A group of volunteer advisors to the Oregon Health Authority has voted Tuesday to make the state the third in the nation to seek federal approval for a basic health program.
It’s an option, established in the Affordable Care Act, that allows states to provide insurance directly to some people who make a little too much money to qualify for Medicaid.
The Oregon Health Policy Board voted unanimously to approve Oregon’s blueprint application. It was the last step in a lengthy policy-making process needed for state approval of the plan after a task force last year recommended moving forward with it.
It’s the latest in a series of incremental steps policymakers have taken that move the state in the direction of universal health coverage, including allowing all children in Oregon who qualify for Medicaid to stay enrolled without annual re-evaluations until their 6th birthday, allowing adults to stay enrolled for two years at a time, and extending coverage to undocumented youths and adults.
The basic health program, set to launch July 2024, will cover people who earn 138% to 200% of the federal poverty level.
In Oregon, about 100,000 people will qualify, the state health authority estimates.
The basic health plan, or BHP, will provide services that are essentially identical to the Oregon Health Plan, the state’s version of Medicaid: free health care, with no copays, administered by Coordinated Care Organizations.
The BHP will not, however, expand the population of people in Oregon who qualify for long term services, including publicly funded nursing home care. Eligibility for those programs is more complex and is based on a person’s assets as well as income.
“I think we have a strong, thoughtful plan that will lead to better health, better care and lower cost,” said interim OHA director Dave Baden prior to the vote.
How it works
The Affordable Care Act gave states the option to establish a basic health program to provide more affordable coverage for low-income residents and to deal with the problem of “churn,” people whose income fluctuates above and below Medicaid eligibility levels.
In theory, people who earn too much to qualify for Medicaid can get federal tax credits to purchase insurance from the federal marketplace. In practice, many end up uninsured, bouncing on and off Medicaid.
It’s a particular problem for low-wage workers whose hours and earnings aren’t consistent.
In Oregon, for example, up to a third of people enrolling in Medicaid are not new enrollees, but people who were returning to the program after less than a year, according to OHA.
New York and Minnesota were the first two states to offer basic health programs. Unlike Oregon’s proposal, their programs generate some revenue through co-pays and some degree of cost sharing.
OHA: Plan requires minimal state dollars
Oregon Health Authority officials believe that they will be able to fund the BHP almost exclusively with federal dollars.
While Oregon provides 40% of the funding for the state’s Medicaid program and the federal government kicks in 60%, the Health Authority claims the BHP will be more than 99% federally funded.
The federal government gives states with BHPs funding based on a different formula.
The federal government calculates how much it would be spending on tax credits and subsidizing private insurance for the people who are instead moving over to the BHP. It then gives states with BHP’s 95% of that amount.
The state’s 2023-25 budget anticipates up to $533.5 million in federal funding from those diverted tax credits for the BHP trust fund.
Oregon will need to contribute $1 million in ongoing funding for two program costs that aren’t allowable under federal rules: $800,000 for administrative costs at OHA, and $200,000 to provide abortion care that is a required benefit under state law but barred from federal funding by the Hyde Amendment.
State officials initially feared the Centers for Medicare and Medicaid Services would not allow federal BHP dollars to cover behavioral health treatment, which Oregon bills for separately from other Medicaid services. That would have added considerably to the BHP’s state funding requirement. But the federal government recently affirmed Oregon can use federal dollars for behavioral health treatment that coordinated care organizations bill for separately.
How much the program costs the state could look different year-to-year, as federal funding for the program is pegged to the value of marketplace tax credits and can rise or fall in response to changes in premiums in the marketplace.
Without additional state revenue or revenue from copays, the program will not have enough money to pay providers higher rates than Medicaid, a target the legislature included when it first authorized the BHP.
Some insurance will cost more
Launching the program also comes with a significant trade off. It’s going to shift thousands of people — and millions in federal funding - out of the state’s individual marketplace.
That will drive up monthly payments for some people who earn too much to qualify for the basic health plan and buy marketplace insurance.
This effect will happen, perversely, because insurance companies will start spending less on a deeply discounted type of plan they’ve been required to offer to low-income people shopping in the marketplace. That will lead them to cut premiums for silver plans. That sounds good, but the federal government pegs the value of its subsidies to the cost of a silver plan, so the net result is shrinking subsidies and a higher monthly cost for many consumers.
The Oregon Health Authority has yet to identify any viable strategy for mitigating those premium increases. A spokesperson for Gov. Tina Kotek didn’t answer whether the governor supports a state funded subsidy to make up the difference.
A short timeline
The logistics of the basic health plan launch are also exceptionally complex and time-sensitive.
Oregon is currently keeping about 55,000 people who will qualify for the BHP enrolled in Medicaid through a temporary Medicaid expansion.
If the BHP doesn’t launch on time next July, those people will get kicked off Medicaid — or the Oregon Health Authority will need to find a lot more state dollars to keep them enrolled.
At the same time, when the BHP launches, the state is required to open it up to anyone who qualifies based on their income.
That means state health officials and their federal colleagues will have to prepare to migrate tens of thousands of people from the federally run healthcare.gov exchange site into Oregon’s benefits system, and assign them to coordinated care organizations.
The state and the Centers for Medicare and Medicaid Services have spent months negotiating how that transition will work.
The state legislation, HB 4035, that originally authorized the BHP stated that it must allow participants to choose to opt out of the program and keep their private insurance.
That, however, conflicts with the federal rules of the program. People found eligible for a BHP no longer qualify for tax credits on the exchange.
According to the Oregon Health Authority, some people currently enrolled in marketplace plans who do not wish to migrate to the BHP next year will be able to remain in those plans and continue to qualify for tax credits for a year or two if they use the healthcare.gov autoenrollment function.
However, people found eligible for the BHP will no longer qualify for the federal tax credits that make individual plans on the exchange more affordable.
That means in future years, anyone from Oregon making between 138% and 200% of the federal poverty level who actively participates in the open enrollment process on healthcare.gov will lose the ability to choose a subsidized plan on the federal exchange.