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Basic Health Plan in California?

Senate Bill 703 (Hernandez) would establish a Basic Health Plan (BHP) in California.

Background

In addition to an expanding Medi-Cal eligibility and establishing health benefit exchanges, the Affordable Care Act (ACA) provides an option for states to establish a BHP, a separate program for persons with incomes between 134% – 200%. Those eligible for the BHP would not eligible to participate in the Exchange.

Section 1331 of the ACA, the section that outlines the structure of the BHP, requires the BHP be less costly to participants than coverage in the Exchange. In the Exchange, at the silver precious metal category, the consumer’s payment level is 30% of the cost of the coverage. In the BHP, the participant cost is 10% of the cost of coverage for lower income persons and 20% for higher income participants.

Under the BHP, the federal government would cover costs up to 95% of the cost of coverage in the Exchange. Premium rates and provider compensation would be at levels that would incur costs below this 95% of Exchange threshold to prevent state costs. The ACA also requires that there be competition between health plans participating in the program.

For more background on the BHP, see this backgrounder by Jeremy Palmer, this backgrounder by Stan Dorn, and listen to this one-hour presentation.

Pro’s & Con’s

Supporters of SB 703 feel that the BHP could be good for California because it may achieve (a) lower costs for consumers than coverage in the Exchange, (b) state savings because the BHP would pay plans something between Medi-Cal and Exchange rates, and (c) better reimbursement rates for providers. Additionally, some people currently on and/or eligible for Medi-Cal (the “spend down” and pregnant women populations) could be shifted to the BHP and receive a potentially better benefit.

Those skeptical of the plan have the following reservations:

  • Putting into the BHP 800,000 – 1,00,000 people that would otherwise go into of the Exchange would weaken the legitimacy of the Exchange;
  • If this population is removed from the Exchange and put in the BHP, it might negatively affect the Exchange’s risk pool; and
  • California should take advantage of this ACA-implementation moment to simplify and streamline the number and operations of health programs; we should not adding new programs and increasing complexity.

Current Status

SB 703 has passed out of the Senate Health Committee and is scheduled for hearing before the Senate Appropriations Committee on May 23rd.

The California HealthCare Foundation is currently working with Mercer Consulting to conduct the financial modeling and verify whether and to what extent the BHP would achieve savings for the state, consumers or both. That report is expected to be released around May 12.

Stay tuned…