Indiana Gov. Mitch Daniels has used free-market thinking and a healthy dose of individual responsibility to create an innovative program to help uninsured people get health insurance.
The Healthy Indiana Plan (HIP) passed the legislature with bi-partisan support last year, and people already are enrolling in the new program. It has funding to cover 130,000 people, and tens of thousands of people already are enrolled.
It works on the principle of a Health Savings Account:
Participants get a POWER account (for Personal Wellness Responsibility) to use for routine health spending, and they are covered by health insurance for larger medical bills.
The state of Indiana and HIP participants jointly pay into the POWER account so that people have $1,100 a year to spend on their routine care, such as doctor’s visits or prescription drugs. After that, regular insurance triggers in, just like with a Health Savings Account. In addition to paying for all medical bills above $1,100, the insurance also covers up to $500 a year in preventive care, such as cancer screenings.
People are eligible for HIP: 1) if they have been uninsured for more than six months, 2) if they don’t have access to job-based health insurance, and 3) if they earn less than 200% of poverty — about $41,300 a year for a family of four.
The amount that people pay into their POWER account depends upon their income, but no one will pay more than 5% of their income.
For example, a family of four with an income of $20,000 would be eligible. The state deposits $480 into their account, and then the family pays $620 a year, or about $52 a month. For that, they get the $1,110 in their account to pay for small medical bills plus insurance that covers preventive care and all of their medical bills above $1,100.
If people have any money left in their POWER account at the end of the year, it rolls over to help fund their share of the account in the next year.
The plan encourages responsible health spending because people see that the money in the account rolls over if they spend wisely. And they have the security of knowing they have health insurance that will cover them and their families so big medical bills would not bankrupt them if someone gets sick or injured.
Many states want to simply expand Medicaid to cover the uninsured. Instead, Gov. Daniels wanted to give people new incentives to spend money wisely, to get preventive care, and to become partners in managing their health costs.
Shelly Ross, a community college instructor and divorced mother of two, was one of the first people to sign up for the plan. She makes $25,000 a year and pays $91 a month for her coverage. She already has had a cataract excised and received the mammogram she had been putting off. “I’m smiling when I’m writing that check,” she told a columnist for The New York Sun. “It’s not like I wanted a free ride.”
Gov. Daniels had to work hard to convince Washington to approve the plan because it is partly funded with Medicaid money, and the Office of Management and Budget saw this as a big change. Gov. Daniels also passed an increase in the cigarette tax to fund his state’s share of the program, for which he was severely criticized by the right.
But he felt that Indiana’s high uninsured rate and declining job-based insurance required a creative solution and that HIP was worth the price. The plan is popular in Indiana, and other states now are looking at whether this creative market-based solution to help the uninsured get coverage could work for them as well.