State Participation. Affordable Choices is an optional program to the states. To participate, the state must redirect half of their DSH funds to the Affordable Choices program. The remainder of the program is financed with federal matching funds, at the SCHIP enhanced matching rates. While the enhanced matching rate is attractive, the state must be willing to pay for the state share of the program.
For illustrative purposes, we assume that all states adopt the program and cover all people through the maximum income eligibility level under the program of 150 percent of the FPL. While it is difficult to know with certainty what individual states would do, state participation in Affordable Choices can be predicted based on their historical participation in SCHIP. All states elected to implement an SCHIP program and nearly all cover children through 200 percent of the FPL. Also, through waivers, some states have already covered adults below 150 percent of the FPL and in some cases have redirected DSH funds to expand coverage. This suggests that most, if not all states will be inclined to participate. We assume that states are required to maintain their current income eligibility levels under both Medicaid and SCHIP.
Benefit Packages. The program requires states to establish an “affordable insurance” product. Based upon the guidance provided in the proposal, we assume that this will be defined as a package costing no more than 6 percent of state median household income for any individual. This implies a premium at the national level of about $2,820 per year, or $235 per-member per-month (PMPM). Thus, the “affordable premium amount (APA)” would be $235 PMPM.
The only way to have a given insurance product with a uniform APA for all applicants would be to use a community rated premium. This is where the premium is the same for all applicants regardless of the risk characteristics of the individual. However, the proposal would not alter existing state regulations of rating practices. Consequently the only way to meet the $235 APA requirement for all applicants will be to vary the benefits package itself by age and other risk characteristics that are typically used to set premiums in each state.
In this analysis, we assume that states would establish “affordable insurance” products where the benefits package itself varies with individual risk characteristics such as age, gender and health status. Thus, while a benefits package with a $200 deductible might be feasible at the APA for an adult under age 25, the deductible might need to increase to $5,000 for someone 59 years of age to hold the cost for that person to the APA.
In this analysis, we assumed that states would use a single benefits package with a cap on total benefits that varies with the risk characteristics of the individual, such that all eligible people have access to a package at the APA. We assume the typical plan would cover:
- Inpatient/outpatient health facility or clinic services;
- Inpatient and outpatient professional provider services by licensed professionals;
- Diagnostic imaging, laboratory services, and other diagnostic and evaluative services;
- Child and adult immunizations and preventive care;
- Health education;
- Prescription drugs subject to a formulary;
- Mental health care;
- Preventive dental care;
- Blood and blood products;
- Emergency care services;
Substance abuse treatment; and
Services that would not be covered by the program include:
- Vision care including eyeglasses (assumed limit of one pair per year);
- Hearing services including hearing aids;
- Durable medical equipment;
- Nursing home services;
- Home health services;
- Cosmetic surgery; and
- Private hospital rooms.
Point-of-service Cost Sharing:
- $200 Deductible;
- $10 Co-payment per visit;
- Prescription drug co-payment: $5 generics, $15 Brand.
This benefits package is designed to provide access to primary care services for all eligible individuals with relatively low point-of-service cost sharing, while using the overall benefits caps to keep costs to the APA levels.
We estimated the premiums for this benefits package with HBSM by age, gender and health status. The HBSM premium estimates reflect the actual demographic and health status characteristics of the people who would become covered under the program. This is important because the uninsured are on average younger than the commercially insured population. Also, because nearly all states now cover pregnant women living below 150 percent of the FPL, none of the newly eligible women in this group will be pregnant. We then used HBSM to estimate the benefits cap required in each age group to hold the premium to the APA amount.
Table 1 presents our premium and benefits cap amounts by age. We assume that the APA in each state will vary in proportion to median household income.
|Less than 25||$90.83||no cap||$55.16|
|25 – 34||$201.92||no cap||$165.00|
|35 - 44||$221.17||no cap||$179.33|
|45 - 54||$558.59||$12,000||$230.66|
|55 - 64||$693.17||$5,000||$235.00|
|Source: Lewin Group Estimates using the Health Benefits Simulation Model (HBSM).|
Program Enrollment. We simulated enrollment in Affordable Choices based upon a multivariate analysis of the likelihood that a person eligible for Medicaid enrolls in the program. The model shows how enrollment rates vary with demographic characteristics, income, premium level (if any) and the availability of employer coverage. Using this multivariate model, we estimated that about 75 percent of uninsured people eligible for Affordable Choices would enroll.
As discussed above, states are required to adopt policies designed to avert a shift of already privately insured people to public coverage under Affordable Choices (i.e., anti-crowd-out measures). For illustrative purposes, we assume that state Affordable Choices plans impose a six-month waiting period prior to enrollment as an anti-crowd-out measure. This means that individuals must be uninsured for six continuous months before they are eligible. However, we assume that there are two exceptions to this rule:
- We assume that people who have lost coverage due to job change or a change in marital status would be eligible (an employer termination of coverage does not qualify for an exemption); and
- We assume that some newly eligible people who currently purchase non-group coverage would shift to Affordable Choices if they lost coverage due to job change or a change in marital status.
Using the multivariate model described above, we estimate that on average, about 39 percent of people in these circumstances would enroll.
We assume that the program has no effect on enrollment in the existing Medicaid and SCHIP programs, with the exception that children of adults enrolling in Affordable Choices would be enrolled in SCHIP. We estimate that about 10 percent of the uninsured are actually eligible for Medicaid or SCHIP but have not enrolled. We assume no change in enrollment for this population, although some of these people are assumed to enroll in private insurance due to the tax credit (discussed below).