Indiana's health coverage for the working poor is at an inflection point. (Getty Images)
When Indiana first created the Healthy Indiana Plan (HIP) it was a conservative approach to expanding Medicaid to working poor Hoosiers who couldn’t afford health care.
Now the next governor and lawmakers may soon have a big decision to make about the program’s future. If court challenges continue to succeed in vacating portions of the program — largely the premium contributions — the state can keep providing insurance to the 762,000 Hoosiers, reduce benefits or shutter the program altogether.
The decision could come down to how important the philosophic belief of “having skin in the game” is to state officials.
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I reached out to former Gov. Mitch Daniels this week to understand how the POWER Account contributions came to be when he first pitched HIP in 2007.
He said advisors first brought him an idea that looked more or less like traditional Medicaid.
“I politely threw them out of the office. I said what I want is (health savings accounts) for low-income people,” Daniels said.
“You either believe in personal responsibility or you don’t,” he said. He added that when you are putting your own dollars in first you make better decisions — whether that be asking for a generic drug, seeking a second opinion or going to a doctor’s office instead of the emergency room.
“Just because they were of moderate means didn’t mean they weren’t capable of making wise choices about their own health and I wanted a system that respected that instead of treating them as hopeless and helpless,” Daniels said.
He said the accounts were a key selling point when he took the program to the General Assembly for approval. But he acknowledged it likely would have passed without it given the large bipartisan support.
The New Republic at the time said that Daniels “moved aggressively” and in a “way that conforms, in broad terms, to conservative dogma about how health insurance should work.”
Originally, estimates were that the program could help between 120,000 and 200,000 Hoosiers who made too much to qualify for traditional Medicaid but not enough to secure insurance independently. And it was originally limited to only what the cigarette tax brought in so therefore wasn’t an entitlement.
When Mike Pence became governor he decided to use the framework of the program to expand Medicaid, with the federal government paying upwards of 90% of the cost.
Follow the money
HIP currently offers a two-tiered plan to all non-disabled adults in Indiana with incomes at or below 138% of the federal poverty level. It restricts coverage, however, in several ways, including by charging monthly income-based premiums and offering no retroactive coverage. Those restrictions were approved by the Centers for Medicare and Medicaid Services in December, though officials at the time expressed concerns about the HIP contributions.
Making a POWER account payment each month of between $1 to $20 depending on income gives participants access to HIP Plus benefits including vision, dental and chiropractic coverage. If the payments aren’t made, a person drops from HIP Plus to HIP Basic.
And, in a strange twist, those HIP members are paying more for coverage than their peers who make slightly more money and qualify for a health plan on the Affordable Care Act marketplace. That’s because Congress voted to expand subsidies — though that expansion may soon expire.
After a federal judge tossed out the contributions , and indeed the entire federal approval of the program’s waiver restrictions, the state says it will have to transition 335,000 Hoosiers from HIP Plus to Basic. The case is under appeal.
That judge found the contributions were minimal and caused havoc by regularly kicking people off benefits. And he noted the state hadn’t used them since 2020 anyway.
Ending the program altogether would save the state little to no money. That’s because the federal government covers most of the costs. The rest is paid for through cigarette tax revenue – estimated at $97 million this fiscal year. The rest of HIP’s annual expenses are paid for by hospitals through the hospital assessment fee, about $415 million this fiscal year.
Those together make up the state match to leverage almost $4 billion in federal funds for HIP.
Theoretically, the state could use that $97 million on other state services but the cost of taking that program away would be immeasurable.
If all those people suddenly were uninsured that would cause hospital costs to rise because they are required to provide emergency care. And that would eventually spike prices for everyone in the system.
“I’m not going to substitute my judgment for theirs. HIP by now has covered probably cumulatively a million people or more and brought peace of mind as we wanted,” Daniels said. “I think it’d be a darn shame if those principles were discarded. But if they are, someone ought to try to certainly avoid throwing people back into the completely uninsured world.”
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