A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation explores the issues surrounding the Basic Health Program, an option that states have under the Affordable Care Act to offer health insurance coverage for people whose family incomes are too high to qualify for Medicaid but fall below 200 percent of the federal poverty level.

This program would allow states to offer an alternative form of coverage that could cushion the effects of “churning”–that is, having a situation in which individuals’ and families’ incomes fluctuate, and they end up moving back and forth between Medicaid coverage and eligibility to purchase more costly private health insurance available through new state health insurance exchanges.

This policy brief explores the issues surrounding the Basic Health Program and outlines options for states going forward. Topics covered in the brief include

  • What’s in the law? The Affordable Care Act allows states that elect to set up a Basic Health Program to contract with one or more managed care plans or other organizations to offer coverage. To qualify for the Basic Health Program, residents must be under age 65, cannot be eligible for Medicaid, and cannot be offered employer-sponsored coverage that is considered affordable (that is, costing no more than 9.5 percent of household income).To fund the Basic Health Program, the federal government would give a state 95 percent of the federal premium tax credits and cost-sharing subsidies that would have been spent on individuals had they been enrolled in a plan through a state exchange.
  • What are the issues? States considering a Basic Health Program have a number of issues to contemplate. There are varying estimates about how much these programs would reduce churning, with some suggesting that the reduction could be as low as 4 percentage points, and others suggest a 16 percent reduction.On one hand, a Basic Health Program might reduce a state’s costs, but there is also potential financial risk for the states, as the brief describes. Additionally, the existence of a Basic Health Program could mean that fewer people would receive coverage through a state’s exchange, possibly threatening the overall viability of that exchange.
  • What’s next? Currently, only a few states–Washington, Massachusetts and California–are taking steps to implement a Basic Health Program. Other states appear to be awaiting further clarification from the federal government about how the program will operate–and also contemplating a related issue, which is whether or not they will proceed to expand their Medicaid programs along the lines that the Affordable Care Act allows.

About Health Policy Briefs. The Briefs are aimed at policy makers, congressional staffers, and others who need short, jargon-free explanations of health policy basics. The Briefs, which are reviewed by experts in the field, include competing arguments on policy proposals and the relevant research supporting each perspective

Previous policy briefs have addressed:

  • Nurse Practitioners And Primary Care. Federal and state laws and other policies limit how these professionals can help meet the growing need for primary care.
  • Pay for Performance: New payment systems reward doctors and hospitals for improving the quality of care, but studies to date show mixed results.
  • The Supreme Court and Health Reform. The future of federal-state programs is more uncertain now that the high court has limited the expansion of Medicaid.

You can sign up for e-mail alerts about upcoming briefs. The briefs are also available from the RWJF’s Web site. Please feel free to forward to any of your colleagues who are tracking health issues. And after you’ve taken a look, we would welcome your feedback at hpbrief@healthaffairs.org.