Health experts on Pa. plan: Any premium too high for poor

Tens of thousands of low-income Pennsylvanians would pay higher premiums in 2015 under Gov. Corbett's proposed Medicaid expansion than they would in 2014 for similar policies on the Affordable Care Act exchange.

Some health-policy experts are concerned about the disparity, although coverage through Corbett's private-market alternative in most cases would still be cheaper, because there are virtually no out-of-pocket costs.

The far bigger issue, they say, is adding any premiums at all, even starting at the proposed $13 for individuals earning as little as $479 a month. The plan also carries heavy penalties. Any household that misses three payments in a row is terminated and locked out of Medicaid for three months.

"Maybe they are working and their car breaks down and the only way they can get to work is to fix the car," said Richard Weishaupt, a senior attorney at Community Legal Services of Philadelphia. "The choice is then to fix the car and keep working," he said, or pay the premium and lose the job.

The premiums, including incentives to reduce them, are likely to be among the more contentious issues during a series of hearings on the governor's "Healthy Pennsylvania" plan. The first is Thursday in Erie; another will be Jan. 3 in Philadelphia.

Obamacare mandated online exchanges - the websites whose troubled rollouts have brought continuing criticism - to sell subsidized private health insurance to low- to moderate-income people.

The lowest-income Americans were to be covered by a government-funded Medicaid expansion that the Supreme Court ruled states could opt out of. Both begin Jan. 1.

Twenty-three states, including New Jersey, have accepted the expansion as envisioned. Arkansas and Iowa won federal approval for alternatives using federal Medicaid money to buy private insurance on the exchange for some lower-income residents.

Pennsylvania's proposal for a "private-coverage option" would insure an estimated 500,000 people and would be submitted after hearings. It would not take effect for a year.

But it seeks more far-reaching changes to control costs, both for the newly eligible population and for those now in Medicaid.

One part calls for premiums beginning at 50 percent of poverty ($5,745 a year for one adult, $7,755 for two). This is similar to what Iowa sought and what was rejected last week by the Centers for Medicare and Medicaid Services. It approved the plan with premiums starting at 100 percent of poverty.

Pennsylvania's proposal uses the possibility of premium reductions as an incentive to encourage healthy behaviors, something the federal government is interested in, Todd Shamash, a deputy chief of staff and Corbett's point man on health policy, said Wednesday. Reflecting on the Iowa decision, he added: "We are also going to be pragmatic."

Shamash acknowledged that some people would pay higher premiums on Medicaid than they would buying insurance on the exchange. Most current recipients would be exempt.

He said the premium amounts were based on the same formula - capped at 2 percent of income - that Washington used to determine federal subsidies on the exchange. To make them easier to administer, however, the state used broader income ranges.

On the federal exchange, the subsidized monthly premium for the benchmark plan would be $19 for an individual just above the poverty line - or zero if applied to a lower-premium plan with higher out-of-pocket costs.

The Medicaid premium for essentially the same benchmark plan in Pennsylvania would be $25. But co-pays and deductibles at that income level for the exchange policy could add up to $2,250 for the benchmark "silver" plan and far more for "bronze."

With Medicaid, "you will have no other co-pays, no other deductibles, no other out-of-pocket expenses," Shamash said.

Premiums will be waived for people in several traditional Medicaid categories, such as pregnant women and the disabled.

And positive incentives for working and for meeting three "healthy behaviors" - paying on time, and completing annual health-risk assessments and physicals - could cut premiums up to 50 percent.

"Our hope is that virtually everyone can hit those targets," Shamash said.

Health-policy analysts have their doubts. While positive incentives can work for middle-class people with private insurance, few have been tried with low-income groups who are living day to day, and none have been rigorously studied.

But there is research on other parts of Pennsylvania's proposal. Several studies have shown that requiring poor people to pay even nominal premiums leads to more of them being uninsured.

The same applies to efforts to encourage "personal responsibility" by punishing households that miss payments.

A decade ago, in what was viewed as a progressive attempt to insure more people by sharing costs, Oregon split its public insurance program. Groups such as nondisabled adults were required to pay premiums not that different from Pennsylvania's proposal.

One missed payment led to termination and ineligibility for six months. Co-payments were increased.

Enrollment dropped 77 percent within 21/2 years. The statewide rate of the uninsured shot up to 17 percent, from 11 percent before the changes.

"The premium was definitely the big factor. Either they left because they couldn't pay a premium or they missed a payment and got locked out," said Bill Wright, a researcher for Portland's Providence Health, who studied the impact. Eventually, he said, the state created a hospital tax to fund an expansion, but enrollment never recovered.

Even Gov. Corbett's less-draconian three-month lockout "could have a devastating effect," said Jonathan Oberlander, a professor of health policy at the University of North Carolina at Chapel Hill. He also has studied Oregon's experience.

"It was widely considered an abject failure," Oberlander wrote via e-mail, "one that Pennsylvania would do well not to emulate."

Gov. Corbett's proposal for a private-market alternative to Medicaid expansion includes premiums and other changes that would affect the current Medicaid program as well.

Any state that opts to expand Medicaid must cover people with incomes up to 138 percent* of poverty.

Premiums

Under 50 percent of poverty ($5,745 for one adult, $7,755 for two): No premium.

Up to 100 percent of poverty ($11,490 for one, $15,510 for two): $13 for household with one adult; $17 for more.

Up to 138 percent ($15,856 for one, $21,404 for two): $25 for one-adult household; $35 for more.

Exempt from premiums: pregnant women; ages 65 and older, 20 and younger; disabled people who receive or are eligible for Supplemental Security Income (SSI) benefits; those "dually" eligible for Medicare and Medicaid; the institutionalized.

Negative Incentives

Missed payments three months in a row: termination of coverage, ineligible for three months.

Second instance of three missed payments: ineligible for six months.

Third instance: ineligible for nine months.

Positive Incentives

Work: At least 30 hours a week at time of application: initial 25 percent premium reduction. Working 20-30 hours: 15 percent after six months.

"Healthy behaviors": On-time premium payments during previous six months and completion of an annual health-risk assessment and an annual physical exam: 25 percent premium reduction.

* Residents of states that have not yet expanded Medicaid, including Pennsylvania, may buy subsidized insurance on the Obamacare exchange starting at 100 percent of poverty beginning Jan. 1; if expansion is approved, exchange subsidies begin at 138 percent.

SOURCE: Pa. Department of Public Welfare (www.dpw.state.pa.us/healthypa)

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@DonSapatkin