As Governor Cuomo pleads for financial help from Washington, one of his state’s programs is sitting on $3 billion in unspent federal aid: the Essential Plan.

According to records from the comptroller’s office, the plan received $5.6 billion in federal funding in fiscal year 2020, but spent just $3.8 billion on coverage for low-income New Yorkers. 

As a result, the balance in the program’s trust fund ballooned to just over $3 billion, or more than double what it was the year before.


This is an installment in a special series of #NYCoronavirus chronicles by Empire Center analysts, focused on New York’s state and local policy response to the Coronavirus pandemic.


That’s enough to cover almost a third of the state’s estimated $10 billion deficit. But federal law allows the money to be spent only on Essential Plan members and benefits, putting it legally off-limits for filling budget holes.

Launched in 2015, the Essential Plan provides free or nearly free health coverage for 800,000 lower-income New Yorkers. It grew out of an optional provision of the Affordable Care Act which was exercised by only two states, New York and Minnesota. In New York, it offers comprehensive coverage for people with incomes up to double the federal poverty level ($25,520 for an individual) with premiums of either $20 or $0 per month, depending on income.

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To pay for that coverage, the federal government provides funding equal to 95 percent of the tax credits and other subsidies that Essential Plan enrollees would have received if they bought commercial coverage through the ACA exchange.

State officials initially projected that federal aid would cover 85 percent of the program’s costs. Instead, the formulas have consistently generated more money than the program needed. The state picks up only about $80 million for administrative costs, as required by the ACA.

The mounting surplus appears to be mostly structural: The federal funding is calculated based on the premiums for silver-level commercial coverage. But the Essential Plan’s costs are lower than those of commercial insurance because its fees to providers are based on Medicaid’s heavily discounted rates.

Dipping into the Essential Plan surplus could be legally difficult.

The ACA specifies that federal money allocated for the program “shall only be used to reduce the premiums and cost-sharing of, or to provide additional benefits for, eligible individuals enrolled in standard health plans within the state.” The program’s benefits are already comprehensive, and its premiums and cost-sharing minimal.

In 2018, the Cuomo administration proposed diverting a portion of the surplus into hospital subsidies previously financed by Medicaid. It later dropped that plan, apparently because of legal concerns.

Getting Washington to address this odd glitch could also be difficult – because it’s a relatively obscure program that involves only two states, and because the ACA remains a wedge issue between Democrats and Republicans. 

For now, in spite of the worst fiscal crisis in generations, $3 billion is destined to remain in the state’s bank account, unspent and unspendable.

About the Author

Bill Hammond

As the Empire Center’s director of health policy, Bill Hammond tracks fast-moving developments in New York’s massive health care industry, with a focus on how decisions made in Albany and Washington affect the well-being of patients, providers, taxpayers and the state’s economy.

Read more by Bill Hammond

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