Another Opponent of Obamacare Starts to Soften

The following originally appeared at The Upshot on May 15, 2014 (copyright 2014, The New York Times Company).

Another die-hard opponent of the Affordable Care Act may be finding a way to expand Medicaid. Few have stood as firm against Obamacare as Gov. Mike Pence of Indiana, but on Thursday he announced a new proposal that would accept federal funds for increased coverage of low-income state residents — though by giving them access to private insurance plans rather than standard Medicaid.

Mr. Pence now joins conservative leaders of Arkansas, Michigan, Pennsylvania and Utah who have recently found or are trying to find ways to “get to yes” with the federal government on this issue. If Mr. Pence can find a way, it’s likely some of the 23 holdout states will eventually follow.

This is significant, because since the Supreme Court made the Medicaid expansion optional for states in 2012, many states have refused to expand the program. This has left about 5 million people nationwide in a coverage gap, where they are too poor to qualify for exchange subsidies to purchase private insurance, and ineligible for Medicaid as it currently exists. Expanding Medicaid in some way is really the only option for their getting insured, and this proposal gets them much closer to that place.

Mr. Pence proposed an expansion of the Healthy Indiana Plan (HIP), a Medicaid alternative that was created in 2007 by a waiver from the Bush administration. It provided coverage to adults in Indiana who earned less than 200 percent of the poverty line. This was important, as parents are eligible for Medicaid only if they earn less than 24 percent of the federal poverty line, or about $5,700 for a family of four. Adults without children are not eligible for Medicaid at all.

HIP was novel in its reliance on health savings accounts. All participants had to contribute between 2 percent and 5 percent of their income to a special account each month, and the state then topped it up to $1,100 each year. This money was used to pay for most nonpreventive health care; most preventive care was free. If participants exhausted their account, they would be covered by a private health insurance plan.

Mr. Pence has long wanted to use HIP as a vehicle to expand coverage for the poor of his state. The federal government has so far refused because it doesn’t meet the standard requirements for Medicaid. It has both annual and lifetime limits, meaning that coverage can run out over time. It has no maternity benefits, either, let alone the many preventive care benefits the Affordable Care Act mandates. And, it requires people to put money in the health savings accounts or risk losing coverage.

But without an expansion, many in Indiana would be left uninsured this year. More than 800,000 in the state were uninsured before the ACA was rolled out. About 375,000 of them would probably newly qualify for this program.

Governor Pence’s proposal, HIP 2.0, compromises by creating three options. The first, HIP Link, would provide premium assistance to low-income people who have access to employer-based insurance but cannot afford it. Option two, HIP Basic, will be more like HIP, but be available with no contribution to premiums to those earning below the poverty line. HIP Plus will include dental and vision coverage, and it will require monthly contributions between $3 and $25, depending on income, to a health savings account.

Indiana now needs to allow a period of public hearings in the state. It also needs to get buy-in from local legislators for the plan. But federal approval seems likely. A spokeswoman for the Department of Health and Human Services, Emma Sandoe, said in a statement, “We are encouraged by Indiana and Governor Pence’s commitment to helping cover more of the state’s uninsured population through the Healthy Indiana program and look forward to seeing his proposal.”

And the department has already approved plans like Michigan’s, which is not too different from this one. It also requires beneficiaries who earn between 100 percent and 133 percent of the poverty line to pay 2 percent of their income to a health savings account and limits cost-sharing to no more than 5 percent of income.

Mr. Pence hopes to submit his proposal by the end of June. If approved, many uninsured people in Indiana would see their prospects improve if they became eligible for insurance. Hospitals and providers would probably see their numbers of Medicaid covered patients go up and uninsured patients go down. Indiana’s state government would get to hold true to its belief that private insurance and health savings accounts are the best way to expand coverage. Finally, the Obama administration would get to achieve its goal of fully activating the ACA in another state.

The one caveat here is that it’s possible that expansion of insurance through HIP could be more expensive than expansion through traditional Medicaid, perhaps more than 40 percent more, according to past reports from the state’s own actuary. It’s unclear whether that’s still the case. Either way, it seems that all involved may be willing to pay that price to move forward.


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