A network of doctors, community hospitals and public health plans is proposing a new, low-cost health plan for some of California’s low-income residents.
But a state agency created to implement the federal health reform law is opposing the idea, saying the low-cost plan would undercut efforts to create a new insurance exchange from which millions of Californians will begin buying their coverage in 2014.
Senate Bill 703 would establish a “Basic Health Program” aimed at serving over 720,000 working adults in California, whose income is between 133 percent and 200 percent of the Federal poverty level: $15,000 to 21,800 a year. The program would also serve legal immigrants who are not eligible for Medicaid.
Those are people the Health Benefits Exchange Board was counting on as potential enrollees in their program. The Exchange board recently came out in opposition to the bill, asking to postpone a vote until next year.
“The Basic Health Program could remove up to 70 percent of the people who are eligible for subsidies and generally healthy from the Exchange,” said Patricia Powers, Acting Administrative Officer for the California Health Benefit Exchange. “This diminishes the Exchange’s purchasing power and efficiencies to be gained from economies of scale. It may result in a less healthy remaining population overall.”
However, many people will not be able to afford insurance through the Exchange and without the Basic Health Program will opt out of the system completely, said Tim Valderrama, spokesman for author of the bill Ed Hernandez (D – Senate District 24).
“While the Basic Health Program removes lives from the Exchange, California will still have either the largest or one of the largest exchange populations in the country,” he said. “If exchanges at all will work, California’s will be large enough even with this population removed.”
The Basic Health Program will cost a person roughly 30 dollars a month, according to two independent studies by Mercer and the Urban Institute. Estimates run from 150 to 200 dollars a month for insurance offered to the same population through the Health Exchange, which has been designed to offer products from commercial insurance companies.
The Basic Health Plan would be able to offer significantly lower rates because it would contract with California’s network of community hospitals, doctors, and public health plans, which accept Medicaid reimbursements rates, said John Raimey, Executive Director of Local Health Plans of California, a lobby group representing non-profit health insurance providers.
“Low income working people is the population we serve,” he said. “Our health plans are well acquainted with what their capacity for buying health insurance is and how much disposable income they have. Plus our provider networks are where these folks go to access coverage.”
There has been talk of trying to fuse the Exchange and the Basic Health Program, but specifics are still unclear. Powers said shifting SB 703 to a two-year bill would allow time to better evaluate ways to address affordability and choice for people who qualify for the program.
“We need to examine alternatives such as an Exchange-based BHP that offers choices of public and commercial health plans, she said. “We need to think about optimum ways to assist people so that when their income fluctuates they do not have to change health plans or doctors. Especially because initial analyses show that people eligible for the BHP experience high income fluctuations and will be moving in and out of the program.”
The benefit terms of state-run health plans, created under last year’s health care overhaul, have yet to be defined by the federal government. The Basic Health Program is optional for states and would receive Federal reimbursements rates similar to the Exchange.
SB 703 has been passed out of the Senate and is currently in the Assembly Appropriations Committee.