Options to Extend Health Coverage in Delaware

Key Background Observations Preponderance of uninsured are working families Preponderance of uninsured are working families

with incomes between 100% and 200% of with incomes between 100% and 200% of poverty. We concentrate on these people.poverty. We concentrate on these people.

For these people, the challenge is to make For these people, the challenge is to make coverage affordable. They will require subsidies.coverage affordable. They will require subsidies.

So federal and state governments will have to So federal and state governments will have to incur new financing if the problem is to be solved.incur new financing if the problem is to be solved.

We acknowledge we cannot solve the problem. At We acknowledge we cannot solve the problem. At best, our approaches would cover about 1/4 of the best, our approaches would cover about 1/4 of the 96,000 uninsured.96,000 uninsured.

Background (cont.)

No state has solved this problem, and no state can No state has solved this problem, and no state can do it alone. do it alone.

Often there is a trade-off between cost and equity: Often there is a trade-off between cost and equity: efforts to prevent “crowd out” result in treating efforts to prevent “crowd out” result in treating people differently even though their need is the people differently even though their need is the same. same.

We consider these policies as if adopted We consider these policies as if adopted separately, but if adopted together, they would separately, but if adopted together, they would have interactive effects that would change cost have interactive effects that would change cost and “take-up” estimates.and “take-up” estimates.

Background: Federal Poverty LevelAnnual Family Income - 2001 Federal Poverty Level

Family Size

100% of Poverty

Level

150% of Poverty

Level

200% of Poverty

Level

300% of Poverty

Level

1 $8,590 $12,885 $17,180 $25,770

2 $11,610 $17,415 $23,220 $34,830

3 $14,630 $21,945 $29,260 $43,890

4 $17,650 $26,475 $35,300 $52,9505 $20,670 $31,005 $41,340 $62,010$0

Add per person $3,020 $4,530 $6,040 $9,060

Safety Net Support: Limited Benefit PlanApproach

““Coverage” program offering ambulatory benefitsCoverage” program offering ambulatory benefits Services include primary care, prescription drugs, Services include primary care, prescription drugs,

diagnostic procedures, and limited specialty care. diagnostic procedures, and limited specialty care. Affordable for low-income individuals:Affordable for low-income individuals:

No premiums or annual deductibleNo premiums or annual deductible Nominal copayments for office visits and prescription Nominal copayments for office visits and prescription

drugsdrugs Cost is 100% state (no federal) unless special Cost is 100% state (no federal) unless special

financing is used.financing is used.

Limited Benefit PlanTarget Populations Individuals age 19 to 64 with incomes between Individuals age 19 to 64 with incomes between

100% and 200% of poverty without regard to 100% and 200% of poverty without regard to employment status; not necessary to be a parent of employment status; not necessary to be a parent of a minor child. a minor child. Income level above Medicaid level. Income level above Medicaid level. Ages 19 to 64 because children have access to CHIP Ages 19 to 64 because children have access to CHIP

and seniors have access to Medicare.and seniors have access to Medicare. Eligibility based on income without regard to Eligibility based on income without regard to

employment status. Individuals may be employed but employment status. Individuals may be employed but health insurance is unavailable or not affordable. health insurance is unavailable or not affordable.

Limited Benefit PlanAdvantages Limited benefits (no acute care covered) makes Limited benefits (no acute care covered) makes

coverage more affordable than full insurance – coverage more affordable than full insurance – allows limited dollars to cover more individuals. allows limited dollars to cover more individuals.

Encourages use of primary and preventive care – Encourages use of primary and preventive care – before illness becomes serious, chronic or costly.before illness becomes serious, chronic or costly.

Safety net system, such that we have with our Safety net system, such that we have with our CAP program, can receive payment for services.CAP program, can receive payment for services.

Limited Benefit PlanDisadvantages Continues reliance on hospitals to fund the cost of Continues reliance on hospitals to fund the cost of

care for the uninsured (in part through cost-care for the uninsured (in part through cost-shifting).shifting).

Availability of ambulatory care without premiums Availability of ambulatory care without premiums may reduce likelihood of low-income employees may reduce likelihood of low-income employees choosing to pay for employer-sponsored coverage.choosing to pay for employer-sponsored coverage.

Requires disclosure of all household income.Requires disclosure of all household income.

State funds not matched by employer or federal State funds not matched by employer or federal (unless Medicaid special financing is used).(unless Medicaid special financing is used).

Limited Benefit PlanCost and Impact on Uninsured

Eligibles Take-Up Total Cost per Capita

Cost to the State

(millions)

State Cost per Newly Covered Person

12,700 5,000-7,500 40%-60%

$400-$570 $2.0-$4.2 $400-$570

One-Third Share PlanApproach Affordable health care “coverage” for employees Affordable health care “coverage” for employees

of low-wage businesses.of low-wage businesses. Affordability achieved by:Affordability achieved by:

Subsidization: employer and employee together pay 2/3 Subsidization: employer and employee together pay 2/3 or less of the total cost of coverage.or less of the total cost of coverage.

Streamlined benefits: Coverage is less extensive than Streamlined benefits: Coverage is less extensive than commercial insurance. commercial insurance. For example, the scope of benefits is structured to level at For example, the scope of benefits is structured to level at

which employer and employee shares of premiums are less which employer and employee shares of premiums are less than $50 each per month. than $50 each per month.

One-Third Share PlanTarget Population Employees of low-wage businesses and their Employees of low-wage businesses and their

dependentsdependents Businesses:Businesses:

Have not offered health insurance for a set periodHave not offered health insurance for a set period Have average (median) employee wages less than Have average (median) employee wages less than

threshold (e.g., $10 per hour)threshold (e.g., $10 per hour)

Employees:Employees: Work more than X hours per weekWork more than X hours per week Do not have access to Medicare, Medicaid, etc.Do not have access to Medicare, Medicaid, etc.

One-Third ShareAdvantages Affordable health care is available to those that Affordable health care is available to those that

have not been able to afford it in the past. have not been able to afford it in the past. Causes new employer money to be contributed to Causes new employer money to be contributed to

employee health care.employee health care. Employees use their available funds to purchase Employees use their available funds to purchase

organized health care rather than to pay for organized health care rather than to pay for services out-of-pocket as funds allow.services out-of-pocket as funds allow.

One-Third ShareDisadvantages Establishing benefits and “premiums” is complex. The legal structure may be problematic if the

coverage is less comprehensive than licensed insurance.

Very intensive effort required to “sign up” businesses.

Inequitable treatment of similarly situated businesses, and crowd-out potential.

One-Third ShareCost and Impact on Uninsured

Eligibles Take-Up Total Cost per Capita

Cost to the State (millions)

State Cost per Newly Covered Person

7,400 800-1,200 11% - 15%

$1,800 $0.5-$0.7 $600

SCHIP ExpansionApproach Through a new 1115 waiver, use S-CHIP funds to Through a new 1115 waiver, use S-CHIP funds to

cover parents of minor children in families with cover parents of minor children in families with incomes between 100% and 200% of poverty.incomes between 100% and 200% of poverty.

New HIFA waiver authority allows flexibility in New HIFA waiver authority allows flexibility in development of the scope of benefits and the development of the scope of benefits and the amount of beneficiary “cost-sharing” (such as amount of beneficiary “cost-sharing” (such as copayments and premiums). copayments and premiums).

Possible component to subsidize employer-Possible component to subsidize employer-sponsored coverage when it is available. sponsored coverage when it is available.

SCHIP Expansion Target Population ParentsParents of minor children in families with of minor children in families with

incomes between 100% and 200% of poverty. incomes between 100% and 200% of poverty. (The children are eligible for Medicaid or S-(The children are eligible for Medicaid or S-CHIP.)CHIP.)

Unlike Delaware’s Medicaid 1115 waiver, this Unlike Delaware’s Medicaid 1115 waiver, this excludes single individuals, childless couples, and excludes single individuals, childless couples, and parents of adult children. parents of adult children.

SCHIP ExpansionAdvantages Federal government pays 65% of the cost of Federal government pays 65% of the cost of

coverage to the extent of Delaware’s unused coverage to the extent of Delaware’s unused SCHIP allocation.SCHIP allocation.

Under an 1115 waiver the state can secure federal Under an 1115 waiver the state can secure federal funds while limiting the state’s financial funds while limiting the state’s financial obligation. (E.g. State’s can “close” enrollment.)obligation. (E.g. State’s can “close” enrollment.)

Can use an existing administrative system.Can use an existing administrative system. More children already eligible for Medicaid or More children already eligible for Medicaid or

CHIP will be newly enrolled. CHIP will be newly enrolled.

SCHIP Expansion Disadvantages Possible “welfare” stigma.Possible “welfare” stigma. Limited to parents of minor children.Limited to parents of minor children. Availability of “free” coverage for significant Availability of “free” coverage for significant

number of full-time working parents may create number of full-time working parents may create greater incentives (than child-only coverage) for greater incentives (than child-only coverage) for employers to drop existing private coverage. employers to drop existing private coverage.

Key issue of what income levels are chosen and what Key issue of what income levels are chosen and what the state does to coordinate coverage with employers.the state does to coordinate coverage with employers.

CHIP Expansion Cost and Impact on Uninsured

Eligibles Take-Up Total Cost per Capita

Cost to the State (millions)

State Cost per Newly Covered Person

16,500 2,900-7,700 $1200-$1700 $1.2-$4.7 $430-$610 18%-46%

Subsidized Purchasing PoolApproach Carriers to submit bids for a defined Carriers to submit bids for a defined

comprehensive, but not rich, benefit package, comprehensive, but not rich, benefit package, assuming normal-risk population.assuming normal-risk population.

Pool negotiates with carriers and decides which Pool negotiates with carriers and decides which health plans to offer, depending on the value.health plans to offer, depending on the value.

State, rather than insurers, absorbs cost of adverse State, rather than insurers, absorbs cost of adverse selection and perhaps provides additional subsidy.selection and perhaps provides additional subsidy.

Employers pay minimum of 50% of premium if Employers pay minimum of 50% of premium if no state premium subsidy, 33% if state subsidy. no state premium subsidy, 33% if state subsidy.

Subsidized Purchasing PoolTarget Populations Anyone (employee not offered coverage or an Anyone (employee not offered coverage or an

individual) with household income below 300% of individual) with household income below 300% of poverty (approximately $53,000 for family of 4).poverty (approximately $53,000 for family of 4).

Any firm with 10 or fewer employees.Any firm with 10 or fewer employees. Any firm with average wage level of $10 per hour Any firm with average wage level of $10 per hour

or less.or less. (All values are for illustration and estimating (All values are for illustration and estimating

purposes only; subject to change.)purposes only; subject to change.)

Subsidized Purchasing PoolAdvantages Offers normal-priced coverage to populations that Offers normal-priced coverage to populations that

often have to pay substantially more than average, often have to pay substantially more than average, with choice of several plans.with choice of several plans.

Provides a fair way of spreading the costs of Provides a fair way of spreading the costs of covering high-risk people— cost comes from state covering high-risk people— cost comes from state general revenues (the total population)— unlike general revenues (the total population)— unlike approaches which assess only insured plans and approaches which assess only insured plans and not self-insured employers/employees.not self-insured employers/employees.

Subsidized Purchasing PoolDisadvantages Need to craft provisions to prevent the pool from Need to craft provisions to prevent the pool from

becoming merely a high-risk pool, which will be becoming merely a high-risk pool, which will be challenging.challenging.

Merely making coverage available will not ensure Merely making coverage available will not ensure that target populations will take advantage of it.that target populations will take advantage of it.

Subsidized Purchasing PoolCost and Impact on Uninsured

Option Eligibles Take-Up Annual Cost Per Covered Peson

Total State Cost

(millions)

State Cost Per Newly Covered Person

Subsidy for Adv. Select.

47,000 13,400-18,800

$2200-$3100

$1 - $17 $100-$900

29%-40%

Plus 1/3 Premium Subsidy

47,000 16,900-23,800

$2200-$3100

$12 - $39 $700-$1600

36%-51%