Basic’s Problems Highlight Importance of Health Care Reform Act
The Department of Health Services (DHS)
announced Friday that it has frozen enrollment for the BadgerCare Basic program, effective on March 18th. The Basic plan was created by DHS to be a non-subsidized option for coverage of childless adults on the waiting list for the BadgerCare Core plan, and it now serves about 5,300 people. In addition to freezing enrollment, the department is increasing premiums to $200 per month, form the current $130.
The increase in premiums is very likely to be the beginning of the end for this experiment in creating an unsubsidized option for low-income childless adults. The problem with the initial plan is that most low-income individuals can’t afford unsubsidized coverage, even for bare bones insurance. Without a subsidy or a mandate that creates a larger pool of people covered, the plan attracts sicker people, and the “adverse selection” pushes up the costs. Increasing the premiums is likely to decrease participation among the healthier enrollees, exacerbating the adverse selection problem, so I doubt that the Basic Plan will survive very long.
The problems with BadgerCare Basic don’t come as a shock, but they highlight the importance of provisions in the federal health care reform act, which was designed to avoid the adverse selection problems. In contrast to the Basic Plan, it provides Medicaid subsidized coverage to childless adults with incomes up to 133 percent of the poverty level, and creates large health insurance exchanges that will help adults between 133 and 400 percent of the poverty level obtain partially subsidized coverage. In addition, the insurance mandate mitigates the adverse selection problem. Nevertheless, the new exchanges will need to be designed carefully to ensure that they offer affordable plans and a sustainable model.
DHS Secretary Dennis Smith commented on the department’s action relating to BadgerCare Basic: “It is unfortunate that we need to take this step. We will maintain coverage for those currently on the program and help new applicants find alternative coverage… In order to prevent a cost shift to the state taxpayers we must suspend enrollment and increase premiums.”
According to the
DHS press release, the Basic program has taken in $4.18 million in premium revenue and paid out $5.83 million in claims since it began in July 2010. The DHS release says those figures understate the deficit because “claims often lag for up to three months, meaning the program is likely in even worse fiscal position than the numbers show.” The release adds that “once all the claims are submitted, BadgerCare Basic may have already accrued a deficit in the range of $5.7 million.” Last year the department set aside more than $1 million in federal grant funding that was intended to be used as a “cushion” for BadgerCare Basic, and that has been completely expended.
The department anticipates making a final determination on premium increases in the coming months. In the meantime, DHS is urging uninsured childless adults to explore the following alternatives
- Individual plans in the private market
- State Health Insurance Risk-Sharing Plan (HIRSP)
- Federal Temporary High Risk Insurance Pool. To be in the federal high risk pool, you must be uninsured for six months
- Consolidated Omnibus Budget Reconciliation Act (COBRA).
- Health Coverage Tax Credit
Go to dhs.wisconsin.gov/badgercareplus/basic/options.htm for more information about these and other programs.
Jon Peacock
