III. COLLECTION OF PREMIUMS AND COPAYMENTS

1. Overview

States need to consider a number of complex issues as they design cost-sharing requirements for children's health insurance programs. Cost-sharing mechanisms are seen in both public and private programs and are implemented for the following reasons: 1) to reduce the costs associated with providing care; 2) to deter the inappropriate utilization of services (e.g., use of the emergency room for primary health care); 3) to instill a sense of responsibility in participants for their health care; 4) to minimize the welfare stigma associated with public programs; and 5) to prevent the substitution of private insurance. The majority of the study states established cost-sharing requirements in order to instill in their enrollees a sense of responsibility and ownership and to reduce the welfare stigma often associated with public programs.

1. Price Sensitivity

It is important to recognize the importance of price sensitivity among families when establishing levels for premiums and copayments. "Price sensitivity" refers to the level of premiums and copayments that families perceive to be affordable. It is important to note that price sensitivity may not always be what families can afford, but rather what they are willing to pay for health care services. States’ consideration of cost-sharing levels is critical to assuring the success of a children’s health insurance program, as it influences the families' incentives to enroll in a program and utilize services.

2. Type of Cost Sharing to be Implemented

Related to the issue of price sensitivity is the decision whether to implement either a flat fee or a sliding scale premium. While a flat-fee may be administratively appealing, designing a sliding scale premium based on family income may encourage participation. Of the states examined, the Colorado Children’s Health Plan is the only program utilizing a flat enrollment fee. The other eight states have established monthly premiums based on a sliding scale. The Florida Healthy Kids program has a sliding scale based on the three levels of the National School Lunch Program (Free Lunch, Reduced Lunch, and Not on Lunch Program). The seven remaining states have sliding scales based specifically on income.

This section details the strategies used by the nine study states to collect premiums and copayments and the penalties for families that do not pay their monthly premiums.

Table 7: Cost-Sharing Requirements of the Nine State Plans

2. Procedures for Collecting Premiums

Six of the nine children's insurance programs examined in this report collect monthly premiums: Florida, Massachusetts, Minnesota, New York, Pennsylvania, and Tennessee. Each of these programs determines premium levels based on a sliding scale. The premium sliding scales for these six states are shown below in Tables 8 through 13. These programs collect and process payments through a central office.

• The Florida Healthy Kids Program requires parents to mail monthly premiums to the program office.

• In Minnesota, monthly premiums must be either sent by mail or paid in person at the state MinnesotaCare office. Minnesota is currently investigating other options to permit parents to pay premiums by automatic payroll and checking withdrawal, assigning tax returns, and/or credit card payments.

In addition to these six programs, the Colorado Children's Health Plan currently collects a $25 annual enrollment fee due at the point of application. Pennsylvania, does not collect premiums, but rather requires the contracted health plans to collect premiums.

Table 8: Florida Healthy Kids Corporation Premium Sliding Scale^*

*A sliding scale of costs is developed by each local project and submitted to Healthy Kids for approval. A family's eligibility for the National School Lunch Program confirms eligibility for a reduced premium. This table shows examples of premium sliding scales for four local projects.

Table 9: Massachusetts Children’s Medical Security Plan Premium Sliding Scale

Table 10: MinnesotaCare Premium Sliding Scale*

*MinnesotaCare enrollees pay a monthly premium based on family size and income. This table consolidates a more extensive premium sliding scale for a family of four so that it may be compared to others based on the %FPL. The full premium is $128 per person per month.

Table 11: New York Child Health Plus Premium Sliding Scale

*The full premium for NY Child Health Plus depends on the insurance company and the location. For example, insurance companies in NY City have the highest premiums.

Table 12: Pennsylvania CHIP Premium Sliding Scale*

*Chart from CHIP annual Report for contract year July 1, 1995 through June 30, 1996. CHIP pays 50% of the subsidized rates. BCNEPA-Blue Cross Northeast PA (Caring Foundation of Northeastern PA). BCWPA-Blue Cross Western PA (Western PA Caring Foundation). CBC-Capital Blue Cross (Caring Foundation of Central PA). First Priority Health-Caring Foundation of Northeastern PA. KHPC-Keystone Health Plan Central (Caring Foundation of Central PA). KHPE-Ketystone Health Plan East (Independence Blue Cross & PA Blue Shield). KHPW-Keystone Health Plan West (Western PA Caring Foundation). USHC-U.S. Healthcare.

Table 13: TennCare Premium Sliding Scale

3. Procedures for Collecting Copayments

Seven of the nine children's insurance programs collect copayments: California, Colorado, Florida, Massachusetts, New York, Pennsylvania, and Washington. All seven programs require contracted providers (i.e., physician's offices, hospitals, pharmacies) to administer the collection of copayments. In Colorado, however, providers are not required to collect copayments specified for services rendered, yet in order to promote patients' responsibility for their health care, they are encouraged to do so.

Table 14: Co-Payment Levels for the Nine State Plans

*Massachusetts has sliding scale copayments based on family income guidelines of $1, $3, or $5.

4. Issues Related to the Non-payment of Premiums

States have established various policies related to the non-payment of required monthly premiums. For example, states that have required premiums have identified the length of time they will permit children to remain in the program when their parents neglect to pay monthly premiums or annual enrollment fees. Three of the six states with monthly mail-in premiums distribute at least one warning letter before disenrolling a child. In other programs, the lack of payment for services rendered (30, 60 days) will result in the disenrollment from the program.

• The Colorado Child Health Plan requires families to renew enrollment on an annual basis. If enrollees fail to pay the annual enrollment fee, they are disenrolled from the program. CCHP distributed a survey in 1996 to identify the reasons that children were not re-enrolled into the program. Of the 42.6% of children enrolled in CCHP who did not renew their coverage, 23% were too old to qualify; 29% moved out of the area; 11.5% became Medicaid eligible; 11.5% had increased family assets and were no longer eligible for CCHP; and 14% acquired other insurance.

• In the Florida Healthy Kids Program, families are required to pay monthly premiums one month in advance. For example, the premium for the month of December is due November first. Families who fail to submit the premium by the 7^th of the month receive a late fee notice, reminding the enrollee of the premium payment and warning that coverage may be cancelled if the payment is not received. If the payment is not received by the 14^th-17^th of the month, enrollees will receive a second warning letter. On the 28^th of the month, a cancellation letter is sent out to inform the family that their child's coverage has been cancelled. In recognition of the difficulty of some families to make payment, there is a liberal reinstatement policy.

• In Minnesota, beneficiaries are provided a 30 day grace period and if they fail to pay one monthly premium are disenrolled from the program and are not eligible to reenroll for another four months. "Good cause" exceptions to 4 month penalties can be made. At this point, Minnesota does not conduct any follow-up with families to identify reasons for missed premium payments. Minnesota program officials are currently examining their policy to identify its effectiveness. In New York, families are provided a thirty-day grace period if they fail to pay their child's monthly premium. During this time they are sent a reminder letter regarding the monthly premium. However, if payment is not made by the end of the thirty-day grace period, the beneficiary is dropped from the program.

• In Pennsylvania, health plans contracted by CHIP have the option of terminating the child’s coverage if families miss their monthly premium; however, individual plans have the freedom to decide when and how to cancel coverage. The Department of Insurance has no formal regulations concerning the non-payment of premiums by families enrolled in CHIP, and all decisions are determined by the contracted plans.

• In Tennessee, if a premium is not received, a warning notice is issued indicating that enrollment will be terminated within sixty days if payment is not received. After the first 30 days, families are sent a notice that enrollment will be terminated within 30 days. After the entire sixty day period is up, if families have not yet made payment they are disenrolled from TennCare. However, if families pay the back premiums, they can be reinstated at any time.