Innovative State Strategies to Insure Children. Florida


I. Overview


A. History and General Description of Program

The Florida Healthy Kids Corporation was established in November 1990 to create a comprehensive insurance product for school children using Florida school districts as a grouping mechanism. A HCFA(now known as CMS)-funded demonstration project of Healthy Kids was initiated in Volusia County in 1992 and was completed in 1995. In late 1993, Healthy Kids began expanding into additional counties utilizing both state and local government funds. Healthy Kids currently serves 19 of Florida’s 67 counties, which contain approximately half the state’s uninsured children.1 The program is designed to provide affordable access to health insurance for all Florida children. Children who are not on the school lunch program pay the entire cost of their insurance, while children who are on the school lunch program have access to subsidized insurance. Participation by Florida counties in the Healthy Kids program is strictly voluntary. The total enrollment was 42,250 in November 1997.

B. Support/Opposition for Program in State

To generate initial community support, the Florida Healthy Kids Corporation held regional meetings which all the school districts were invited to attend. In general, there was a great deal of interest in the program, especially from school health personnel and public health workers. The school health participants took the idea of Healthy Kids back to the school and proposed the idea to their superintendents and school boards.

The demonstration site (Volusia County) was not required to contribute any money for the Healthy Kids demonstration waiver. Ten counties volunteered to host the demonstration. Volusia County was chosen primarily because of its size, since funding was available for approximately 7,000 children. The success of the program in the initial sites has served as an incentive for other communities to "buy-in" to the program (figuratively and literally, since local governments must contribute a share of the expense).

C. Number of Uninsured Children in State

The number of children under 19 years of age whose family income is at or below 200 % FPL, and who are reported to be not covered by health insurance is 444,000 in Florida. The U.S. Bureau of the Census determined this number based on the arithmetic average of the number of low-income children and low-income children with no health insurance as calculated from the 1995-1997 March supplements to the Current Population Survey.2


II. Program Design


A. Options Considered for Coverage

Adverse selection was a concern for the actuaries evaluating the Healthy Kids program at its onset. Healthy Kids began when only Minnesota and New York were doing similar initiatives, and very little information was available on which to base estimates. Healthy Kids refused to do certain things that are known to decrease adverse selection - no pre-existing conditions, no waiting period, and no medical underwriting. Instead, Healthy Kids addresses adverse selection through open enrollment periods. Generally children are enrolled during a 4-6 week time period at the beginning of the school year, and cannot be enrolled at other times of the year. This prevents parents from enrolling their children only when they are sick. The children have to get the insurance when it is available, or it is not available to them at all. Florida has a good state system for taking care of chronically ill kids through the Maternal and Child Health bureau. Since these children’s needs are already covered, Healthy Kids does not have to be responsible for the sickest (and most expensive) children. This limits the costs of the Healthy Kids program.

B. Target Population

Once a school district elects to participate in the program, qualified children become eligible for Healthy Kids. Children must be between the ages of 5 and 19, uninsured (i.e. not enrolled in Medicaid or private insurance), and enrolled in school up to the 12th grade. Counties may expand eligibility to allow children of other age groups the ability to participate (e.g., children who are less than school age whose families are enrolled in Healthy Kids).

C. Services Included in the Benefit Package

Program benefits are extensive, including inpatient care, surgery, emergency services and transportation, eyeglasses, hearing aids, physical therapy, mental health services, pre-natal care and delivery, and organ transplants. Copayments are required for certain benefits. Counties may add additional services such as dental care to the package. Healthy Kids has a $1,000,000 lifetime cap on services received.

The benefit package was determined by the Board of Directors. They knew that they wanted to provide benefits with a maximum premium of approximately $50-60 per child per month. The first thing they put in the benefit package was well child visits (using the American Academy of Pediatrics standards). Then they added all the things a child needs to learn: eyeglasses, hearing aids, etc. The third thing added to the list was primary care visits. The physicians on the committee argued that prescriptions would have to be included as well for complete treatment.

Each benefit was discussed in turn, with the most significant debate arising over inpatient treatment, which added $10-15/month to the cost per child. The Board debated having a primary care component and a second tier for inpatient care that parents could elect to purchase (and actually sent out that proposed structure in their first RFP). However, they decided not to go with that structure in order to prevent adverse selection into the second tier, and to avoid a possible negative perception. Mental health and substance abuse treatment benefits were also debated, with the result that mental health benefits are provided, but with a limit of 20 visits per year.

D. Provider Network

Eight managed care networks serve Healthy Kids enrollees. Insurers are selected on the basis of five variables: price, benefits, provider network, reporting capabilities, and general criteria such as accreditation and solvency. Healthy Kids aggregates state, local and family funds to pay premiums to commercial health plans that assume the insurance risk.

E. Sources of Financial Support for the Program

All individuals enrolled in the Healthy Kids program are required to pay some portion of the cost of their insurance. Sliding-scale premiums are based on reported family income required for participation in the school lunch program. The three cost-sharing levels are "Free Lunch", "Reduced Lunch", and "Not on Lunch Program". Premium levels vary by county. Funding for the demonstration project in Volusia county came from a HCFA(now known as CMS) waiver. All subsequent funding has been granted through a combination of state, local and family contributions.

F. Estimation of Initial Costs

Costs were initially estimated by examining data on Medicaid rates and commercial insurance for children, with the premium for Healthy Kids estimated to be in the middle. This was a very conservative estimate, as Healthy Kids did not want their partner health plans to lose any money in the initial rounds and make it difficult for Healthy Kids to negotiate with health plans in the future. The risk for the children ended up being much less than expected. Because of the federal reporting requirements, Healthy Kids extensive data on utilization of services, and was able to negotiate reductions in premiums three times during the first two years of the program. Data reflecting appropriate utilization of services and the relative good health of children continues to be utilized when negotiating new contracts for medical services with health care providers and health maintenance organizations.

G. Cost-Sharing Arrangements

Co-payments required for: office visits ($3), prescriptions ($3), glasses ($10), emergency room ($25), outpatient mental health ($5). Sliding scale premiums based on income.

H. Marketing of Program

Healthy Kids found that adolescents are the most difficult age group to reach because of their sense of immortality and disinterest in taking enrollment information home to their parents.

There are also cultural and communication issues with African American and Hispanic families, who have been shown to utilize services differently. In the Miami area, they encountered very different demographics - the majority of their children are African American and Hispanic. Different strategies have been used to try to capture these different age brackets and cultures - e.g. direct mail.

I. Eligibility Criteria

Children must be between the ages of 5 and 19, uninsured (i.e. not enrolled in Medicaid or private insurance), and enrolled in school up to the 12th grade. Counties may expand eligibility to allow children of other age groups the ability to participate (e.g., children who are less than school age whose families are enrolled in Healthy Kids).

J. Verification Process

The school lunch program is used to verify eligibility for subsidized enrollment in Healthy Kids.

K. Enrollment Process and Waiting Period

For Volusia County, the expected enrollment and actual enrollment were very similar. It was predicted that 7,000 children would enroll. The first open enrollment brought in 3,500 children. The second open enrollment brought the total up to 5,000 and the third open enrollment brought the total up to 7,500 children. Approximately 50% of the county’s eligible children were enrolled within 12-15 months.3


III. Implementation


A. Amount of Time it Took to Implement the Program and Begin Enrollment

Healthy Kids Corporation was founded Nov. 1990 and began enrolling Volusia County children in February 1992. Challenges encountered during implementation of the program include: difficulty in obtaining HCFA(now known as CMS) approval; developing an eligibility system that families could understand; and difficulties in designing the computerized enrollment and record-keeping systems.


IV. Administration


A. How Program Fits within the State Structure

Healthy Kids is an independent corporation legislated into existence by the Florida legislature, not a state agency. However, five of the 13 members of its Board of Directors are members of state agencies. The program was set up in that manner because at the time there was a big anti-growth in government movement and privatization and public/private partnerships were "hot." Also, an organization was created the year before in the legislature with a similar structure which served as a model for the Healthy Kids administrative structure.

The Healthy Kids administrative system is working well. Because they are not a state agency, Healthy Kids feels that they can focus clearly on one mission. Healthy Kids Corporation noted that they have not been delegated additional functions by the state legislature, nor have they been subject to political whims. The Board of Directors is appointed by three independently elected officials: the Governor, the Insurance Commissioner, and the Education Commissioner. Not one of these three people has control of a majority of the Board. Therefore, there hasn’t been a lot of turnover on the Board.

B. Administrative Costs of the Program

Administrative costs are kept to a minimum (about 5%) of total costs.4 Healthy Kids has a small staff and they contract out a lot of services. Contracted out services to health plans include quality assurance, utilization review, member services, marketing, and credentialing. Healthy Kids’ member services are just a complement to the member services already provided by the health plans. Since the school systems verify eligibility, that holds down costs a lot. Their total eligibility expense is just the cost of getting the electronic files mailed over from the school district.

C. How Premiums, Copays, and Deductibles are Collected

Premiums are mailed to Healthy Kids. Co-payments are collected at the physician’s office or the provider location. There are no deductibles.

D. Cost-Shifting to Medicaid

There is no cost-shifting since no enrollees are eligible for Medicaid.

E. Interaction with Other Children’s Programs at the State Level

Healthy Kids has very little interaction with other children’s programs in Florida.

County Public Health Departments and providers distribute applications and childcare programs market the Healthy Kids program in many instances. The most significant interaction Healthy Kids has with another state program is the Department of Maternal and Child Health, which runs the state program for children with chronic illness. In two instances, Healthy Kids has used MCH as a reinsurer for a very ill child who needs services that are outside of the health plan contract. The Director of Maternal and Child Health is one of the Directors on the Healthy Kids Board. Healthy Kids is currently considering how to best expand interactions with Welfare recipients as they move from "Welfare to Work". The legislature just extended funding for this population.

F. Coordination with Medicaid

The Medicaid agency has a seat on the Board of Directors of Healthy Kids. They interface electronically with Medicaid’s third party administrator (TPA) to verify that enrollees are not currently enrolled in Medicaid. Informal interactions occur because Rose Naff (the Director of Healthy Kids) and the Medicaid Director "sit in the same committee meetings". Healthy Kids does not refer children to Medicaid. Healthy Kids did an intensive screening for 9-10 months of enrollment to see if any enrollees into Healthy Kids were also eligible for Medicaid but were not enrolled. The results of the study were that 4.2% of the families were eligible for Medicaid. It was decided that this number was too small to justify the administrative effort and expense of verifying Medicaid eligibility for each potential enrollee. Medicaid does not currently refer to Healthy Kids either, however, this is something that they will probably look into in the future.

G. Coordination with Other Children’s Programs

County Public Health Departments and providers distribute applications and childcare programs market Healthy Kids in many instances.

H. State Laws the Program is Required to Comply With

The state monitors the program by having 5 state officials on the Board of Directors. In addition, Rose Naff, Director of Healthy Kids, reports to the Insurance Commissioner. The program is subject to a financial audit by the State each year. Healthy Kids also submits an annual report to the Legislature each year.


V. Policy Issues


A. Adverse Selection

Open enrollment periods are used to limit adverse selection, as mentioned previously. However, there is some concern that the attention deficit disorder (ADD) and attention deficit and hyperactivity disorder (ADHD) populations are way too high in some school districts. Rose Naff believes that to some extent this is due to the fact that nurses and teachers are referring these children to the program more than other children. However, in some rural districts, one-third of the children are on Ritalin. This is clearly abnormal, and they are doing a special study on the ADD and ADHD populations this year.

B. Substitution of Employer Coverage

There is very little evidence of substitution. The average length of enrollment in the program is one year, and most children leave because their families have received employer-based insurance. Exit surveys are conducted with all families to determine the reason for their withdrawal from the program. There is not a lot of interest in employers buying into the program. In Florida, the growth in business is generally among companies with less than 25 employees or the self-employed. Neither of these groups are likely to offer insurance. Healthy Kids is concerned if children have access to employer-based insurance and yet are enrolling in Healthy Kids because the employer-based insurance is more expensive and not affordable to families. Children whose families are above 185% of the FPL are paying 100% of the costs of their insurance through premiums. Therefore they have no upper income limit, and are happy to enroll the children of lower-income families even if they have access to employer-based insurance.


VI. Program Impact


A. Impact on Number of Uninsured Children in State

Steve Freedman, employed by the Institute for Child Health Policy, is conducting a continual evaluation of the program, documents of which are available on the Healthy Kids Corporation web-site. In addition, the General Accounting Office (GAO) and Abt Associates have compiled evaluation reports, and additional sources of documentation are available through the Healthy Kids annual report.

B. Other Direct Impacts

Halifax Hospital reported a 30% decrease in pediatric charity care after Healthy Kids became available in its community. In sites where a program has been active, emergency room visits declined by 70% during the first year of operation. This decrease is estimated to have saved Florida $13,125,000 in health care costs in fiscal year 1996-97 alone.5


VII. Future of Program


A. Lessons Learned

The single biggest mistake reported by Healthy Kids was not competitively bidding their first third party administrator (TPA) contract.

B. Vision of the Future of the Program

Healthy Kids is currently expanding to five more counties. They will probably never be state-wide because they are a voluntary program. However, the success of the program is encouraging more and more counties to participate.


2. Final Federal Register notice: State Children's Health Insurance Program; Reserved Allotments to States for Fiscal Year 1988; enhanced Federal Medical Assistance Percentages -- September 9, 1997.

3. Interview, Summer 1997

4. Interview, Summer 1997

5. Health Kids Annual Report. February 1997. (p. 12).