The Commonwealth Health Care Reform Implementation Advisory Committee created by out-going Pennsylvania Governor Ed Rendell recently submitted its report on implementing the new health care law. The committee recommended the state strongly consider covering people making between 133-200% of FPL (Federal Poverty Level) with the optional “Basic Health Plan” program added to the bill by Sen. Maria Cantwell (D-WA), instead of forcing residents to buy more costly individual private health insurance on the new exchange. From the report (PDF):

Pennsylvania should carefully consider establishing a Basic Health Program for individuals with income up to 200% of the FPL, rather than offering coverage through the exchange.

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HealthChoices Medicaid managed care plans, CHIP insurers, and current adultBasic insurers might be interested in contracting for the new population using the same provider networks and similar contract terms. If a managed care approach is desired, Pennsylvania would need to expand managed care to all regions of the state. This would enhance continuity of care for a group of beneficiaries who experience frequent income fluctuations.

The Urban Institute estimates that for most states, the economies of purchasing coverage for this large new group with the basic health plan approach could have important benefits to consumers. First, this approach could achieve lower out-of-pocket costs for consumers – economies of scale achieved could make it possible to offer the essential benefits package with lower premiums and cost-sharing to participants. In addition, states may be able to negotiate extra services to improve health care quality outcomes, such as care coordination and care management for enrollees with chronic conditions and incentives for use of preventive services. Furthermore, this approach could enhance the continuity of care for a group of consumers that is prone to frequent income fluctuations. Other states that have purchased services for Medicaid expansion groups have achieved lower costs and enhanced quality through this approach.

Like the SustiNet Board in Connecticut, the Commonwealth Advisory Committee suggests against forcing this population to use the new exchanges for basically the same reason–the private insurance exchanges will likely result in worse coverage at a greater cost to both the customers and the government.

Compared to direct public insurance, like Medicare, or even a program where the government collectively negotiates with private insurance companies on behalf of a population, like the advisory board is suggesting with the “Basic Health Plan,” the new private exchanges are clearly a very bad deal. Except for the private insurance companies, that is.