The ACA’s Basic Health Program Option: Federal Requirements and State Trade-Offs

The ACA gives states the option to implement a Basic Health Program (BHP) that covers low-income residents through state-contracting plans outside the health insurance marketplace, rather than qualified health plans (QHPs). BHP offers the prospect of improved affordability for low-income residents, fiscal gains for some states, and reduced churning. However, it also poses financial risks for states and has implications for state marketplaces. This paper summarizes the federal policies on BHP, including the requirements for BHP as well as the methodology for determining federal BHP payments. It also analyzes the key trade-offs facing states as they decide whether and, if so, how to implement BHP, with a particular focus on the impact of BHP on state budgets and the size, stability, and risk level of state marketplaces.