Pence to unveil multipronged plan to expand health insurance

May 13, 2014

Gov. Mike Pence will unveil his detailed plan to expand health insurance coverage to low-income Hoosiers on Thursday morning at two press events around the state.

Pence’s plan involves a combination of the Healthy Indiana Plan, employer-sponsored health plans and health savings accounts, according to an invitation email sent Tuesday to Indiana health care officials. The Healthy Indiana Plan, or HIP, currently enrolls about 40,000 Hoosiers who contribute a portion of their incomes to something like health savings accounts.

“After negotiating a one-year waiver for 40,000 HIP recipients, Gov. Pence has now developed plans to expand the program as an alternative to Medicaid,” stated the invitation to Thursday’s event in Indianapolis. The second press event on Thursday will be held in Fort Wayne, with a third scheduled for Friday in Jeffersonville.

"[Pence] plans to use private market-based reforms, employer-based plans, and HSAs to transform health care in a fiscally responsible manner for the Medicaid-eligible population in Indiana,” the invitation says.

The expansion of coverage was called for in President Obama’s health reform law, which offered to pay at least 90 percent of the cost of expanding the traditional Medicaid program so that it covered all Hoosiers up to 138 percent of the federal poverty limit.

Such an expansion has been estimated to pull in an additional 180,000 to 300,000 Hoosiers, mostly childless adults who are currently ineligible for Medicaid unless their incomes are just 25 percent of the poverty limit. Indiana hospitals are particularly keen to see coverage expanded, since unpaid patient bills sap about 5 percent of their revenue each year.

But the Pence administration has rejected the idea of expanding traditional Medicaid and instead asked the Obama administration to allow Indiana to use the Healthy Indiana Plan—or something like it—to expand coverage for low-income residents.

The Obama administration has been cool to the idea, especially HIP's requirement that Hoosiers with incomes below the poverty limit contribute part of their income toward health insurance. Medicaid, by contrast, requires no contributions for those who qualify. The Obama administration also had concerns over HIP’s enrollment cap, which hinges on available state funding.

But the two sides kept talking, and Pence expressed optimism in February after meeting face-to-face with Obama’s outgoing health secretary, Kathleen Sebelius.

“Our administration remains committed to using the Healthy Indiana Plan’s consumer-driven design,” Pence said in a statement after his meeting in Sebelius’ office, “and appreciates the secretary’s willingness to identify areas of common ground that will allow us to use an Indiana solution to meet our shared goal of providing more health care options to Hoosiers in a fiscally responsible manner.”

Pence has been working with Indiana hospital leaders to develop ways to fund the costs of the expansion that will be borne by the state—including the significantly higher reimbursement rates that the HIP program pays doctors and hospitals, compared with the Medicaid program.

Any Indiana health insurance expansion that is approved by the Obama administration would be paid for entirely by the federal government in 2015 and 2016, but would then require state contributions that could rise to $393 million per year by 2020, according to estimates by the actuarial firm Milliman Inc. Other elements of Obamacare are estimated to cost the state government $123 million per year by 2020.

In March, Pence’s staff began talking with Indiana hospital leaders about increasing a hospital assessment fee, which would allow hospitals and the state to qualify for additional federal funding to pay for the state’s costs. It is not clear if that idea will be included in the plan Pence announces on Thursday.

It’s also not clear if Pence will announce that he has struck a deal with the Obama administration. Indiana is required to submit an application this summer to keep the Healthy Indiana Plan going past its expiration date of Dec. 31.

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