Public private coverage in SCHIP reauthorization Premium assistance and

Public/private coverage in SCHIP reauthorization: Premium assistance and other issues Joan Alker Deputy Executive Director Center for Children and Families Health Policy Institute, Georgetown University jca 25@georgetown. edu American Academy of Pediatrics Committee on Federal Government Affairs September 29, 2007 1

A very ideological debate l “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 2

Public v. private – a false dichotomy l l l 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. 3

Has CHIP crowded out private coverage? l l l 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. 4

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 5

How have states structured their premium assistance programs? l Key issues include l Who pays? l l What does the benefits package look like? l l Fed/state $$; employer $$; beneficiary $$ Is there a wraparound? Is it cost-effective? 6

“Opt-out” premium assistance model l l 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 7

RI/NJ model l l 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 8

Does it make sense to use public program dollars for private coverage? 9

Potential advantages of premium assistance l l 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 10

Offers of Coverage by Income, 2005 Worker has Own or Other ESI Coverage Declined ESI Offer in Family No ESI Offer in Family 30% 52% 15% 79% 92% 14% 55% 35% <100% FPL 8% 13% 100 -199% FPL 200 -399% FPL 4% 4% >400% FPL 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 ). 11

The Cost of Covering Families Through Employer Coverage vs. Medicaid, 2004 $9, 950 $7, 418 Employer-Sponsored Public Note: Average cost of coverage for a family of four. These costs do not include family deductibles, co-payments, or coinsurance, 12 which tend to be much higher in employer-sponsored coverage Sources: 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.

Have states been saving money? l l l 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 l l Florida - first six months admin costs are $6, 600 person because enrollment is so low Families face increased costs and may get fewer services – state may spend the same but buy fewer services 13

Savings from Premium Assistance Programs, Selected States, 2005 Savings Data 1 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 14 1 All savings data represent combined federal/state savings

Cost of private insurance is rising l l 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 l l 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 15

Key lessons l Be realistic about what to expect from your premium assistance program l l l 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 l RI/NJ have the best data and they do provide a wraparound and do not cap their subsidy 16

Key lessons, cont. l Two key elements for achieving savings are: l A robust employer contribution which is more likely at higher income levels l Parents are covered as well l Enrollment will be highest when parents are covered at higher income levels 17

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 l l l 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. 18

What does CHIPRA do? l l 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 19

What does CHIPRA do? Other provisions to integrate public and private coverage: l l 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. 20