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Public/private coverage in SCHIP reauthorization: Premium

assistance and other issues

Joan AlkerDeputy Executive Director

Center for Children and FamiliesHealth Policy Institute, Georgetown University

jca25@georgetown.eduAmerican Academy of Pediatrics

Committee on Federal Government AffairsSeptember 29, 2007

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A very ideological debate

“The (Congressional SCHIP) proposal would move millions of American children who now have private health insurance into government-run health care. Our goals should be for children who have no health insurance to be able to get private coverage, not for children who already have private health insurance to get government coverage”

President George W. Bush

Veto message delivered on

9/20/07

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Public v. private – a false dichotomy

Private plans are delivering the vast majority of care to children in public programs.

In 2004, 73% of children enrolled in Medicaid managed care.

In 2005, all but two separate state CHIP programs contracted with managed care companies or other outside entities.

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Has CHIP crowded out private coverage?

An Urban Institute report estimates that CHIP may have contributed to a 10% in private coverage among CHIP eligible children. For some of these families, private coverage is too expensive.

States have found little evidence of crowd-out. Private coverage for all Americans – children and

adults alike – has been declining for many years. CHIP and Medicaid have ensured that the number of uninsured children has not risen higher.

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Premium Assistance: Where public and private intersect in SCHIP bill

What is premium assistance?

The use of federal and state Medicaid and/or SCHIP funding to subside purchase of private health insurance coverage, on the individual market or through employer sponsored plans, primarily for Medicaid and SCHIP beneficiaries

•SCHIP bill creates a new option for states to do premium assistance

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How have states structured their premium assistance programs?

Key issues include Who pays?

Fed/state $$; employer $$; beneficiary $$

What does the benefits package look like? Is there a wraparound?

Is it cost-effective?

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“Opt-out” premium assistance model

Families receive a set amount of money (“defined contribution”) to subsidize purchase of private coverage (could be employer or individual market)

There are no limits on cost-sharing/premium costs

Benefit requirements are minimal VA, FL, IL, UT, ID

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RI/NJ model

Families receive the full benefits package but can be required to join and state applies strict cost-effectiveness test

Higher income families pay premiums State pays any additional costs beyond

families’ contribution Don’t subsidize individual market coverage

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Does it make sense to use public program dollars for private coverage?

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Potential advantages of premium assistance

Could save money Supports employer-based system Can provide coverage to parents or older

children not otherwise covered Private insurance may offer better access to

providers

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Offers of Coverage by Income, 2005

Note: Percentages may not total 100% due to rounding.Sources: L. Clemans- Cope and B. Garret , Changes in Employer- Sponsored Health Insurance Sponsorship, Eligibility, and Participation: 2001 to 2005 , Kaiser Commission on Medicaid and the Uninsured (December 2006).

55%35%

13%

15%

14%

8%

30%52%

79%92%

4%4%

<100% FPL 100-199% FPL 200-399% FPL >400% FPL

Worker has Own or Other ESI CoverageDeclined ESI Offer in FamilyNo ESI Offer in Family

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The Cost of Covering Families Through Employer Coverage vs. Medicaid, 2004

Note: Average cost of coverage for a family of four. These costs do not include family deductibles, co-payments, or coinsurance, which tend to be much higher in employer-sponsored coverageSources: Kaiser/HRET, Survey of Employer Health Benefits, 2004; and Georgetown Center for Children and Families/Center on Budget and Policy Priorities analysis of 2004 Medicaid Statistical Information System (MSIS) data.

$9,950

$7,418

Employer-Sponsored Public

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Have states been saving money?

Available information has been scarce Enrollment has been very low, which results in high

administrative/start-up costs on a per-person basis States can limit premium costs with “opt-out” model

but admin costs can be very high on per capita basis

Florida - first six months admin costs are $6,600 per person because enrollment is so low

Families face increased costs and may get fewer services – state may spend the same but buy fewer services

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Savings Data1

Illinois None Available

New Jersey $203.97 per family per month (varies from month to month

Oregon None Available

Rhode Island

Average of $222.45 per family per month (including administrative costs)

Utah Subsidy is $50 per member per month, compared to $80 per member per month for direct coverage

Savings from Premium Assistance Programs, Selected States, 2005

1All savings data represent combined federal/state savings

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Cost of private insurance is rising

The average cost of family coverage in 2007 was $12,106, of which the average family contribution was $3,281 or $273 a month. (Kaiser/HRET study 2007)

In Illinois after receiving a subsidy of $75 per month, in 2004 Walmart premiums constitute almost 9% of the worker’s pre-tax income Plan has $350 deductible which constitutes another 2% of the

worker’s pre-tax income before they get services (Alker, Kaiser 2005)

NJ decided doesn’t subsidize Walmart because it is not cost-effective

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Key lessons

Be realistic about what to expect from your premium assistance program Employer-based coverage is limited for this population State experience shows enrollment is low (usually under

1% of eligibles – exceptions include IL, OR, RI)

States have not been able to document a lot of savings RI/NJ have the best data and they do provide a

wraparound and do not cap their subsidy

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Key lessons, cont.

Two key elements for achieving savings are:

A robust employer contribution which is more likely at higher income levels

Parents are covered as well Enrollment will be highest when parents are covered

at higher income levels

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What does CHIPRA do?Creates a new state option for premium assistance

programs that are cost-effective and ensures that children don’t lose benefits

The new option only subsidizes employer-based coverage where employers contribute 40% of the premium

Participation is voluntary, and kids can “opt-out” to get back to CHIP/Medicaid at the end of every month

Strengthens existing cost-effectiveness requirements. States must establish that (individual or aggregate basis) premium assistance programs cost no more to operate than it would cost to enroll child in public coverage. Costs include administrative costs. Funds are not available to cover parents.

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What does CHIPRA do? Allows states to require employers to provide

information on benefits covered by their plans. This change makes it easier for states to assess when it is cost-effective to use CHIP funds to buy employer-based coverage.

Treats a child becoming eligible for CHIP/Medicaid as a “qualifying” event. Employers must allow a child found eligible for Medicaid/CHIP into their plan even if it is not an open enrollment period. This makes it easier for states to enroll families quickly into premium assistance programs

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What does CHIPRA do?

Other provisions to integrate public and private coverage:

Creates an employer “buy-in” option. States can establish a purchasing pool with 2 CHIP benchmark products to offer to employers with fewer than 250 employees at least one of whom is SCHIP eligible.

Treats the loss of CHIP/Medicaid eligibility as a qualifying event. This will ensure that a child who becomes ineligible for public programs when the family’s income goes up can enroll in employer-sponsored coverage right away and not experience a period of uninsurance.