldn’t address problems of underfunded payments to providers. The association has suggested it would be better to have the low-income adults get private insurance through the exchange.

Others have questioned the need to decide on the program this legislative session.

London said she and Seifert “would suggest very strongly” that the legislature do so because it will have a significant effect on the exchange, and the board developing the exchange must get federal approval of its plan by next January.

DeJesús said she’d like to see more analysis with concrete examples of how the various options would affect specific cases, and what the cost would be to the state.

“I am more interested in getting to a high-quality, accessible, affordable package of coverage options for people than racing through a legislative session without sufficient information,” she said.

Tercyak said it’s a valid question whether there will be enough information to get a basic health program approved this session.

“If we can get enough information to people to have an understanding of both how this works and what happens if we don’t do this, than this should be a popular plan,” he said.

Keith Stover, a lobbyist for the Connecticut Association of Health Plans, said the group had not formalized its position on the issue, but offered the cautions. Decisions about the exchange should be made based on how policymakers want the exchange to function, not driven by the basic health program, he said. He also cited concerns about reimbursement rates for health care providers.

Rep. John Hetherington, R-New Canaan, who attended the presentation Tuesday, said the concept was “worth a hard look.”

“It is an interesting concept. If we can do something with it to help people at the lower end of the income ladder, why, we probably should do it,” he said.

But he said he wants to know more about the cost and questions of payment for health care providers.