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Basic Health Program vs. Health Benefit Exchange

The Health Care Reform was launched with the idea of transforming the healthcare scenario in the entire United States, but how far will it actually serve the main purpose is the doubt I have in mind.

The main agenda of the much talked about Health Reform legislation is being able to make healthcare affordable for all the citizens of US as the act typically says "Affordable Care Act". But in the struggle for fulfilling the Reform's motive of care for all the policy makers are making provisions that in a way  contradict each other. The irony is that PPACA's act 1331 talks about establishing Basic Health Program, the implementation of which might lead to be a threat to the its own state established exchanges. BHP and Exchange can cut lines for each other. The ultimate decision with the BHP still awaits but it has the potential of affecting the successful running of Health Benefit Exchange, though both have their own pros and con's.

The Number plays the game here too. The Fundamental concept of Health benefit Exchange's ability to sustain and provide affordable care to consumers is the huge number of enrolees expected to purchase coverage through the Exchange. The entire issue of Basic health program option revolves around the low income exchange eligible population. The target group for BHP being individuals with income between 133% to 200% of FPL, or immigrants not eligible for Medicaid, the enrolees for exchange would fall. According to American Academy of Actuaries, every state has almost 25%-30% of the uninsured with incomes between 100-200% of FPL. Risk pooling in the exchange's individual market might change as its lowest - income members depart, thus affecting the entire concept of the Exchange and questioning its self -sustenance due to smaller risk pool and higher administrative costs.

  • States shall consider opting for the Basic Health Program based on the following:
    BHP dwells on the concept of 'States bargaining power vs Individual buying coverage'  by promising  to offer lower premiums and co-pays compared to exchange and  creating the much needed consumer appeal. It permits the states to provide "Medicaid look-like "or "CHIP " for adults, at lower costs  than exchange.
  • More comprehensive coverage, continuity of care, the concept of 'health homes' for families are some features that might drive the success of BHP. Building BHP on the existing Medicaid /CHIP infrastructure will reduce the administrative costs resulting in potential savings for the state. It also comes with built in public accountability -a feature may or may not exist in Exchange.

On the other hand BHPs' could translate into limited consumer choice due to narrower provider network and less plan options as compared to exchange an can be have capacity issues. Insurance risk profile remains an uncertainty, if all the BHP enrollees are less healthy than the individual markets it comes as a positive implication on the exchange risk pool, higher costs for BHP plan, less attractive market for BHP plan and providers.

Coexistence of both HBE and BHP....

But as a coin has two sides and I too believe that every aspect will have its own move and say.  One perspective is that BHP can be implemented without any affect on the exchange's viability if the approach is well defined.

  • In some states the combined small group and individual markets in Exchange might reach a size that would be less affected by BHP enrollee migration.
  • Joint Exchange with another state can increase the size of the risk pool thus supporting BHP and Exchange Co-existence and reduce the uninsured population in the state.
  • Another option is that the state can offer certain basic health plans within the Exchange, at a slightly lower premium than other commercial plans offered in the exchange. This way it could retain the 133-200% FPL enrollees and can spread the costs over a larger group.  This approach will also ensure continuity of care ensuring no coverage gaps resulting from the income fluctuations. Consumers may also have choice of enrollment into plans based on their priority of either a broader provider network in exchange plans or more affordable coverage through the other basic plans.

Now, when states are facing tremendous budget and administrative constraints to set up exchanges  by 2014, BHP could come up as a more lucrative cost effective option and reduce the number of low income uninsured population. But at the same time Implementation effects of BHP will differ from state to state depending upon the state demographics thus a generalised statement cannot be made against it.

Thus at this phase I feel the Federal government should take a deep note on what should be the way forward for the states. In view of all the perspectives the dilemma: should the states go for BHP or HBE or both -still remains as an important question to ponder upon.

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