Innovative State Strategies to Insure Children. Minnesota


I. Overview


A. History and General Description of Program

MinnesotaCare began in 1992 as part of a package of legislation aimed at reducing the number of uninsured in the state of Minnesota. The MinnesotaCare 1115 reform waiver was proposed in July 1994, approved in April 1995 and implemented in July 1995. With its advent, all Minnesota Medicaid enrollees were transitioned into mandatory managed care. Phase I of the demonstration extended Medicaid coverage to families with children under 275% FPL and with no insurance coverage. Under the demonstration, children and pregnant women receive all benefits available to traditional Medicaid enrollees.

In May 1997, a bill was approved to expand MinnesotaCare eligibility for adults without children with incomes from 135% FPL to 175% FPL, and it added non-preventive dental coverage for adults in families below 175%. Families with children will still remain covered up to 275%FPL. The legislation will add another 3,500 people to the rolls by the year 2000. The measure also imposes an asset test of $30,000 with exceptions for things such as a home or car.

B. Support/Opposition for Program in State

Good community support existed for the creation of a state-supported insurance plan for the poor, uninsured population in Minnesota. There was a great deal of concern in the state about making health care more accessible, affordable and uniform. In 1994, a small group of seven Democratic legislators known as the "gang of seven" banded together to address the issue of rising health care costs in the state. Their discussions led to the initial design of the MinnesotaCare program. State officials served as technical advisors to the "gang of seven", but did not participate in the actual design of the program. The Governor at that time was also a Democrat, which probably made it easier to gain approval for the program. However, the current Republican administration is also supportive of the program.

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 50,000 in Minnesota. 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.1


II. Program Design


A. Options Considered for Coverage

The most important impetus for the program was the desire to create access to the health care system for uninsured families. The intent was also to create a program without "welfare stigma." Proponents wanted MinnesotaCare to resemble an insurance product rather than welfare.

The current Republican administration in Minnesota wants to make enrollment criteria tougher with stricter asset limits (under $30K). Democrats worry that this will limit the amount of capital that self-employed business owners need to survive. The trend is to get tougher on eligibility. Initially MinnesotaCare had only an income standard, assets limit, and residency requirement. Now they are much more stringent about policing people who might manipulate the system. For example, before giving an immigrant access to the program, they check the assets level of the immigrant's sponsor.

B. Target Population

MinnesotaCare is available to families with children who have incomes of less than 275% FPL and individuals who have incomes of less than 175% FPL. To become eligible for MinnesotaCare, one must have been uninsured for at least four months and have had no access to employer-subsidized coverage for 18 months or more. An assets test will be implemented when the amended demonstration waiver is approved by HCFA(now known as CMS). Under the assets test, families cannot have more than $30,000 in assets, and individuals cannot have more than $15,000 in assets to be eligible for the plan.

The most difficult group to enroll has been found to be uninsured children. Studies have shown that they are the group that is most likely to be eligible for MinnesotaCare and least likely to be enrolled. Problems with families getting access come from the fact that many don't know about the program, and others don’t realize that they are eligible. MinnesotaCare marketing and advertising efforts have been limited.

C. Services Included in Benefit Package

The program offers a comprehensive benefit package including inpatient hospital benefits. However, inpatient benefits are capped at $10,000 annually for adults without children and for parents with incomes greater than 175% FPL. The new bill also adds nonpreventive dental coverage for adults in families below 175% FPL Seniors with incomes below 120% FPL can now sign up for prescription drug coverage.

Services include doctor visits, health screenings, immunizations, inpatient-hospital care, prescriptions, dental care, eyeglasses, emergency, outpatient, mental health, drug and alcohol treatment, chiropractic, home care, hospice care, and durable medical equipment.

MinnesotaCare does not pay for past medical bills. If an enrollee is over 21 years old and not pregnant, MinnesotaCare will also not pay for personal care attendant services, nursing home care, private duty nursing, non-emergency medical transport, or case management services.

D. Provider Network

Enrollees have the opportunity to choose a health plan upon enrollment into the program, and they receive all services from that plan. Provider reimbursement was originally structured on a fee-for-service basis but now is a capitated payment system. In addition, there are several providers in the state who now participate in the MinnesotaCare program who do not participate in Medicaid, so the network for MinnesotaCare is actually a little bigger than for Medicaid, especially in rural areas of the state.

E. Sources of Financial Support for the Program

MinnesotaCare was originally funded through a cigarette tax, a provider tax, and family contributions. The cigarette tax is no longer used for MinnesotaCare support. In July 1995, the state 1115 demonstration waiver was implemented, and the federal match was added to the funding mix. Due to a surplus in MinnesotaCare funds, in 1997 legislation reduced the tax on hospitals and surgical centers from 2% to 1.5% for the next two budget years. In addition, the 1997 legislation eliminated a $400 physician surcharge, a 2% tax on medical equipment and supplies, and a 1% tax on non-profit health plans. The new bill also created a $150 million "Federal Contingency Reserve Fund" in the event that Congress ever changes the Medicaid program to cause gaps in current coverage.

F. Estimation of Initial Costs


G. Cost-Sharing Arrangements

Monthly premiums are based on family size and income. The premium was initially based on a certain percentage of gross family income, but MinnesotaCare implemented a more standard sliding scale to ease the administrative burden. Families below 150% FPL pay a $4 per month premium. Children and pregnant women make no co-payments. Non-pregnant adults pay 10% of inpatient hospital charges out-of-pocket with a $1,000 maximum. Co-payments for prescriptions are $3, and eyeglasses have a $25 co-payment.

H. Marketing of Program

MinnesotaCare has not had the success covering children in recent years as it once had. The program was initially state-subsidized and aimed specifically at children (the remnants of the Children’s Health Plan). Children were referred by a variety of agencies. Gradually, the program switched its focus to the whole family. The original MinnesotaCare/Children’s Health Plan was easier to advertise to families with uninsured children. The annual premium was straightforward and simple to collect, and the application process was easy. Now the process is more complex and monthly premiums can be a large burden on families with children. Today, adults take advantage of the program, but it is sometimes at the expense of outreach to children. When MinnesotaCare was transitioned into an 1115 waiver program, many of the children were lost in the shuffle and never re-enrolled.

Research2 has found that most people find out about MinnesotaCare from their friends rather than from advertising. The overwhelming reason enrollees cite for applying is the low cost of the program. However, MinnesotaCare has limited advertising. Interested individuals can request a bundle of application forms to distribute in churches, but that is the extent of current outreach efforts. Thus far, MinnesotaCare has not concentrated on enrolling non-English speakers. All enrollment applications are currently in English. However, the program is currently considering translating some of the enrollment applications. In addition, MinnesotaCare has found that over two-thirds of enrollees live in rural areas. Program officials are unsure why more urban dwellers are not participating. The speculation is that potential applicants are receiving services from other charity services available in the cities.

Minnesota recently sent out a request for proposals to community groups asking them to design appropriate outreach strategies at the local level. Administrators of MinnesotaCare consider the response a success, as 28 public and private proposals were submitted. The applications will be evaluated based on the level of uninsurance in the target population, the ability to raise matching funds and the ability to contact or serve the target population. MinnesotaCare plans to provide $750,000 in grants to support the groups chosen.

I. Eligibility Criteria

Enrollees must be Minnesota residents, but legal U.S. residency is not required. If enrollees are 21 years old or older and have no children, they must have lived in the state for the previous 6 months. Individuals must be uninsured and not covered by any other form of insurance for the previous four months. Enrollees should not have access to employer-sponsored insurance for the last 18 months, and they must meet income guidelines. Employer-sponsored insurance is defined as private insurance where the employer pays fifty percent or more of the family’s cost. No enrollment cap exists, but the Commissioner has the authority to institute one or raise premiums if funds become inadequate.

If an individual acquires other health insurance, they lose MinnesotaCare coverage. Children in families under 150% FPL can enroll if the benefit package offered by their private insurance plan is less rich than the benefit package offered through Medicaid. People can remain enrolled in MinnesotaCare even if their incomes exceed 275% FPL. A substantial gap exists between the highest MinnesotaCare premium and the lowest premium in the private market. An important question is how to decide what "affordability" means for each family.

J. Verification Process

No presumptive eligibility exists. Program staff verify eligibility of applicants for both MinnesotaCare and Medicaid. These employees are trained to place applicants in the appropriate program. Families who are eligible for both Medicaid and MinnesotaCare are given the choice between programs. The benefits packages are the same, but some families prefer to pay the premiums required by MinnesotaCare in order to avoid the "welfare" stigma associated with Medicaid.

K. Enrollment Process and Waiting Period

It takes approximately 30 days to process the application. Families must pre-pay their first month’s coverage. Enrollment starts the first day of the following month. It usually takes 3-4 months from when the application is submitted until enrollment begins. Children are continuously enrolled for 12 months. Recertification is required every 12 months. As long as a family continues to pay the premium and their income has not changed, they are automatically re-enrolled.


III. Implementation


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


IV. Administration


A. How Program Fits within the State Structure

The traditional Medicaid program was administered at the county level. When MinnesotaCare was established through the 1115 waiver, enrollment at the state level was required. This meant that everyone eligible for MinnesotaCare had to disenroll from Medicaid and re-enroll at the state level for purposes of accessing the federal funds.

Efforts were made to keep families in the same program (MinnesotaCare or Medicaid). Families can choose to stay in MinnesotaCare even if they are Medicaid eligible as long as they pay the premium. Some families choose to stay in MinnesotaCare rather than enroll in a "welfare" program.

B. Administrative Costs of the Program


C. How Premiums, Copays, and Deductibles are Collected

Children and pregnant women have no co-payments. Those required to give co-payments submit them directly to the physician or pharmacy. Monthly premiums must be either sent by mail or dropped off at the state MinnesotaCare office. Minnesota is investigating allowing parents in rural areas to pay their premiums by credit card to alleviate the inconvenience of the current system.

One problem is that people drop out of program when they cannot afford the premium. MinnesotaCare loses about 100 people a month for this reason. If an enrollee forgets to pay the premium, they are not eligible for another four months. This policy was instituted so that people would take their premiums seriously. However, the policy may cause people to drop coverage because of affordability issues, and MinnesotaCare may in effect cause people to become uninsured.

D. Cost-Shifting to Medicaid


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

All of the state children's programs know about each other but they have not been good about working together. A common enrollment form has been considered, but nothing has been done to date. County health departments make referrals to MinnesotaCare on an informal basis.

F. Coordination with Medicaid

The Minnesota Department of Human Services estimated that the total number of AFDC recipients is about 7% lower than it would be without the existence of MinnesotaCare. This works out to be about $2.7 million per month savings for the state and federal government.

State employees processing applications for both Medicaid and MinnesotaCare are trained to know which program people are eligible for, and they attempt to refer people to the right place.

G. Coordination with Other Children’s Programs

When MinnesotaCare was a separate program just for children, a lot of agencies referred children to the program. Now the agencies are not doing as good of a job reaching the children, and outreach efforts are limited. Originally there was a "Children with Special Needs" health care program for the severely ill as well as a "Children’s Health Plan" for the uninsured. These two programs were combined to offer basic preventive health care coverage to children through the public health department (CHP—Children’s Health Plan). When MinnesotaCare began and offered inpatient care, the public health department worked to get children into MinnesotaCare. Children with severe special needs were allowed to remain in the preventive care program, but most opted for MinnesotaCare. Some children with very severe special needs still rely on the public health department to help facilitate their care, but their numbers are growing smaller. Since the initial collapse of the CHP into MinnesotaCare, Minnesota social service programs have reduced referrals. Public health and social service workers are reticent about helping with the applications since they are now so complex. The assets test in particular is difficult to assess. It is difficult for social workers to tell someone that they might be eligible, go through the process, and then find out that they are not.

H. State Laws the Program is Required to Comply With

Residency Requirements

Child Support Enforcement

Payment for Administrative Expenses


V. Policy Issues


A. Adverse Selection

The program has an all or nothing rule: if families want to enroll one child, they must enroll all children. If one parent wants to enroll, both must enroll. The exception is for family members with private coverage. This prevents families from just enrolling their sickest kids.

Initially there were concerns about moving children from the "Children with Special Needs" program into MinnesotaCare due to worries about adverse selection, but the number of children who were severely ill was so small that it did not have much of an impact on the MinnesotaCare program.

B. Substitution of Employer Coverage

Research3 on MinnesotaCare found that most people did not have other insurance options when they enrolled in the program. Over 88% reported that they had no access to affordable employer-based insurance. Eight percent reported that Medicaid enrollment was an option for them. Only 7.1% reported giving up private insurance coverage to enroll in MinnesotaCare. Most of these people reported giving up policies that they were paying for on their own, rather than policies offered by employers.

Substitution is an issue that needs to be studied more, but there is little evidence of it to date. The advent of MinnesotaCare probably did not cause employers that were already offering insurance to drop coverage, but the program may be providing less of an incentive for new or existing companies who did not offer insurance before to develop coverage now. This is especially a problem with small new companies, which offer health insurance at great risk. With just one seriously sick person, a company could be ruined as a result of high health insurance costs.


VI. Program Impact


A. Impact on Number of Uninsured Children in State

The goal is to have below 2% of children uninsured in the state. Currently, Minnesota fluctuates between 6 and 9%.4

B. Other Direct Impacts

No concrete studies have been conducted on health status or private pay premiums; however, anecdotal information on private pay premiums indicates that MinnesotaCare has had no effect on them. MinnesotaCare seems to have had a tremendous impact on the health status of the state. It has certainly increased access to health services. This has allowed the public health department to turn to more difficult issues, such as the homeless and immigrant populations.


VII. Future of Program


A. Lessons Learned

From the beginning, it would have been advantageous to have more staff. Program staff ran far behind in processing initial applications. One to two years is necessary to really get a children’s health insurance program up and running. More staff training also would have been helpful.

The transition from MinnesotaCare to private insurance could be improved. An alternative plan would be to cut MinnesotaCare coverage off at 200% FPL and then offer subsidies to help cover private insurance premiums up to 275% FPL. Some believe that the program needs to be less dependent on the government and based more on cooperation with employers.

New programs should make their systems as simple as possible. The 1115 waiver forced MinnesotaCare to complicate the enrollment process. While Minnesota is estimated to have 80,000 uninsured kids, the program has become too complicated to reach them. Staff must simply process paper at this point. More outreach to the parents of these families would help them navigate the confusion over Medicaid and MinnesotaCare.

An annual once-a-year premium is easier and less confusing to deal with than a once-a-month payment. The previous Children’s Health Plan had an annual premium. In the MinnesotaCare program, families temporarily lose coverage when they miss one month’s premium. Thus enrollment is subject to the unexpected events that come up in a month that can make payment impossible. It would be helpful to check into the reason why the premium was not paid before denying coverage.

Other states have shown interest in creating new programs like MinnesotaCare, but state officials have found that community buy-in is essential for the success of the program. State officials should be aware that even one horror story about someone manipulating the system could cause much criticism of a program. Naturally, legislators oppose programs that promote fraud and abuse. This makes it hard for programs like MinnesotaCare to survive because a couple of abusers cast doubt on the whole system.

B. Vision of the Future of the Program

MinnesotaCare officials are worried about anti-charity sentiment in the country. Programs like MinnesotaCare will continue to be criticized because of anecdotes about abusers of the system. In reality, these comprise a small portion compared to the many pockets of people, such as children, widows, and single mothers, who really need programs like MinnesotaCare.

The flip side is the fear that MinnesotaCare will become more like Medicaid. It is important to maintain MinnesotaCare’s status as an "affordable insurance product".

1. 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.

2. Lurie, N., Pheley, A., Finch, M. (1995, October). Is MinnesotaCare Hitting its Target? Institute for Health Services Research, University of Minnesota School of Public Health and Hennepin County Medical Center.

3. Lurie, N., Pheley, A., Finch, M. (1995, October). Is MinnesotaCare Hitting its Target? Institute for Health Services Research, University of Minnesota School of Public Health and Hennepin County Medical Center.

4. Interview, Fall 1997