VI. Implications For Future Expansions Under Title XXI of the Social Security Act
A. Implications for the design of Title XXI programs by states
Decisions regarding how and to what extent to expand coverage for uninsured children will be made in the context of broader state policy objectives and existing state programs. The issue of substitution and how states will address it is likely to be influenced by specific views regarding the role of the public and private (employer) sectors in providing affordable health care coverage for their citizens. There are two ways that substitution can occur under CHIP: (1) substitution of coverage, which can occur when families or employers drop existing private coverage to enroll in CHIP, and (2) substitution of premiums, which can occur when employers reduce their contribution levels for dependent coverage because families are able to obtain subsidies that offset the reduced amount of contribution. Existing and potential policies regarding insurance reform, efforts to assist employers in providing coverage, and state social and economic policies are likely to be examined in the overall planning for expanded children's coverage and the effect of possible substitution of private coverage. Current research coupled with past experiences of states provides some information for states to consider as they plan and implement programs funded by Title XXI. Four major program design issues were identified as important areas in addressing substitution: the overall design of the program; determining whether to use Medicaid expansions or separate state programs; the development of specific provisions related to employer coverage; and the oversight and evaluation of the expanded program.
One of the most difficult issues facing states is how to design a program that neither limits access to new coverage, nor replaces existing insurance coverage. Among the many programmatic areas that need to be addressed are: the determination of an appropriate benefit package; the implementation of suitable cost-sharing measures; the development of an administratively simple, yet stringent enrollment process; the identification of appropriate eligibility criteria that will encourage enrollment, while limiting substitution; and strategies focused on collaboration with the private market.
It is essential for children's health insurance programs to adequately design programs that target children not eligible for Medicaid, affordable employer-sponsored, or other health insurance programs. Implementation of well-defined state programs that conduct outreach to enroll targeted children while controlling for substitution, may be a vehicle through which states can actually increase participation in all forms of available insurance. States also need to consider how the implementation of their programs will affect and may potentially enhance the private market. Programs may utilize strategies such as employer buy-ins as a collaborative effort with the private sector to augment the enrollment of eligible children and increase the sustainability of state programs in the long-term.
2. Implementing a Medicaid expansion versus a separate state insurance program
States deciding whether to implement a separate state insurance program or expand Medicaid will need to focus on differences between the potential for substitution of a Medicaid program versus a separate state program. States may consider the following questions with respect to understanding the complexity of substitution: What are the tradeoffs? What will influence family choice? Are there certain situations that foster substitution in one type of program versus another? Employer-sponsored plans have the ability to provide varying benefit packages and impose premiums, deductibles, and coinsurance which may have an impact on individuals at certain income levels. However, Medicaid programs have a comprehensive benefit package with minimal cost sharing for beneficiaries. In some cases, Medicaid has the potential for significant substitution due to these features, especially for populations such as children with special health care needs. Title XXI programs, can select from a range of "benchmark" or "benchmark equivalent" plans and have more flexibility on cost sharing. There are other considerations states may also take into account in deciding between a Medicaid expansion and a separate state insurance program. For example, there is a stigma attached to social insurance programs such as Medicaid that may deter families from substituting public for private programs.
3. Issues related to employer coverage
Employee participation may increase as a result of additional support for dependent coverage as provided by small employers, including employer buy-in programs or other alternatives that lower the cost to employees. Employee participation may also be enhanced as a result of increased support for dependent coverage provided by small employers. Most insurance companies require a minimum level of employee participation in employer-sponsored plans in order to reduce the threat of adverse selection. It is often difficult for employers to obtain the required minimum level of participation for dependent health insurance programs due to the high cost of such plans. Therefore, assistance in lowering cost to employees may increase total participation in small employer health plans.
States need to consider how they plan to implement strategies that might limit substitution. There are two major issues that may affect compliance with and evaluation of expanded programs which attempt to monitor substitution. First, several states have suggested that ensuring compliance with existing strategies to limit substitution is a cumbersome and expensive process. Second, the establishment of strategies to limit substitution, or "firewalls," may increase the complexity of the enrollment process, thus impeding the enrollment of eligible children. However, there are some examples of verification processes that are effective and efficient. Florida has utilized the National School Lunch Program as a method to verify eligibility of enrollees, and other state programs have used the verification processes of state Medicaid programs.
States are required under Title XXI to evaluate the effectiveness of their efforts to limit substitution. States must design and implement plans to evaluate how well their programs are reducing the number of uninsured children without substituting for private coverage. With any assessment it is necessary to identify the actual impact of substitution directly related to specific measures versus other unique state-specific issues (e.g., income, cost of living, structure of the labor market, wage levels, characteristics of the insurance market). Through expanded state efforts under Title XXI funding, states will be required to evaluate and estimate the nature of substitution, the scope of the problem, and the actual levels of substitution among employees and employers. The collection of state-specific information will assist state program directors, researchers, and federal agencies in measuring the actual impact of employee- and employer-based substitution, and if consistently measured, will allow for comparison across states.
C. There are various types of data states may need to collect in order to measure substitution.
Most states did not initially identify substitution as a major concern in current efforts to provide coverage to uninsured children. As a result, states did not conduct initial surveys or evaluations to quantify rates of substitution and the long-term impact of employees and employers substituting for private coverage. In order to assist states in determining types of data to collect, the following is a list of information that may be useful in effectively quantifying substitution:
· What are the characteristics of the target population covered by state's current programs? Income levels? Differences at various levels (150 vs. 200)? Access to employer coverage? Health status? Other characteristics?
· What has the states' enrollment experience been: at different income levels; different age groups? For different employment status; other characteristics influencing enrollment?
· From where do program participants come and where do they go when they leave the program? From or to Medicaid? From or to private coverage? From or to no coverage?
· There are various program features that may relate to either increasing or decreasing the likelihood of crowd out. What are the issues around crowd out that were considered in designing the state's program? Who raised these issues? How were the issues addressed in the design? How did actual experience match up with expectations? How was the program modified to reflect these experiences?
· Do states perceive crowd out to be different between Medicaid coverage and other types of government supported coverage?
D. States have identified the need for additional research.
The implementation of state strategies to expand coverage for children has been too recent to fully assess the actual impacts on individual- and employer-based substitution. Therefore, states have identified a number of areas in need of additional research:
· Factors associated with individual (family) decisions regarding participation in employer-based or public insurance. States have identified individuals opting out of employer-sponsored insurance coverage as a greater concern than employers pushing individuals out of coverage. Therefore, states have suggested the importance of collecting information that will describe the factors that influence the complex decisions families are making with respect to purchasing insurance coverage for their children.
· Whether and how the availability of public programs affect employers dropping coverage. Little data currently is available to describe why employers decide to drop coverage and the affect the availability of public programs may have on those decisions. Therefore, state specific information focused on where, when and why some employers drop coverage would assist in the understanding of employer-based substitution.
· How different mechanisms work to encourage enrollment of individuals in state programs, yet limit crowd out. Much of the current information on state strategies to limit substitution are based on anecdotal evidence. The effectiveness of mechanisms may be confined to the demographics, economics, and general characteristics of a particular state. However, an understanding of why and how certain mechanisms work in specific situations is necessary in order to identify the usefulness of these or variations of these mechanisms in other settings.
· The insurance status of individuals that leave state programs. States have identified the need to acknowledge where individuals go to receive health insurance after they have disenrolled from state programs. It is important to understand whether or not individuals are leaving state-subsidized programs for private insurance or whether they are again becoming uninsured. States need to understand whether or not they are meeting the goals of their programs. In addition, this information will assist in shaping Title XXI programs into either long-term or transition programs based on the overall needs of the target population.
· Issues related to the affordability of state programs and the implications of price sensitivity among potential and current enrollees. As indicated earlier, most research does not address this issue, although a recent article by economists at the Agency for Health Care Policy and Research identified the importance of examining the affordability of private coverage. However, states have also identified the importance of affordability in state programs to insure children. Several states have found that increasing monthly premiums by a few dollars resulted in increased disenrollment rates. As states are focused on insuring larger numbers of uninsured children, affordability is an important issue that directly impacts the enrollment of eligible children in some income ranges. This issue is related to the complex decisions families make that are substantially based on cost.
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