Imposing premiums could prevent low-income people buying insurance

There is a vigorous and important debate going on in Pennsylvania about the wisdom of charging premiums to low-income people eligible for the state's proposed expansion of Medicaid to adults earning up to 138% of the federal poverty level. Experts say experience shows that imposing premiums and other requirements sharply reduces poor people's participation in health insurance programs.

Pennsylvania's Republican Gov. Tom Corbett, who originally opposed any Medicaid expansion under the Patient Protection and Affordable Care Act, has submitted a waiver request to the CMS to allow his state to expand coverage to low-income adults by using federal Medicaid dollars to buy them private coverage through the federal insurance exchange.

An article in the Philadelphia Inquirer Friday explored how the governor's proposed requirements on premium sharing and other obligations could affect participation in his “Healthy Pennsylvania” plan to cover an estimated 500,000 Pennsylvanians, which is being discussed in a series of public hearings around the state.

Arkansas was the first state to win federal approval for using private plans to expand coverage to low-income adults as a conservative alternative to a straightforward Medicaid expansion, and it was followed by Iowa. The approach has faced less opposition from Republican state legislators who adamantly reject expanding the government-run Medicaid program under Obamacare.

But Iowa and Pennsylvania added more conservative wrinkles to this model. Both proposed requiring low-income adults—including people with incomes from 50% to 100% of the poverty level—to pay premiums. The federal poverty level for a single adult is $11,490, while the poverty level for a family of four is $23,550.

The CMS refused to allow Iowa to charge premiums for people below the poverty level but allowed a premium contribution of up to 2% of income—about $230 a year for a single adult just above the poverty line—for people earning 100% to 138% of poverty. Iowa's program waives premiums if enrollees participate in specified health improvement activities.

Now Pennsylvania has proposed premium sharing of up to 2% for people making as little as 50% of the poverty level ($5,745 a year), though premiums would be waived for pregnant women and disabled people. Paying premiums on time, completing annual health-risk assessments, and receiving regular physical exams could cut premiums up to 50%.

But on top of those requirements, Corbett's plan would take away coverage unless beneficiaries were participating in a job search or job training activities. And households that miss premium payments would be locked out of the program for months.

The Inquirer article reviewed what happened in Oregon a decade ago when that state required Medicaid beneficiaries to make premium contributions, increased copayments and imposed penalties for nonpayment. Enrolled plummeted 77% within 2 ½ years, and the state uninsured rate jumped from 11% to 17%.

“The premium was definitely the big factor,” Bill Wright, a researcher at Providence Health who studied the impact of the Oregon cost-sharing program told the Inquirer.

“It was widely considered an abject failure… that Pennsylvania would do well not to emulate,” Jonathan Oberlander, a professor of health policy at the University of North Carolina who also has studied the Oregon experience, told the Inquirer.

Advocates for the poor wonder how realistic it is to expect people who make so little money they can barely afford basic necessities to pay even $25 a month for a health insurance premium (Corbett's plan would charge $35 for larger households). Richard Weishaupt, a senior attorney at Community Legal Services of Philadelphia, told the Inquirer that poor people in this situation would face quandaries if, for instance, the car they rely on to get to work breaks down. “The choice is then to fix the car and keep working” or pay the premium and lose the job, he said.

Follow Harris Meyer on Twitter: @MHHmeyer