HIP 2.0 approval means 40,000 Hoosiers must end their Obamacare coverage

My email program pinged even more constantly than usual this week as one Indiana health care group after another “applauded” the Obama administration’s approval of Gov. Mike Pence’s Healthy Indiana Plan 2.0 proposal.

I would applaud, too, if the state and federal government agreed to use taxpayers’ money to fund an estimated 350,000 new customers for my business.

(Of course, some conservative groups think Pence has completely sold out his principles in this deal. The Heritage Foundation, for example, urged Pence to go back to basics on conservative thinking on expanding coverage and care for low-income residents.)

But one group that was clearly not applauding—at least not yet—were the estimated 40,000 Hoosiers who will essentially be forced to enroll in HIP 2.0. That’s the number of folks the Pence administration estimates have purchased a 2015 health insurance plan on the Obamacare exchange, but whose incomes are low enough that they qualify for HIP 2.0.

How low? Between 100 percent and 138 percent of the federal poverty line. That’s a range of $11,770 to $16,243 for individuals. For a family of four, it's a range of  $24,250 to $33,465.

According to enrollment figures released so far, that means about one out of every five Hoosiers who has purchased an Obamacare plan for this year will have to scrap it and sign up for HIP 2.0.

“Ugh,” was the response of a friend of mine who I thought might be in that group, when I told him of the change. He had already labored through several administrative headaches to get his entire family covered, starting Feb. 1.

But that’s the day HIP kicks in, making anyone who qualifies for the HIP program ineligible for the tax credits and cost-sharing subsidies that make the Obamacare affordable. (By one estimate, those subsidies will total $925 million in Indiana next year.)

For people with incomes just over the poverty line, those tax credits can be huge. An individual Hoosier in Marion County earning 138 percent of the poverty limit would receive a subsidiy of at least $2,500, while a family of four at that same level of poverty would receive a credit of $9,000.

(Turns out, my friend's income was just high enough to let him keep his Obamacare coverage.)

The Pence administration swung into action this week to help anyone who does need to switch quickly from an Obamacare insurance policy to the HIP 2.0 program.

“We know this is a big deal and we’re going to do a lot to help people out,” said Jim Gavin, a spokesman for the Indiana Family and Social Services Administration, the state agency that operates HIP and the Indiana Medicaid program.

Gavin sent out a notice to numerous community groups that have been helping Hoosiers sign up for Obamacare coverage. In addition, the Pence administration is ending letters directly to the 40,000 Hoosiers they think will be affected, to tell them they need to change their coverage.

It’s not just that Hoosiers need to sign up for the HIP program. Starting on Sunday, they need to take action to tell the federal government that they are no longer eligible for their Obamacare plan.

Otherwise, the federal government will keep sending their tax credit check to their health insurer each month. And come tax time next year, the IRS will ask for those credits to be repaid.

For folks with incomes just north of poverty line, that’s a bill they simply won’t be able to afford.

“If you are eligible for HIP but continue to receive reduced cost coverage on the federal Marketplace, you will face a tax penalty in 2016,” wrote Joe Moser, the director of the Indiana Medicaid program, in the letter being sent to the 40,000 low-income buyers on the Obamacare exchange, which is also called the federal marketplace.

The good news is that, once a Hoosier logs onto the federal exchange, HealthCare.gov, and reports the “life change” that the HIP 2.0 approval has caused, the federal government should automatically forward that person’s application details to Indiana, which will start the application process for HIP coverage.

There could be some benefits to being in HIP versus an Obamacare plan. The networks of hospitals tends to be wider than the narrow networks offered on several Obamacare plans. Also, more doctors accept HIP coverage than traditional Medicaid, because it pays them more—about 25 percent more n Pence’s plan.

The cost should be about the same and, for fairly heavy users of health care services, actually cheaper.

The Obamacare tax credits work so that folks with incomes between 100 percent and 150 percent of the federal poverty line pay no more than 2 percent of their incomes to buy one of the Silver plans offered on the exchanges.

Buyers could choose a cheaper Bronze plan, which would actually cost them nothing in premiums. However, those plans have very large deductibles that require participants to foot the entire bill of health care services up to that high threshold.

HIP 2.0 will require monthly contributions that cannot exceed 2 percent of income for participants. After that, the only payments they will face will be co-payments, ranging from $8 to $25, for non-emergency use of hospital ERs.

The only problem is that, this year at least, many Hoosiers will have to endure bureaucratic whiplash to get those benefits.