History of HIP – A Decade of Change

How the Healthy Indiana Plan was born, how it has evolved, and what the 400,000 Hoosiers who depend on it for health care can expect through 2020

On Feb. 2, Gov. Eric Holcomb and U.S. Health and Human Services Secretary Alex Azar announced approval of the continuation and enhancement of the Healthy Indiana Plan (HIP) through 2020, allowing the state to continue health coverage for more than 400,000 low-income, adult Hoosiers.

“A decade after it launched, Indiana’s HIP program has become the national model for a state-led, consumer-driven health care program that meets citizens’ needs, provides choices, and improves lives,” Holcomb said.

The most recent HIP extension represents a new chapter in the decade-long story of a program that has maintained bipartisan support in an increasingly polarized political environment, increased access to care for Indiana’s most vulnerable populations, and become poised to help the state combat some of its most pressing challenges, such as the opioid abuse epidemic.


Ever since Medicaid was established in 1965, the program has undergone a slow evolution. In January 2007, then-President George W. Bush announced the Affordable Choices initiative, which permitted states to divert certain federal funding streams to provide private health coverage to those individuals. Indiana policymakers responded quickly and passed the first iteration of HIP, which was modeled after a high-deductible plan and health savings account but tailored for low-income, uninsured working-age adults. By the end of the year, Indiana had received approval from the Centers for Medicare & Medicaid Services (CMS) for a five-year Medicaid waiver to implement HIP.

“HIP was proposed by Governor Mitch Daniels,” said IHA President Brian Tabor. “The Indiana House of Representatives and Senate were controlled by different parties when HIP was established, but legislators like Sen. Pat Miller and Rep. Charlie Brown worked across the aisle to ensure its passage. We now have Republican supermajorities in the legislature, but HIP has remained popular on a bipartisan basis with the public and in the General Assembly.”

Part of the program’s bipartisan appeal was due to the importance HIP places on individual responsibility. HIP members have Personal Wellness and responsibility (POWER) accounts that they must contribute to each month, much like traditional health savings accounts. Contributions initially were set on a sliding scale, never to exceed 5 percent of a family’s income.

In addition, HIP incentivizes members to receive preventive care. As a result, HIP members are more likely to receive a preventative service, avoid unnecessary trips to the emergency room, and use generic drugs when available.

What is retrospectively referred to as HIP 1.0 expanded coverage to 61,797 Hoosiers in its first two years. However, more than 860,000 Hoosiers, or about 14 percent of the population, were still uninsured.


When the Affordable Care Act (ACA) was signed into law in March 2010, it was the most significant overhaul of the U.S. health care system since the Medicare and Medicaid programs were established in 1965. One of its most impactful provisions was the expansion of Medicaid to most adults with incomes at or below 138 percent of the federal poverty level. Gov. Daniels reached out to CMS that May to discuss the possibility of using HIP as the vehicle for covering the newly eligible population in 2014, the year the provision was scheduled to go into effect.

The ACA faced a number of legal challenges from the beginning. In June 2012, the U.S. Supreme Court ruled that the ACA was mostly constitutional but that the “coercive” penalty to withhold all Medicaid matching funds from states not participating in the broad coverage expansion was not. This surprising decision effectively gave states the option to expand Medicaid eligibility.

IHA and its members immediately recognized the implications of this ruling. Indiana hospitals were facing payment cuts under the ACA of almost $4 billion over 10 years that were intended to finance increased coverage through Medicaid expansion. If Indiana did not move forward to maximize coverage, these cuts could threaten the survival of many hospitals. In addition, more than 300,000 Indiana residents were caught in a “coverage gap,” earning too much to qualify for Medicaid, but too little to qualify for tax credits and subsidies through the federal health insurance marketplace.

In September 2012, CMS granted a one-year extension of the existing HIP waiver. No one was certain what might happen when that extension expired in December 2013. However, when Gov. Mike Pence took office in January 2013, he indicated that he was interested in his predecessor’s plan to use HIP to support expansion.

“Any expansion of Medicaid would have to be fiscally responsible, and it would also have to permit Indiana to expand it in a way that reflected recent innovation in health care—namely, our Healthy Indiana Plan,” Pence said at the time.

“There was a sense that the Affordable Care Act might represent too big of an expansion for Indiana, but also a fear that the one-size-fits-all approach of expanding traditional Medicaid was going to quash Hoosier innovation,” Tabor said. “The governor, now the vice president, and many other Republican lawmakers said, ‘If we can expand HIP, then we’re open to that.’ Ultimately, that’s what happened.”

Believing that the best way to expand access in Indiana was through HIP, IHA endorsed Pence’s decision to break coverage expansion into two stages. The first was to ask CMS for a second one-year extension of the HIP waiver. After that extension was approved in the fall of 2013, Pence was willing to talk about using HIP as a vehicle for expansion up to 138 percent of the poverty level, which was phase two.


With the second waiver extension scheduled to expire at the end of the year, IHA and its members launched an aggressive campaign in 2014 in support of maximizing coverage for the uninsured. The Expand Indiana campaign was designed to help residents, legislators, and business leaders understand the importance of expanding health care coverage in the state.

The campaign utilized grassroots outreach, media messaging, and other strategies. IHA and its members attended editorial board meetings with newspapers across the state, submitted op-ed letters, met with legislators, spoke at local chamber of commerce events, and held community meetings. A key component of the campaign was the use of personal stories from uninsured Indiana residents, who could share their experiences through the campaign website.

“The best way to help elected officials understand the importance of expanding coverage is to hear the experiences of those who are currently without affordable health insurance options,” 2014 IHA Chairman and Parkview Health President and CEO Michael J. Packnett said at the time. “Expand Indiana has heard from some of the 300,000 Hoosiers who currently fall in the coverage gap.”

Pence and then-U.S. Health and Human Services Secretary Kathleen Sebelius held a number of discussions throughout 2014 on how HIP could be expanded. IHA played an integral role in this process by collaborating with the state to develop a plan to partially fund the expansion through the hospital assessment fee.

“The hospital assessment fee paradigm was a way to fund expanded care in Indiana and to help reimburse hospitals for the care they gave to the underserved,” said 2013 IHA Chairman and then-President and CEO of Indiana University Health Dan Evans. “Though it sounds like money, it’s really about providing care.”

In January 2015, CMS approved the new waiver. Under HIP 2.0, Hoosiers ages 19 to 64 with incomes up to 138 percent of the federal poverty level became  eligible for affordable health care coverage. It was a huge victory for patients, hospitals, and Hoosier health care.

“With the approval of the Healthy Indiana Plan 2.0 waiver after months of negotiations, Governor Pence and his administration are to be commended for their efforts to secure this innovative, affordable coverage program for those who need it most: our state’s working families,” said then-IHA President Doug Leonard. “While our focus is on enrolling our patients so that they can have improved access to preventative care and the security of coverage, there is no doubt that this announcement also sends a much-needed lifeline to Indiana’s safety net hospitals.”

A number of hospital executives issued statements thanking the governor for his support.

“When HIP originally began enrolling individuals in 2008, Rush Memorial Hospital promoted HIP through our community outreach program. I knew there was a need, but I was amazed by the response. Rush Memorial received several letters from patients and community members thanking the hospital for holding their hand and walking them through the enrollment process,” said Rush Memorial Hospital President and CEO Brad Smith. “However, HIP was capped by the number of enrollees and only scratched the surface of what was actually needed to provide insurance coverage for all Hoosiers. I commend the governor for his leadership and reaching out to all those in need in our state and working with the hospitals by adopting HIP 2.0.”

“On behalf of Clark Memorial Hospital, I am proud to join with IHA and its 160 members throughout the state in support of the governor and the HIP 2.0 program, an innovative and fiscally responsible approach to expanding coverage to more uninsured individuals in Indiana,” said Martin Padgett, FACHE,  president and CEO of Clark Memorial Hospital. “The HIP 2.0 program represents an opportunity for those most in need in our communities to leverage appropriate health resources and it allows Indiana’s health care providers to deliver on our promise to deliver superior health care to our communities.”

Among its many innovations, HIP 2.0 facilitated linkages to employment services and rewarded individuals for securing employment and moving off public assistance. Unlike traditional Medicaid, the Healthy Indiana Plan reimbursed providers at 100 percent of the higher Medicare rates, ensuring more provider participation and leading to greater access to health care services.

“Our increased reimbursement rates brought thousands of new providers into our Medicaid family,” said Dr. Jennifer Walthall, secretary of the Indiana Family and Social Services Administration. “That not only increased access for HIP members, but allowed our partners in managed care to provide incentives to encourage and sustain the healthy behavior changes their patients were exhibiting.”

In addition to expanding coverage for new applicants, Hoosiers enrolled in the original HIP program were transitioned to HIP 2.0, along with all non-pregnant adults receiving coverage in Indiana’s traditional Medicaid program, Hoosier Healthwise. With the transition of these members and the enrollment of many more, the program has continued to grow with more than 400,000 individuals fully enrolled today. The results have been astounding, both in their short-term returns and in the possible long-term, systemic change in the way people perceive health care.

“I think about people between 20 and 29 as the walking immortal,” Walthall said. “These are usually people who don’t think about participating in health care as something that’s mandatory. The fact that we are enrolling 120,000 in that age group in HIP means that we’re starting that behavior of personal engagement with their health care that’s going to persist for generations.”

Walthall believes the behavioral change in this demographic will pay long-term dividends.

“We know that kids’ health behaviors are driven by their caregivers’ behaviors. If we’re enrolling young moms and dads, we know that their kids’ health care outcomes are going to increase right alongside theirs,” she said.


In addition to continuing HIP through December 2020, the recent renewal of the 2.0 waiver includes a number of enhancements and changes.

First, the renewal provides an additional $80 million in annual funding to support efforts to attack the opioid epidemic. Indiana will expand access to a range of addiction treatment options—inpatient, outpatient, and residential—for both HIP and Medicaid members to help ensure Hoosiers get the specific treatment needed for their disease. The state will also add chiropractic benefits to the HIP Plus plan to help provide members with expanded non-opiate pain management options.

The renewal also provides expanded coverage for expecting mothers. Women enrolled in HIP at the time of pregnancy will stay in HIP while pregnant and move into HIP Maternity. These pregnant women will receive enhanced benefits as part of an effort to decrease infant mortality.

“Our research shows that 60 percent of infant deaths are due to perinatal risk,” Walthall said. “We know those risks are mitigated when we have early access to quality prenatal care.”

Additional HIP Maternity benefits include vision, dental, non-emergency transportation, and chiropractic care, regardless of the selected HIP Plan. These benefits will be extended for two months after delivery.

“Health care needs don’t end when the infant is delivered,” Walthall said. “This is really critical as we connect to the substance use disorder/opiate epidemic because we have a rising number of moms with substance use disorder on HIP who are delivering infants who are at risk for neo-natal abstinence syndrome. That requires seamless coverage.”

In addition, the renewal adds provisions that connect HIP members to job training, education, and community engagement activities through Indiana’s existing Gateway to Work initiative. Expanding Gateway to Work will help fill thousands of available jobs in high-demand industry sectors and improve quality of life for participating HIP members.

“Most of our HIP members are already working,” said Walthall. “Because of that, we started asking ourselves how we can help them get that next, better job. So we’re getting members ready to engage in employment, helping to reduce transportation and health barriers that are keeping people from where they should be next.”

Finally, the renewal expands incentives for members who achieve tobacco cessation, participate in substance use disorder treatment, and take steps toward  managing chronic disease.

“Some of these changes are the result of internal assessment of the program,” Tabor said. “Others are the result of dialogue with advocates, providers, and enrollees in talking about how to make the program better from an administrative standpoint. These are not new wrinkles but rather system improvements.”

“We’re only as good as the last criticism we received,” Walthall said. “Because really, at the end of the day, the members that we serve are our constituents. Everything we can do to make that experience better will really help move the needle on health outcomes.”


The success of HIP can be attributed to a number of factors, including the close collaboration between IHA and the state.

“I’d like to think that our advocacy and the voice of hospitals and patient advocates helped frame the debate around coverage expansion in Indiana,” Tabor said. “Our position has always been that we support the different approaches to expanding coverage. I think we’ve had success because it’s been done in a fiscally sustainable way and with input from all sides.”

Following the approval of the HIP 2.0 plan in 2015, IHA presented Pence with the John C. Render Award for Health Policy. The respect was mutual: Pence presented the IHA team who had worked with his staff on the creation of the program with the Sagamore of the Wabash award, the highest honor the governor can give to those who have rendered a distinguished service to the state.

“I’m honored to receive the John C. Render Award for Health Policy as a reaffirmation of the broad success and support the Healthy Indiana Plan has garnered since its rollout last January,” Pence said upon receiving the award. “Because of the Indiana Hospital Association members here today, as well as the many service providers around the state, Indiana has served as a national leader in reforming Medicaid through the HIP 2.0 program by implementing this consumer-driven model.”

Walthall also acknowledges the role that IHA has played in HIP’s success—and looks forward to more collaboration in the future.

“I want to thank IHA for being an ongoing partner. Without the hospital association and our health care community, HIP isn’t possible,” she said. “We sit here as grateful partners in this grand experiment that’s really doing some pretty incredible stuff. We have the eyes of the nation upon us.”