The state Senate’s approval of a plan to provide low-cost health insurance for low-income Californians sets the stage for a significant part of health care reform to take shape. But with many policy pieces still in flux and a budget still in limbo, the move to create a basic health plan raises almost as many questions as it answers.
The Affordable Care Act includes a provision that allows states to create low-cost coverage — called “Basic Health Plans” — for residents who can’t afford health insurance on the open market but who don’t qualify for Medi-Cal, California’s Medicaid plan.
Earlier this month, the state Senate passed SB 703, by Sen. Ed Hernandez (D-West Covina),Â which aims to offer coverage for as many as 829,000 Californians. Federal subsidies would pay for about 95% of the coverage, and beneficiaries would contribute the remaining 5%. Premiums could be as low as $30 per month.
The legislation is now before the Assembly, but its path is anything but clear. So far, the idea of a basic plan has encountered little active opposition in California, but that may change. In addition, the plan’s home in state bureaucracy is uncertain.
“There are several things still in motion that could have a bearing on what happens next,” said John Ramey, executive director of Local Health Plans of California, sponsor of the bill.
“So far the only opposition has been from those who are against anything having to do with reform, but I expect that to change. I do think it will probably pick up some active opposition based on how folks analyze the numbers — insurers and/or providers,” Ramey said.
“And we really don’t know yet how the exchange is going to react,”Â Ramey added. “The ultimate goal of the exchange is to get as many people covered as possible, and the basic plan would be a tremendous boost toward that goal. We’ll see what happens,” Ramey said.
Among the most pressing questions facing the basic plan:
- The bill calls for the basic plan to be administered by MRMIB — the Managed Risk Medical Insurance Board — which is slated to be eliminated under Gov. Jerry Brown’s (D) budget proposal. What happens to the basic plan if MRMIB dissolves?
- Although the bill is envisioned as an alternative to offerings in California’s new health benefit exchange, there is a possibility the new exchange could take the basic plan under its wing — once it has wings. Will the plan remain a separate option or will it eventually be offered through the new state exchange?
- Will the bill spark active opposition? How much and from whom?
- Will the bill survive in the Assembly without significant changes?
- How will Brown react?
Although tactical and practical questions confront the plan, financial questions are not an issue, so far. The plan is billed as having no effect on the state’s general fund because it’s paid for through the Affordable Care Act. And according to estimates, the basic plan could pay health care providers more than standard Medi-Cal reimbursements.
A report released last month by Mercer Health & Benefits concluded that the state would be able to offer a basic plan that would pay health care providers 20% to 25% higher than current Medi-Cal reimbursement rates.
The Mercer report, “Exploring the Financial Feasibility of a Basic Health Program in California,” was commissioned by the California HealthCare Foundation, which publishes California Healthline.
Who and How Many Would Be Covered
According to estimates from the UCLA Center for Health Policy Research, as many as 829,000 Californians could be eligible for coverage under a basic health plan.
To qualify, residents must be younger than age 65 and be either:
- A citizen with an annual income between 133% and 200% of the federal poverty level; or
- A documented immigrant with an annual income up to 133% of the federal poverty level who is ineligible for Medi-Cal because of immigration status.
Although the plan is designed to provide coverage for a vulnerable population, it is still rooted in the insurance marketplace, Ramey points out.
“Like all the rest of national health care reform, this is very much based in the competitive environment for health plans and provider networks. There is perhaps a way for government to spend the same amount of resources that might be spent in the open marketplace and change the expenditure to benefit low-income residents, but this is still competitive economics,” Ramey said.
Ramey — a consultant in former Gov. Arnold Schwarzenegger’s (R) unsuccessful attempt to reform California’s health care system five years ago, and MRMIB’s first executive director in 1990 –Â said the basic health plan’s potential to provide affordable coverage for low-income residents coupled with enhanced reimbursements for health care providers make it an appealing option for policymakers.
“It’s pretty exciting to see the potential for programs like this, but until a bunch of these questions get dealt with, that’s all it is — potential,” Ramey said.