BCBS of Alabama proposes state insurance program using Medicaid expansion funds

Ted Hosp, vice president of governmental relations for Blue Cross Blue Shield of Alabama, delivers a presentation on ALL Health, a proposal to extend insurance coverage in Alabama, to the Association of County Commissions of Alabama on Dec. 11, 2024 in Montgomery, Alabama. The proposed program would use Medicaid expansion dollars to extend policies to those without insurance. (Brian Lyman/Alabama Reflector)

The state’s dominant health insurer Wednesday pitched a health care plan to county commissioners that would use Medicaid expansion money to pay for private insurance plans for Alabamians without health coverage.

The ALLHealth plan — presented by Blue Cross and Blue Shield of Alabama (BCBS of Alabama) at the Association of County Commissions of Alabama’s legislative conference Wednesday — would provide private health insurance to up to 330,000 eligible Alabamians, either through ALLHealth or premium assistance for employer-provided insurance using Medicaid expansion funding.

“ALLHealth was designed to be affordable. It had to be sustainable over the long-term. It was designed to be a public-private partnership that ultimately encourages people to enter into and remain in the workforce and stay employed, and that’s what we think we put together here,” said Ted Hosp, vice president of governmental affairs for BCBS of Alabama.

A long battle for expansion

Medicaid expansion allows people making up to 138% of the poverty level – $20,782 a year for an individual and $35,632 for a family of three – to get coverage under the federal program. Alabama limits enrollment in traditional Medicaid to children, the elderly and those with disabilities. Able-bodied childless adults almost never qualify. Those with children who qualify for benefits can get coverage only if they make 18% of the poverty line, or $4,648 for a family of three.

Alabama is one of 10 states that has not opted into the program, despite years of lobbying from activists and health care professionals, who say it could improve public health outcomes and provide financial stability to the state’s hospitals, particularly those in rural areas. The lack of expansion also means that 101,000 individuals in the state fall into a “coverage gap,” according to KFF, a national health research organization. Under the Affordable Care Act, only people making over 138% of the poverty line qualify for subsidies critical to buying ACA health insurance.

But the Republican-controlled Legislature has resisted expansion, citing both ideological objections and concerns about cost. A provision in a gambling bill filed earlier this year would have allowed the Legislature to fund “rural health care” programs that seemed similar to Medicaid expansion. The House approved the measure, but it was later stripped out by the Senate.

ALLHealth would provide insurance to about 113,000 individuals without insurance coverage who earn too much to qualify for Medicaid but too little to afford private coverage.

Hosp said the program would avoid shifting enrollees from private insurance to Medicaid. Unlike traditional Medicaid expansion, ALLHealth allows most enrollees to remain on private insurance plans, using federal Medicaid funds to subsidize their premiums. The state would cover 10% of costs for eligible individuals, keeping financial burdens low at least over the next five years.

The model is similar to Arkansas’ Medicaid expansion program, which provides private health insurance to eligible Medicaid recipients using federal Medicaid expansion dollars regardless of income level. But unlike the Arkansas approach, ALLHealth would cover only those making between 100% and 138% of the poverty level. Those making less than 100% would be covered by traditional Medicaid.

The plan includes a five-year sunset clause.

Appeal to counties

Hosp said ALLHealth could support struggling rural hospitals by reducing uninsured patient rates. He also said it could improve access to mental health services, potentially saving money for counties who have to pay 100% of health care costs if an inmate receives care outside of the county jail.

By offsetting state expenses with federal funding and potentially increased hospital revenues, ALLHealth’s net cost is projected at $6 million annually, although interest on the federal funding and about $30 million in new taxes going into the General Fund, the ALLHealth program would have a revenue of about $50 million in year three.

The Affordable Care Act, which allowed states to expand Medicaid after its passage in 2010, could face changes in the upcoming administration. Enhanced premium subsidies that provided some people with lower incomes with lower premiums could expire at the end of 2025 if the next administration fails to extend the enhanced subsidies.

Hosp said that cost wouldn’t be passed on to the consumer under ALLHealth, as the federal government would pick up 90% of the cost and the state the remaining 10%.

Medicaid could also face funding cuts under the next administration. A conservative policy group with ties to the Trump administration has suggested phasing down the federal government’s contribution to Medicaid expansion and allowing states to restrict coverage to those with incomes at or below the poverty line.

Caution from lawmakers

Alabama legislators were cautious about the proposal Wednesday but not dismissive of it. Sen. Greg Albritton, R-Atmore, the chair of the Senate’s Finance and Taxation General Fund Committee, which handles Medicaid funding, said he was open to learning more about it. Albritton has opposed traditional Medicaid expansion but said he was willing to consider the insurer’s proposal.

“This would be private insurance coverage, not government insured, which is a very, very positive aspect to things,” said Albritton.

But he said he still has questions about how the program will differ from traditional Medicaid, its potential impact on rural hospitals, and the long-term costs to the state.

Albritton, who has been critical of programs relying on federal funding, said that he supports ALLHealth’s five-year sunset provision as it provides a safeguard.

House Ways and Means General Fund Chair Rex Reynolds, R-Huntsville, also seemed open to learning more about the program.

“There’s value to looking at a plan that covers people with additional insurance and therefore saves our Medicaid dollars,” said Reynolds.

Sonny Brasfield, executive director of the ACCA, said Wednesday the program could address challenges  facing Alabama’s counties, including prison costs, rural hospital closures and mental health crises.

“For counties, it means expanding coverage and providing services to those who can’t get them today,” Brasfield said after the presentation. “As much as 50 percent of people incarcerated are there due to mental health issues. Expanding access to mental health services would reduce jail populations, saving money and human costs.”

Gov. Kay Ivey has historically expressed reservations about Medicaid expansion, citing concerns over long-term costs. Gina Maiola, a spokesperson for Ivey, wrote in a text message Wednesday that “her concerns remain the same.

“For counties, it means expanding coverage and providing services to those who can’t get them today,” Brasfield said after the presentation.

The ACCA is expected to vote on supporting the program in its 2025 platform on Thursday.

“I assume it will pass, especially based on the questions in there. It appears our group understands the importance, especially as we try to keep health care facilities open,” Brasfield said.