A new rule proposed by the Trump Administration could result in drastic cuts to New York’s Essential Plan, which covers almost 800,000 people. The rule was published on April 2 and comments are due by 5PM today (comments can be posted electronically here). You can read HCFANY’s comments here.
The Essential Plan is an option for states that was created in the Affordable Care Act (in Section 1331, where it is called the Basic Health Program). The program provides an option for people with low-incomes who are not eligible for Medicaid. This could be because of income – for adults, Medicaid is only available in New York up to 138 percent of the federal poverty line. Or it could be because of immigration status. Many lawfully-present non-citizens are not allowed to enroll in Medicaid regardless of income. The Basic Health Program statute provided a way for states to cover those residents.
The program is available to people who earn up to 200 percent of the federal poverty level (about $25,000 for an individual). The federal government funds the program by calculating the amount of assistance (tax credits and cost-sharing reductions) those enrollees would have received if they purchased their own health insurance on the Marketplace. It would be difficult for people who earn less than $25,000 to afford those plans – so New York decided to take that funding and provide a public plan for them. The funding is only 95 percent of what those enrollees would have received, but administrative costs are lower in public plans than in private plans. New York knew it could provide robust coverage for less money, and the program has been wildly successful.
Republicans had targeted the cost-sharing reductions (payments to insurers to reduce enrollees deductibles and co-payments) long before the Trump Administration took office. They succeeded in a lawsuit that resulted in the de-funding of the cost-sharing reductions – in part because the Trump Administration refused to fight in court. So one of the Administration’s arguments is that the cost-sharing reduction part of the formula is now zero. The Administration’s other major argument is that more people than ever are enrolling in Bronze plans, which would mean the tax credit part of the formula should also be lower. Tax credit amounts are tied to silver-level plan premiums, so when silver-level premiums go up (as they did in response to the loss of CSR funding), the tax credits go up. If you use the tax credits to buy a Bronze plan and your tax credit is worth more than the plan’s premium, you save the government money (and give yourself less financial coverage).
There are lots of arguments against both of these ideas. First, individuals are still benefitting from the CSRs because insurers are required to give them to members by the ACA. The federal government may fail to fund those payments, but there is still a value attached. HCFANY argues in our comments that the Administration cannot stop taking account of that value without changing the ACA. And though it has tried, it has failed!
Another argument is that in New York very few people purchase Bronze plans. Bronze plans might look like a good deal because they have lower premiums. But they also have higher deductibles. In New York we have great consumer assistance programs that educate people about those trade-offs. The result is that before we had the Essential Plan, fewer than one percent of people in that income group choose Bronze! If the Administration was truly trying to adjust funding to account for people enrolled in Bronze plans and not just trying to give New York a big funding cut, the impact would be very, very small.