The accumulated surplus of the state-run Essential Plan had ballooned to $9.9 billion by the end of December, putting it on track to break $10 billion before the close of the fiscal year on March 31, according to newly released records from the comptroller’s office.

The plan, which provides free health coverage to 1.1 million low-income New Yorkers, was established in 2015 through an optional provision of the Affordable Care Act.

Due to a quirk in its funding formula, the program generates far more federal funding than it needs to pay expenses – resulting in an operating surplus that has grown to almost $3 billion per year.

Federal law bars the state from diverting the money for any other purpose, causing a $9.9 billion cash balance to build up in the program’s trust fund.


Despite this snafu, the Hochul administration is seeking even more federal aid to finance an expansion of the program, which would lift the income eligibility threshold from 200 percent to 250 percent of the poverty level.

If the proposal is approved, the state projects that the program's annual surplus would get half a billion smaller – but the cash balance would continue to mount.

The plan was established under an optional provision of the ACA that allows states to establish a "basic health program" similar to Medicaid for people with incomes up to 200 percent of the federal poverty level, or $29,160 for an individual. New York and Minnesota are the only states to exercise the option so far.

The programs are entitled to 95 percent of the amount that the federal government otherwise would have spent on premium tax credits and other subsidies if enrollees had purchased silver-level insurance through an ACA exchange.

Unexpectedly, the money generated by this formula has far exceeded the actual cost of coverage – likely because the Essential Plan pays lower fees to doctors, hospitals and other medical providers than the typical commercial plan.

The plan provides comprehensive medical, dental and drug coverage with no monthly premium and minimal cost-sharing.

Its enrollees include several hundred thousand legally present immigrants who are ineligible for federal funding in Medicaid. Before 2015, the state had been paying the full cost of this group's Medicaid coverage, as required by a court ruling. Switching them into the Essential Plan has saved the state hundreds of millions per year.

The state's only expense for the program has been administrative costs, which have amounted to about $75 million or 2 percent of the overall budget.

About the Author

Bill Hammond

As the Empire Center’s senior fellow for 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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