Children's Health Insurance Expansions: State Experiences in Developing Benefit Packages and Cost-Sharing Arrangements. The Debates Over Inpatient, Vision, Dental, and Hearing Benefits

02/17/1998

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.