MONTGOMERY, Ala. — Blue Cross and Blue Shield of Alabama, the state’s largest health care provider, is advocating the ALL Health plan for expanded Medicaid coverage as a way to close the insurance coverage gap and save rural hospitals.
Speaking at the Association of County Commissions of Alabama’s legislative conference on Wednesday, Ted Hosp, vice president of government relations for BCBSA, presented new details of the plan to local leaders gathered in Montgomery.
“Our customers live in these communities where hospitals are struggling, where it’s difficult to attract and retain primary caregivers,” Hosp told Alabama Daily News. “Part of the reason you can’t is because there are a lot of uninsured people.”
In addition to sharing new details of the ALL Health plan, Hosp also stressed the potential positive impact it could have on Alabama’s rural hospitals, which have struggled financially in recent years due to the high number of Alabamians without insurance.
“This will have a disproportionate positive impact on rural hospitals because they have a higher percentage of uninsured patients than your standard urban facility,” Hosp said.
ALL Health plan
Developed by Hosp and the Alabama Hospital Association, the ALL Health plan would leverage federal Medicaid expansion dollars to offer insurance for residents making up to 138% of the Federal Poverty Level, which for 2024 would be an annual salary of up to $20,782 for an individual.
The ALL Health plan would differ from the traditional Medicaid expansion in that it would be a private-public partnership model, similar to Arkansas’ Medicaid expansion program, Arkansas Health and Opportunity for Me. Under this model, rather than the significant federal matching dollars being used directly by the state to insure those making up to 138% of the FPL, money would largely go through private health insurance companies to provide expanded coverage, including BCBSA, which provides the majority of health plans in the state.
Hosp said that the ALL Health plan is estimated to provide health insurance to 113,000 uninsured Alabamians and would cost $320 million by its third year, but generate $346 million in state revenue.
Impact on rural hospitals
More than half of Alabama’s 52 rural hospitals are at risk of closing, 19 of which are considered to be at an immediate risk largely due to having to eat the costs of patients without health insurance. Hosp said that about one in five Alabamians who walk into a rural hospital have no ability to pay for services.
Under the ALL Health plan, however, Hosp said rural hospitals would go from one out of five of their patients being uninsured to one in 20.
“If you go from 20% of your population with your patients uninsured to 5% uninsured, it’ll have a very significant effect on rural hospitals, very positive,” he told ADN.
The ALL Health plan would also help rural hospitals through higher reimbursement rates due to how it differs from traditional Medicaid expansion models, he said.
“One of the consequences (of) a traditional Medicaid expansion is that it pulls a bunch of people who actually have health insurance out of private health insurance and puts them in the Medicaid program,” Hosp said. “For reasons that are probably obvious, we don’t think that’s a particularly efficient way of doing it.”
While there are approximately 475,000 Alabamians whose incomes would make them eligible for Medicaid were it to be expanded, 137,000 already have health insurance through their employer and 193,000 through the Health Insurance Marketplace, which provides federally subsidized coverage from private insurers for those making between 100% and 138% of the FPL.
Hosp said that when compared to traditional Medicaid expansion, the ALL Health plan would likely see more than 200,000 Alabamians retain private insurance, and thereby, increase the reimbursement rates for health care providers at rural hospitals.
Costs
Hosp also addressed what has been among the leading concerns of state lawmakers and Gov. Kay Ivey, that being the cost to the state to expand Medicaid, be through a private-public partnership or otherwise.
The Republican-controlled Legislature has balked at Medicaid expansion citing concerns over costs, though some have recently expressed an openness to the idea, including House Speaker Nathaniel Ledbetter, R-Rainsville, and others after hearing directly from Arkansas and North Carolina lawmakers about how Medicaid expansion benefited their own states.
Ivey, however, has remained skeptical, with her office telling ADN in May that her concerns over long-term costs of Medicaid expansion remained unchanged.
In his presentation, Hosp shared that under ALL Health, the gross cost to the state by year three would be $320 million. However, there would be an immediate offset to this cost of $296 million from money the state would receive in federal and state dollars.
Of the $296 million, $118 million would come from the federal government’s improved matching rate that comes with expanding Medicaid, increasing from $0.72 for every dollar to $0.90, and the remaining from increased Medicaid tax revenue from hospitals, as well as federal funding for inmate medical care, which the state currently pays in full.
While the $296 million offset would still leave the state with $6 million to cover itself by year three, additional federal dollars would negate this cost and then some, Hosp explained.
“In the first two years after adopting a plan like this, the state will receive from the federal government what amounts to essentially a lump sum, enough to create a trust fund equal to $424 million starting in year three.”
Hosp said that this federal incentive is permitted to be placed in a state-controlled trust fund where it could accrue interest, which, calculated at a return of 5%, would generate around $21 million annually for the state in new revenue. With the Alabama Trust Fund’s 13-year annual rate of return at around 7%, Hosp said the BCBSA estimation of 5% was a “conservative” estimate, and that in practice the state could see even higher returns, more than covering the cost of expansion.
As a private insurance company, ADN asked Hosp what incentive BCBSA would have to advocate for Medicaid expansion. He insisted that under the ALL Health Plan, BCBSA would not “get any new customers,” and that it was largely due to wanting to help improve the general state of health care in Alabama.
“By increasing the financial viability of the health care system as a whole, that’s good for our customers,” he said.
As one of the ten remaining states yet to have expanded its Medicaid program, Alabama has among the strictest Medicaid eligibility requirements in the country, with only parents or those with disabilities currently eligible for the program, all of whom must adhere to strict income caps.