Efforts to Enroll Individuals inEmployer- Based Insurance

Coverage in Six States

Susan TuckerSenior Research AnalystUniversity of Maryland, Baltimore Co.

SCI Winter MeetingJanuary 25, 2007

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Purpose of HRSA Study Document the design elements that are important

in implementing a workable program for providing health coverage for low-income workers

Examine how the states used information gained during the State Planning Grant (SPG) process to design their programs

Six states were selected for study – most of whom had received SPGs and all of whom had implemented a public or private program to provide affordable insurance coverage

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Features of Selected States

Programs are incremental attempts to address the problem of uninsured workers

None of the programs are part of full scale state health care reform programs

None of the programs include legislative mandates to require or penalize employers who don’t offer health insurance

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Programs and Enrollment

Arizona Healthcare Group (HCG) 24,562 as of Dec 2006

Access Health (Muskegon Co, MI) 1,200 as of Nov 2006

New Mexico State Coverage Insurance (NMSCI)

4,623 as of Dec 2006

Healthy NY (New York) 110,000 as of Oct 2006

Oklahoma O-EPIC Premium Assistance (O-EPIC PA)

1,216 as of Oct 2006

Utah’s Premium Partnership (UPP) New Program

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Why work with employer-sponsored insurance?

It is the predominate source of health insurance for most Americans

If an employer offers insurance, most workers in low wage firms will participate

Small firms employing low wage workers are much less likely to offer insurance

Therefore, state coverage initiatives tend to target small employers

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One of Key Study Findings Concerning Small Employers

Marketing the program and assisting employers and their employees in enrolling is critical to program success. But at the end of the day, program design has the biggest influence on participation of small employers. This presentation will cover how states have designed their programs to meet the needs of small employers.

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What Do Employers Want?

Good deal – reasonable premiums for a fairly comprehensive benefit package

Predictability – program will continue to exist and costs will not increase dramatically

Ease of administration – simple application and premium processing

Equity among employees – all employees will be able to get health insurance at a reasonable cost

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What States have Done to Attract Small Employers

Subsidize premiums Design benefit packages and implement cost

sharing to keep premium costs down and constant Make it easy for employers/employees to enroll in

the program In some cases, allow all employees (regardless of

income level) to buy coverage and use existing employer sponsored insurance (ESI) products

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Direct Subsidy of the Insurance Product

Healthy NY provides stop-loss protection for the carriers, thus lowering product prices. They pay 90% of cost of care for individuals with health care costs between $5,000 and $75,000. Carriers pay all costs below $5,000 and above $75,000.

NMSCI pays monthly capitation payments to MCOs. The payments equal the difference between the negotiated rate and the fixed amount the employer/employee pays the MCO.

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Subsidies Paid to the Employer

O-EPIC Premium Assistance pays the employer directly for the difference between the employer/employee contributions and the cost of the insurance product. The employer collects the employee contribution through payroll deduction and forwards the entire blended premium to the carrier.

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Subsidies Paid to the Employee

Utah UPP pays subsidies directly to the employee to assist them with purchasing insurance from the employer. The money is sent to the employee early in the month so that there is not a big time lag between the payroll deduction for the employee’s share of the premium and the receipt of the money.

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Program Keeps Subsidies

Although they are exempt from state health insurance rules (which means they are not subject to state benefit mandates or solvency requirements), Access Health (Muskegon County, Michigan) acts as a virtual health plan. They collect the employee/employer share of the premium and combine this money with a subsidy. Access Health enrolls providers, provides care management, establishes payment rules, and uses the blended money to pay for health care services for enrollees.

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Employer Contributions to Premiums/ State Rules

Program Minimum ContributionsArizona HCG Employer determines amount

Access Health 30 %

NMSCI $75 per month

Healthy NY 50 % of subsidized premium

O-EPIC PA 25 %

UPP 50 %

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Challenges of Benefit Design

Employers have two competing interests – they want comprehensive benefits and they don’t want to pay a high price. States have to develop a benefit package that small employers and their low wage employees can afford. This is particularly difficult when there is no subsidy.

States have attempted to meet this challenge by developing a variety or products and by limiting the benefit package.

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Benefit Design Strategies

Varied Packages – Arizona HCG currently has no subsidy to apply to the cost of the benefits. They offer a range of benefit choices to small businesses. These packages have different benefit mixes with different cost sharing. The plans meet the needs of different populations (healthy and more medically needy) at different price points. Some packages are fairly basic and some are comprehensive. Some are provided by MCOs and some by PPOs.

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Benefit Design Strategies

Comprehensive limited package All HMOs participating in Healthy NY must offer a

wide variety of services. However, several services that can add significantly to the cost of care are not offered under the program – such as mental health, substance abuse, and home health services.

NMSCI offers a comprehensive package – with an annual $100,000 limit on covered services.

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Benefit Design Strategies

De Facto Restrictions on Benefits – Access Health (Muskegon Co, MI) is a county-specific, non-insurance product. As such, it only pays for services provided by providers within the county. This effectively eliminates many tertiary services from the benefit package (such as burn care, neonatal intensive care, and transplants) and allows the program to keep down the cost of the premiums for employers and employees.

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Cost-Sharing Challenges

States have attempted to lower premium costs and to keep premium costs relatively stable over the years by implementing out-of-pocket cost-sharing such as co-payments and deductibles

When subsidizing ESI programs, states have to decide whether to take on the administrative burden of intervening in existing co-payment/ deductible procedures

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Reducing Premium Costs through Cost-Sharing

Using existing ESI out-of-pocket cost-sharing rules O-EPIC PA allows plans to establish out-of-

pocket cost sharing rules within certain broad parameters - Employees apply for reimburse-ment from the state if cost-sharing exceeds 5% of family income

UPP has similar procedures - but does not step in if employee out-of-pocket cost-sharing exceeds 5% of family income

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Other Cost-Sharing Methods

Arizona HCG has a variety of plans and each plan has different cost-sharing requirements. Plans with higher cost-sharing have lower premiums.

Access Health and Healthy NY have extensive lists of co-payments related to covered services. But there is no overall limit on cost-sharing.

NMSCI has nominal co-payments which correspond to income groups. Enrollees can receive reimbursement from the state if cost-sharing exceeds 5% limit of family income.

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Ease of Administration for Employers

With an ESI Premium Assistance Program - it all starts with the employer. If the employer doesn’t offer coverage then the employee can’t take advantage of the coverage. Once the state has decided to implement the program and has developed the program design, then they have to sell the program to employers. One of the key selling points will be that it won’t involve a lot of extra work on the part of the employer.

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Marketing/ Enrollment Strategies

NMSCI requires health plans to outreach and assist small employers and their employees to apply/enroll in the program

Access Health has in-house staff that outreach and assist in application/ enrollment process – these staff also help with information about Medicaid

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Marketing/Enrollment Strategies

Strategies for encouraging Insurance Brokers/Agents to help with enrollment On-line applications and good training materials

– O-EPIC PA Paying commissions similar to private sector

commissions – O-EPIC PA, UPP Paying commissions with certain restrictions –

Arizona HCG (one time), NMSCI (not allowed to use state or federal funds for commission)

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Marketing/Enrollment Strategies

Under Healthy NY, health plans decide whether or not to use insurance brokers to help in the enrollment process. However, the State does require plans who provide commissions to insurance agents on their regular small group contracts to do the same under Healthy NY.

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Marketing/Enrollment Strategies for Enrollees

States who means test enrollees – New Mexico, Oklahoma and Utah – have attempted to streamline the application process. They do not conduct assets tests and they do not require face-to-face interviews. In the case of Oklahoma, applicants can apply via on-line. Nevertheless, means testing requires significant administrative effort.

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Advertising – a few examples

Healthy NY uses radio and television commercials

O-EPIC PA reaches out to small employers through direct mailing of educational materials and through presentations at Chambers of Commerce meetings

Arizona HCG participates in special enrollment events

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Equity among employees

In addition to the fact that means testing is administratively burdensome, some employers will not sign-up for a insurance program unless all employees can have access to the program. Some of the programs were creative in addressing this issue.

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Equity for Higher Income Employees

Healthy NY and Access Health target companies who mostly employ low-income workers In Healthy NY, all workers in a company can

participate as long as 30% of its employees/ enrollees earn less than $34,000

In Access Health, all workers can participate as long as the company’s median income is less than $11.50 per hour

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Equity for Higher Income Employees New Mexico has established other similar

programs for employees within a small business who have family incomes higher than 200% FPL. For example, the Small Employer Insurance Program (SEIP) provides the same benefit package as NMSCI. The State will process the paperwork for all the employees within the same business and make sure that the low income employees are placed on the NMSCI and the higher income employees are placed on SEIP. Note - higher income employees do not receive the premium subsidy.

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Lessons Learned

Programs targeted at small business have a long take-up process – don’t have unrealistic goals

Premiums have to be affordable and benefit package needs to be meaningful – survey local small employer market before designing the program

Need to consider both the employer and employee share of the premium – subsidies may be key to successful implementation

Making it easy for the employer doesn’t translate into making it easy for the state – these programs can be difficult to administer

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Lessons Learned

Need to hire marketing staff or rely on insurance agents/brokers- need to consider payments of private agents/brokers

Individual means testing is a huge administrative burden – Medicaid expansions have a hard time getting away from this requirement and are more complex to administer

Plan on the program initially costing more than expected due to pent up demand for services

Administrators need to appreciate the tension between adding benefits and keeping program costs low