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SCHIP: What's Happening? What's Next?
For Employer-Sponsored Insurance & Family Coverage
Richard E. Curtis, President, Institute for Health Policy Solutions, Washington, DC.
Therese L. Hanna, M.H.S., State Insurance Administrator, Department of Finance and Administration, Jackson, MI.
Patricia Canney, Director, Agency Program Implementation, Massachusetts Division of Medical Assistance, Boston, MA.
Coordinating State Children's Health Insurance Program (SCHIP) funding with employer coverage has pros and cons and is mainly pursued by States only when there is legislative interest. Mr. Curtis sited many key problems States will face when pursuing this option. Mississippi and Massachusetts have Health Care Financing Administration (HCFA)-approved plans to subsidize premiums for children with access to employer-sponsored coverage (through a parent) and shared their models and experiences, although limited, with the workshop participants.
Mr. Curtis cited research that estimates that 33 to 37 percent of uninsured children have access to employer-based health insurance. The percent of "targeted low-income" children would be less, but it is still a significant number.
Reasons States may want to consider coordinating with employer-based insurance (ESI) coverage are:
- To encourage, rather than "crowd-out," employer financing of health care for dependents.
- To support work for low-income families.
- To allow parents to cover their children under the same plan they are in.
Reasons States may not want to coordinate with employer-based coverage include:
- The program is complicated to administer.
- It may exacerbate the appearance of inequity under SCHIP (i.e., assistance is only available to those who have not previously purchased coverage, and co-workers in similar or the same circumstances may not have access to the program).
- It may increase the likelihood that crowd-out will occur (i.e., families may drop their dependent coverage to enroll their children into SCHIP through the subsidized employer-sponsored program if they can remain in the same health plan).
Mississippi's SCHIP ESI program will be available to children in families with incomes up to 200 percent of the Federal poverty level (FPL). Ms. Hanna, during her presentation, gave reasons her State decided to create an employer-sponsored subsidy program. The State's philosophy is that the program is a natural outgrowth of the emphasis on insurance vs. Medicaid; it is a step toward unsubsidized health insurance; and it will prevent crowd-out.
Difficulties the State will face with its subsidized ESI program:
- A large proportion of small employers.
- No standardized health insurance market.
- Little data on the employer market (i.e., employer contribution levels, benefit package, etc.).
To participate in the subsidized ESI program, both the family and employer must agree to participate, then the benefits are compared and coordinated, if necessary, and the subsidy must pass the cost-effectiveness test.
The program faces many challenges, such as:
- Gaining the interest of families and employers.
- Meeting the needs of transient employees.
- Implementing a process to deal with enrollment periods of health plans.
- Educating agencies, employers, families, providers, and others affected by the program.
Massachusetts' SCHIP ESI program is also available to children in families with incomes up to 200 percent of the FPL and in some cases provides family coverage as well. The ESI program must meet the benefit benchmark, must be cost effective, and the employer must pay 50 percent of the cost of insurance.
To meet the family coverage cost-effectiveness test, the State compares the cost to cover children under their direct coverage program with the employer-sponsored coverage. If the total premium minus the employer share costs the same or less than covering the children in the direct-coverage program, the State will buy the children in to their parents' employer coverage. If the cost of buying the children in also covers the parent(s) as well, then the State can offer family coverage. This is most likely to occur when there are two or more children and the employer pays more than 50 percent of the insurance cost.
Before a State decides to subsidize ESI coverage or provide family coverage, it should study the present insurance market, contact carriers for information and work with them, and consult with health insurance experts. Operational difficulties are many and include designing processes to subsidize the employer premium, verifying that coverage meets the SCHIP standard, ensuring that families do not pay more than the 5-percent maximum, and making sure that copayments are not charged for well-child visits.
Mr. Curtis gave a brief summary of why other States may want to subsidize ESI coverage. Under such a program, public and private dollars are mixed. Also, by keeping children in the ESI market, the risk pool is widened, which may in effect decrease the cost of ESI. Being up front and honest, Mr. Curtis states that subsidizing ESI is difficult. It may not be realistic for some States to even consider it. Success will depend on State staffing capacity, the insurance and employer market, the level of income eligibility, and legislative support.
During the discussion after the presentations, HCFA stated that the regulations may have guidance on options to provide family coverage.
Tollen LA. Subsidizing employer sponsored insurance under state children's health insurance programs. Washington (DC): Institute for Health Policy Solutions, 1999 Feb.
Henneberry J, Hearne J. Using SCHIP funds for health insurance premium contributions: policy issues and operational challenges. Washington (DC): Institute for Health Policy Solutions, 1998 Oct.
MassHealth Family Assistance Program: case study of employer-based insurance subsidy program. Washington (DC): Institute for Health Policy Solution, 1999 Apr.
Hearne J. Coordination of children's coverage expansions with employer-sponsored coverage. Washington (DC): Institute for Health Policy Solutions, 1998 Mar.
Merlis M. Employer coverage and the Children's Health Insurance Program under the Balanced Budget Act of 1997: options for states. Washington (DC): Institute for Health Policy Solutions, 1997 Aug.