The primary goal of the federal health care overhaul is to help provide affordable health insurance to the millions of Americans who lack it. But health planners are wrestling with a little known, yet significant gap in the plan.
A low-income group under age 65 falls into a kind of no-man's land for affordable coverage. They earn too much to qualify for assistance through Medicaid, but not enough to afford even subsidized commercial insurance.
Minnesota officials are considering an optional program to help fill this gap but there is a huge unknown: how much it will cost.
The affordability gap affects about 100,000 low-income Minnesotans, people whose household incomes are slightly above the threshold to qualify for Medicaid's free or low cost coverage.
Yet their incomes are low enough that the deductibles and co-pays of their private health insurance could cause hardship — even with the federal health care law's subsidies.
Many individuals in this predicament earn less than $2,000 a month.
According to the non-profit Kaiser Foundation, their out-of-pocket costs for the health care overhaul's benchmark plan could run as high as $220 per month.
The monthly premium would run about 3.3 percent of their income, or about $45 per month, to buy insurance in the commercial market. Out-of-pocket costs such as co-pays and deductibles could reach more than $170 per month.
That's unaffordable for many low-income people, said Jonathan Watson, director of public policy for the Minnesota Association of Community Health Centers.
"That's a significant percentage of their income that can be used for ... necessities of their life in terms of food, utilities and rent and housing and things of the like," he said.
Congress gave states the option of creating a so-called Basic Health Plan for this income group to complement the health care law's main program, a health insurance exchange. That's an online market place where individuals and small businesses can compare and buy commercial health plans in 2014.
The basic plan is patterned after a program in Washington state.
The state needs the basic plan option, said Christina Wessell, deputy director of the Minnesota Budget Project. The group advocates on behalf of low-income residents and supports a basic health plan.
Without one, Wessell said, people in the gap must use the exchange and sort through plans with a confusing array of co-pays and deductibles. They could find themselves with a bill they didn't expect and can't afford.
"If you take these people and then all of a sudden push them into a health care exchange where they have all the options, all the choices, and all the responsibility and are suddenly exposed to a lot of cost sharing that they are not used to, it's going to be a very, very dramatic transition," Wessell said. "We're worried they're just not going to make that change very successfully."
For states considering the option of the basic plan, the task is to figure out the economics. Federal dollars would pay for most of the cost of the basic health plan. But there are so many moving parts that calculating the cost to the states is still a matter of guesswork.
State officials say based on an analysis by economist Jonathan Gruber of the Massachusetts Institute of Technology, Minnesota's share of the basic health plan could swing widely with a basic health plan. It could save the state $50 million a year — or cost $460 million per year.
Under the federal health care law, states will receive 95 percent of what the federal government would have provided in subsidies to low-income Minnesotans had they bought health insurance through the state exchange.
State health officials are concerned that many low-income Minnesotans who don't quality for Medicaid might be less healthy and more expensive to insure. State Human Services Commissioner Lucinda Jesson also worries that that the federal government's portion for the basic health plan might come up short.
"Is that 95 percent really going to be enough to provide the coverage?" Jesson asked. "That's a real question mark."
There's also the question of how long the federal government would provide a 95-percent subsidy. State Rep. Steve Gottwalt, R-St. Cloud, said signing on to too much of the federal health care law — including the Basic Health Plan option — would be a step backwards. Gottwalt, chairman of the House Health and Human Services Reform Committee, said Minnesota already has many great approaches to health care reform that other states don't.
"We could get to the goal quicker with more assurance with less cost and with a higher level of quality without completely redoing the system and forcing it into the federal guidelines that are being spelled out from Washington right now," he said.
Minnesota officials are also considering adapting the existing MinnesotaCare program, the state's health insurance program for people who have difficulty affording coverage, to subsidize residents who don't qualify for Medicaid but who can't afford to buy coverage though the state's health insurance exchange.