A seldom-used provision of the Affordable Care Act allows states to create a Basic Health Program (BHP) to replace subsidized coverage on the health insurance Marketplaces for individuals with low incomes. The state receives federal funding in lieu of normal Affordable Care Act subsidies to run the program, with the state covering the remaining cost, if any. To date, New York and Minnesota are the only two states to implement BHPs. Oregon appears to be moving forward with a BHP of its own, and several other states are currently exploring the option.
To help inform this decisionmaking, we examined the BHPs in New York and Minnesota to explore how a BHP might play out in other states. We interviewed stakeholders in Minnesota and New York, specifically state officials, insurers, providers, and consumer advocates, as well as federal officials overseeing the program. We also analyzed BHP rules and operations.
What emerges is a complex picture. On the one hand, both New York and Minnesota’s BHPs have demonstrated success providing comprehensive coverage that is more affordable than Marketplace coverage for individuals in the BHP income range (generally those with incomes up to 200 percent of the federal poverty level). New York’s BHP has accomplished this while accumulating a large surplus of federal funding, while Minnesota’s appears on track—after recent federal regulatory changes—to receive enough federal funding to largely eliminate its state contribution.
Stakeholders in both states reported stable markets with ample insurer participation and generally high satisfaction with the consumer experience. On the other hand, federal funding may not cover the full costs of the program in states with different market conditions. In particular, New York’s surplus may stem in large part from its unique rating rules. And the fiscal calculus, more generally, requires BHP provider reimbursement rates (often based on Medicaid rates) to be significantly below Marketplace rates.
At the same time, implementing a BHP is likely to increase costs for some Marketplace plan enrollees with higher incomes by weakening the impact of “silver loading,” though these effects could be mitigated with state expenditures. A BHP also affects the consumer experience, potentially improving continuity of coverage for consumers losing Medicaid but layering an additional coverage transition between Medicaid and the Marketplace that could increase consumers’ administrative burdens.
In short, both New York and Minnesota’s BHPs have shown success in making coverage affordable and accessible for low-income consumers, but it’s not clear that these experiences are replicable in other states or can be achieved without countervailing costs. Much depends on state-specific factors, including administrative capacity and the difference in provider reimbursement rates between Medicaid and the commercial market. Understanding how these factors may play out in a given state will require careful analysis that considers the state’s specific goals, market conditions, and operational capabilities.