California Health Insurance Exchange: Ramifications of introducing a Basic Health Plan

The UCLA Center of Health Policy Research in collaboration with UC Berkeley Center for Labor Research and Education conducted a simulation for the California Health Insurance Exchange to discern how introducing a Basic Health Plan would impact the state as a whole.

For the uninitiated, a Basic Health Plan (BHP) is a health plan program for the poor state residents that are ineligible for Medicare & Medicaid and fall within the 133%-200% of the Federal Poverty Line income band. Legal foreigners that fall below the 133% of the Federal Poverty Lines will also be eligible for the BHPs. The federal government has given the U.S. States complete autonomy on whether or not they want to offer a BHP model through their state health insurance exchanges.

The California research team identified the following impact:

A) Introducing a BHP would reduce the overall number of uninsured Californians by a significant amount.

B) A Basic Health Program would also reduce the number of participants in the exchanges and is likely to limit the health insurance exchange enrollee numbers to somewhere between 720,000 and 950,000. This may have an adverse impact on the exchanges’ primary goal to rein in the healthcare costs as the administrative costs per policy will rise.

C) The simulation assumed a $20 premium amount per person per month in the Basic Health Plan. A higher premium figure is likely to reduce the number of enrollments in the BHPs and in turn reduce the gains in coverage. A lower premium on the other hand would increase the number of enrollments in the BHPs

D) Introduction of a Basic Health Plan model will not have any undesirable impact on the overall risk mix in the individual and health insurance exchange markets.

With not many foreseen risks, BHPs may be considered by states for introducing in the health insurance exchanges.