There are a series of complex decisions that states must make when designing a children's health insurance benefit package. The states included in this review of programs developed prior to the enactment of Title XXI faced decisions that differ in part from those now facing states who must respond to the specific requirements of Title XXI. In particular, the stand alone programs did not have to address any requirements for specific federally defined benefits.

Like states under Title XXI, however, the states in this review had the option of considering whether to expand coverage under a Medicaid expansion or by creating a separate health insurance program. As part of that decision, states identified the objectives they wished to achieve, such as: provision of a comprehensive benefit package (generally through a Medicaid expansion); provision of primary and preventive services to as many uninsured children as possible; and provision of coverage for a specific population of uninsured children (i.e., filling a gap).

The benefits offered by the states presented in this report as of August 1997 are described in Table 3 below.

Table 3: State Benefit Packages

1 Not all Florida counties offer dental benefits.
² New York benefits were expanded to include inpatient care effective 10/1/97.

 

Objective 1: Providing a comprehensive Medicaid benefit package
Minnesota, Tennessee, and Washington opted to provide a comprehensive array of benefits under a Medicaid expansion. Due to the comprehensiveness of the coverage requirements, these states provide inpatient care and dental, vision and hearing services, in addition to preventive care. For example, MinnesotaCare provides a rich benefit package modeled on the state Medicaid program for children up to 275% of the poverty level. Comprehensive health care services are offered, including dental care, eyeglasses, mental health and substance abuse treatment, chiropractic care, home care, hospice care, and durable medical equipment.

Objective 2: Providing preventive services to as many children as possible
The Colorado Children's Health Plan, CaliforniaKids, Massachusetts Children's Medical Security Plan and New York's Child Health Plus programs decided to provide preventive health services to as many children as possible. By focusing on covering as large a population as possible, these states opted for a more limited benefit package. Their benefit packages excluded such costly services as inpatient, dental, vision, and hearing. For example, New York's Child Health Plus Program, the largest of the 13 non-Medicaid, taxpayer-funded child health insurance programs, provided a modest benefit package which covered preventive care, ambulatory surgery, emergency care, and prescription drugs. As of July 1, 1997, the program was providing coverage to over 135,000 children. This program expanded its benefits to include inpatient care as of October 1, 1997, but has raised premiums to offset the costs of adding this benefit. Similarly, the CaliforniaKids program was designed to limit inappropriate emergency room use by providing preventive care to as many children as possible. By excluding inpatient care, the program was fiscally capable of reaching a broader population of children.

Objective 3: Providing coverage for a specific population of uninsured children
Some children's health insurance programs were established to provide insurance for a specific population. The Caring Programs were initially the only programs that had experience developing health insurance products for a "gap" population. The first Caring Program was established in Western Pennsylvania in 1989 after the steel industry lay-offs, and its tremendous public appeal led to replication efforts in twenty-six other sites. The Caring Program generally serves children within 100-150% of the poverty level. The Caring Program model was designed to provide transitional care for children without insurance coverage and as such did not include a comprehensive benefit package. The limited benefits of the Caring Program led many states to significantly expand their benefits over time. For example, when the state of Pennsylvania established its state-sponsored Children's Health Insurance Program (CHIP), the state modeled its state program on the original Caring program but added additional benefits such as dental, vision, hearing, prescription drugs, and hospitalization to meet state legislative requirements. The following year, 1994, both the CHIP and Caring Programs added mental health benefits.

The Colorado Children's Health Plan, also initially modeled on the Caring Program, is now being significantly expanded to include inpatient services and mental health care when it is incorporated into the new Children's Basic Health Plan in July 1998. The Colorado Children's Health Plan (CCHP) initially targeted families in rural counties in northeast Colorado, since those families had limited access to health care and few safety net providers were available to fill the gaps. The program gradually expanded throughout the state. Benefits included most primary and preventive services, but did not include inpatient hospital care, eyeglasses, hearing aids or dental care. Benefits were also capped at annual maximum of $10,000 per child.

The broad flexibility that states, particularly those with stand-alone programs, had in determining the benefit packages for their programs led to debates regarding inclusion of specific benefits such as inpatient, vision, hearing and dental services. Inclusion of dental, vision, and hearing services was strongly espoused by proponents of the need for a complete primary and preventive benefit package designed to assure children's well-being and functioning. They believed that while there was specific concern with hospital care, it was likely to be available whether or not a child had insurance coverage. On the other hand, children were very unlikely to have a source of care for dental services unless they had insurance coverage for it.

Some states also believed that limiting the scope or comprehensiveness of the benefit package served as a mechanism to deter families from opting out of employer coverage. Families with children with special health care needs (CSHCN), who often require access to specialty services, were viewed as being less inclined to drop private health coverage for a state program that offers fewer benefits.

Those opposing the inclusion of certain benefits often argued based on cost of services rather than on the significance of such health services for children. Three states in this review did not provide inpatient care through their programs (California, Colorado, and Massachusetts); three did not provide dental care or vision care (Colorado, Massachusetts and New York); and two did not provide hearing services (Colorado and New York). In Florida, where the counties had some flexibility, not all chose to provide dental benefits.

Coverage of inpatient care was also a major concern for the stand-alone programs. Those supporting its inclusion felt that inpatient care was an important service to provide in even the most basic benefit package, as it might prevent families from having to spend-down to enroll in Medicaid. Proponents also argued that a benefit package must include coverage for catastrophic illness in order to convince parents to enroll and to ensure continuity of care.

The issue of inpatient care for children is a very different concern than that for adults. In general, inpatient utilization rates for children are very low with a few major exceptions: premature infants and children with special health care needs who are often covered by Medicaid. Experience has often shown that the costs of this benefit for children are not as high as anticipated. Even so, the debate over whether or not to include inpatient benefits in state programs has been hotly contested. Some states felt that the inclusion of inpatient benefits was essential to ease enrollees' peace of mind and to ensure a quality health insurance program. Other states believed that by adding the inpatient benefit, the children's health plan became competitive with private insurance programs. As a result, these states believed that substitution of private coverage for the "public" program might occur.

The costs of hospitalization benefits particularly in contrast to other benefits, whereas viewed as expensive. States generally debated over whether to provide a more limited insurance product for more children or include inpatient benefits and therefore serve fewer children. CaliforniaKids did not offer inpatient benefits in order to provide a greater number of children with preventive care. The experience of this program has shown that CaliforniaKids enrollees have very infrequently needed hospitalization, and in the few instances when they have, they have been referred successfully to the MediCal (Medicaid) program.

In states where parents bear a substantial portion of the program cost, such as Florida, the inclusion of hospitalization benefits was seen as essential to insure participation in the program. New York also to added hospitalization benefits to the New York Child Health Plus package to increase its attractiveness to parents. Consumer and anti-poverty groups advocated unsuccessfully for other alternatives to a hospitalization benefit including: expanding the benefits to include dental care instead of inpatient care,; and offering families the option of buying a cheaper, basic plan without hospitalization. The inclusion of inpatient benefits resulted in a dramatic increase in cost for parents. Initially the state believed that children whose parents pay the entire cost of the program were dropping coverage, but the most recent data reviewed by the State no longer did not supports this assumption.

Some states expanded their benefit packages as costs of their initial programs turned out to be lower than anticipated. Many of the programs have continued to focus on preventive care in order to avoid competition with employer-based plans and to cover more children. When CaliforniaKids began in 1992, a primary and preventive care model was used so that as many children as possible could be enrolled and then the program expanded as more funding became available. Actuaries estimated that it would cost $33 per child per month to provide outpatient visits, emergency room visits and prescriptions. After the first year, the program was found to cost $22 per child per month. The decision was made to expand the benefits to include vision care. In the following year, continuing low costs resulted in the addition of dental benefits and a 24-hour emergency hotline.

In the Florida Healthy Kids program, all counties are required to include inpatient care in their benefits packages, but counties are not required to offer a dental benefit. Out of the 19 counties participating in the Healthy Kids program, however, nine have opted to provide dental benefits. Massachusetts, New York and Colorado do not offer dental benefits in order to contain program costs.