Innovative State Strategies to Insure Children. Pennsylvania


The following information regards the Pennsylvania Children’s Health Insurance Program (CHIP) only. The Caring Program for Children also addresses uninsured children in Pennsylvania.


I. Overview


A. History and General Description of Program

The Pennsylvania Children's Health Insurance Program (CHIP) was modeled after the Blue Cross Blue Shield Caring Program. The first Caring Program was established in Western Pennsylvania in 1989 after the steel industry lay-offs, and its tremendous public appeal led to replication efforts in twenty-six other sites. Caring Programs generally serve children within 100-150% of the poverty level. The Caring Program model was designed to provide transitional care for children without insurance coverage and as such did not include a comprehensive benefit package.

The limited benefits of the Caring Program led many states to significantly expand the program's benefits over time. When Pennsylvania established its state-sponsored Children's Health Insurance Program (CHIP), the state modeled the program on the original Caring program but added additional benefits such as dental, vision, hearing, prescription drugs, and hospitalizations to meet state legislative requirements.

The CHIP program was signed into law in December 1992 and was implemented in May 1993. The original program was projected to cover 29,000 children age 1-6 who were under 100% of the federal poverty level. The program was supported by revenue from the state cigarette tax. However, there were excess funds under those eligibility limitations, so coverage was increased in May 1994 to children age 1-13 up to 185% of the federal poverty level, and mental health services were added to the benefit package. This expansion resulted in a waiting list. In the 1996 session, the legislature appropriated another $32 million to the program. Currently CHIP covers kids up to age 16 under 185% of the federal poverty level and provides subsidized coverage to children under age 6 from 185% to 235% of the poverty level. 1

B. Support/Opposition for Program in State

CHIP enjoys good public support across the state. In 1992, Pennsylvania State University did a study that showed that a substantial number of children in Pennsylvania did not have insurance, even though their parents worked. This left an impression on Governor Casey, and he became a very strong advocate for universal health care in Pennsylvania. After his plan for universal health care failed, he proposed the CHIP program. This was intended to be an initial step towards universal coverage in Pennsylvania.

C. Number of Uninsured Children in State

According to the U.S. Bureau of the Census, the number of uninsured children (ages 0-19) at or below 200% of poverty in Pennsylvania is 192,000. This figure is based on the March 1995-1997 Current Population Surveys.


II. Program Design


A. Options Considered for Coverage

CHIP was set up under the insurance department to decrease the association of the program with welfare, since it was feared that the stigma of welfare might prevent people from applying. The focus of CHIP was intended to be on preventive services, with the goal of reducing children’s medical costs later in life.

B. Target Population

Initially CHIP only covered children up to age 6 and under 185% of the federal poverty level. This decision was based on how many children the state thought the tobacco tax would cover. The program currently covers children up to 16 under 185% of the federal poverty level, and it provides subsidized coverage to children under age 6 from 185% to 235% of the poverty level.

C. Services Included in Benefit Package

Benefits include routine health care, preventive medical care (e.g., check-ups, immunizations), emergency medical care, regular dental exams/ preventive dental care, eye exams and eyeglasses, hearing services, prescription medicine with a $5 co-pay, mental health services, and 90 days of inpatient hospitalization.

D. Provider Network

The CHIP program is administered by five health maintenance organizations (HMOs), which each have responsibility for one of five regions in the state. Three of the HMOs are "Caring Foundations" set up by Pennsylvania Blue Cross/Blue Shield. The fourth plan is Independence Blue Cross/PA Blue Shield (the Philadelphia Area BC/BS HMO). The fifth plan is U.S. Healthcare, which also covers the Philadelphia Region.

The plans design their own provider networks, but the Department of Health must approve them. The first year of the program, reimbursements were primarily based on a fee for service schedule. Today, 98% of CHIP children are in enrolled in managed care organizations. Enrollees have their choice of a primary care provider from within the plan.

E. Sources of Financial Support for the Program

The Pennsylvania Children's Health Insurance Program is supported by a two-cent per pack state cigarette tax, generating approximately $21.5 million annually. In 1996, the program's request for an additional one-cent per pack did not pass, but the state Legislature appropriated an additional $10 million dollars for the program out of general revenue funds. This raised the total Children's Health Insurance Program budget to close to $32 million.

F. Estimation of Initial Costs


G. Cost-Sharing Arrangements

The Pennsylvania Children's Health Insurance Program is based on the principle that most families respect the idea of cost-sharing and like the idea that they are paying for their children's health care through a monthly premium. In addition to countering welfare stigma, cost-sharing mechanisms are viewed as a way of helping participants adjust to the requirements of employer-sponsored insurance, thus building a bridge between conditions of uninsurance and private insurance. In addition, CHIP requires $5 co-payments for eyeglasses, hearing screenings, hearing aids, prescriptions, dental care, outpatient surgery, outpatient mental health, and emergency room use.

Premiums to cover CHIP enrollees are set through the annual grant application process. For a plan to be selected as a CHIP health plan, they must be willing to provide care at the lowest price in that region. Applicants interested in serving as CHIP plans submit premium proposals that are reviewed by the Insurance Department to determine whether the proposed premiums are adequate to meet the risk exposure. CHIP then pays the selected plans a premium per member in each plan. In 1996, CHIP paid $32,133,047 in premiums to plans to cover its enrollees.2

H. Marketing of Program

The HMO plans contracting with the Pennsylvania CHIP program are required to produce all of their own outreach and marketing materials. However, although they are required to spend 2.5% of the total amount paid in premiums to this end,3 most plans actually do more than this on an in-kind donation basis. The Pennsylvania Department of Insurance does no marketing for the plans.

Outreach activities occur through: local businesses, customer service hotlines, daycare centers/preschools, school districts, County Assistance Offices, hospitals/providers, legislative offices, religious organizations and churches, social service agencies, unions, civic groups, and state and local health department offices.

I. Eligibility Criteria

The Children's Health Insurance Program provides coverage to children up to age 16 whose families are below 185% of the poverty level. These children receive free coverage. Children under age 6 up to 235% of the poverty level are eligible for subsidized coverage. Applicants must be residents of Pennsylvania for at least 30 days (except newborns) and cannot have access to any other private insurance or to the Medicaid program.

J. Verification Process

The contracted health plans do all enrollment and verification. Children are recertified every year by presenting proof of income. There is no presumptive eligibility. Pennsylvania will waive the requirement that families be without access to employer-based insurance if the family submits documentation to demonstrate that the co-pays or deductibles make it sufficiently difficult for the family to afford the available private coverage.

K. Enrollment Process and Waiting Period

CHIP was originally expected to serve 29,000 children. As a result of the 1994 eligibility expansion, however, the program grew to just fewer than 50,000 enrollees in 1995. CHIP decided to cap the program in April 1995. At the end of the 1995-96 contract period, there were 49,552 kids enrolled in CHIP. Of these children, 2,271 were under age 6 and paid a portion of their subsidized coverage. The rest of the children received free coverage.4

CHIP relies on the HMOs that they contract with to collect applications and determine eligibility. It can take up to 4 months in Pennsylvania for a child to be enrolled in CHIP from their time of application. It usually takes only one month to process the application, but the current size of the waiting list can result in a three to four month delay before coverage actually begins. Applications are done over the phone, but they cannot be processed until written documentation follows.


III. Implementation


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

The Children’s Health Care Act (Act 113), which was signed into law in December 1992, gave state officials 90 days to create the program and begin enrolling children.


IV. Administration


A. How Program Fits within the State Structure

The Department of Insurance's Office of Special Projects administers CHIP. The Insurance Commissioner, the Secretary of Health, and the Secretary of the Budget govern the CHIP program. The Secretary of Public Welfare was tactically excluded in order to separate CHIP from Medicaid. State CHIP staff are not responsible for verifying the eligibility of applicants. This process is handled by the insurance plans contracting with the CHIP program.

B. Administrative Costs of the Program


C. How Premiums, Copays, and Deductibles are Collected

CHIP health plans, which are known as "grantees," are responsible for the collection of premiums, payment of claims, management of health care, and the administration of the program, including promotional and marketing activities.

D. Cost-Shifting to Medicaid


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

BC/BS Caring programs in Pennsylvania provide coverage to "wrap-around" the CHIP program eligibility guidelines. There are three Caring Foundations: Western, Central and Eastern Pennsylvania. The Caring Programs subsidize coverage for kids 6-18 between 185% and 235% of the federal poverty level and offer free coverage for 17 and 18 year olds under 185% of the federal poverty level who are too old for the CHIP program.

In addition, BC/BS allows families who are on the CHIP wait list to "buy-in" to the program while they wait for a spot. The Caring Foundation will often pay for their coverage until a spot in CHIP is available.

F. Coordination with Medicaid

The five CHIP health plans are required to refer ineligible families to other sources of health care. Children who apply to CHIP and are determined to be Medicaid-eligible are sent a letter notifying them of their ineligibility for the CHIP program and instructing them to apply for Medicaid instead. In contract year 1995-1996, over 8,000 referrals were made to Pennsylvania Medicaid.5

CHIP has a medically needy provision that directs children requiring inpatient care to participate in the spend-down process. The spend-down process in Pennsylvania is usually initiated by the hospital on the first day that the child is admitted. The child's family will be given a Medicaid application by the hospital, as well as an estimate of the expenses that the child will incur while hospitalized. Medicaid will then recalculate the family's Medicaid eligibility within 90 days, taking into account the new medical expenses. Usually children are determined to be Medicaid eligible and are then placed on the Medicaid program. However, CHIP will automatically allow the child to re-enter the program if their health status improves and the family's income rises to the point where they are no longer eligible for Medicaid. CHIP also coordinates with the Medicaid program to allow the child to remain with the CHIP physician, rather than switching to a new doctor. Currently there is little overlap between providers participating in the CHIP program and providers participating in the new Medicaid managed care program.

G. Coordination with Other Children’s Programs

In Philadelphia, there is a 1-800 number, operated by the Pennsylvania Department of Health in cooperation with two local consumer groups, that screens callers to determine if they are eligible for Medicaid or for CHIP. Callers qualifying for CHIP are sent the simple one-page application form. Those eligible for Medicaid are referred to help lines where counselors take applications and explain procedures.6 In contract year 1995-1996, counselors reported 1,325 CHIP related calls and/or referrals.7 No formal process is in place to make sure that these children actually enroll in Medicaid.

H. State Laws the Program is Required to Comply With



V. Policy Issues


A. Adverse Selection

Adverse selection does not seem to be taking place. Premiums have been going down for the past four years, and prices seem to be following the HMO industry. Since the program is geared to preventive care, most kids are healthy when they enter. Really sick children tend to spend-down into Medicaid.

B. Substitution of Employer Coverage

Substitution has not been discussed in detail, and there is no feasible way to track it in the state. The legislature has not been worried about this issue yet either.


VI. Program Impact


A. Impact on Number of Uninsured Children in State

The CHIP health plans are contractually required to participate in an impact/outcome evaluation. The evaluation is based on medical chart reviews. The purpose of the evaluation is to measure the quality and continuity of medical care provided to enrolled children. These evaluations are primarily focused on preventive and health maintenance services.

The Pennsylvania State University Center for Biostatistics and Epidemiology is conducting the evaluation for the contract period from July 1, 1994 to June 30, 1996. The goal of this study is to estimate the rates of adherence to the standards and criteria for quality access in the primary care of all enrolled children. This data will be compared with historical data from other populations and with normative standards for quality and access in primary care populations. The external review was scheduled for completion in June 1997.

B. Other Direct Impacts

Pennsylvania Partnerships for Children feels that the program has had some impact in the state, but Pennsylvania still has a large number of children without insurance.


VII. Future of Program


A. Lessons Learned

The annual bidding process for HMO plans takes a great amount of time and effort. It results in a four-month process that sometimes appears unnecessary, especially considering the fact that the same contractors have been selected for the last four years. Logically, it doesn’t make sense to bid it out this often, especially with the cap on the program. This discourages new plans from bidding since there are no new children to enroll.

The administrative structure of CHIP is another issue to reconsider. The three agencies that run the program sometimes encroach on one another’s areas of expertise. A CHIP unit separate from any state agency would be another option.

A larger administrative budget would allow more evaluations of the program.

B. Vision of the Future of the Program

Program administrators feel that the CHIP program has a bright future. With the new Title XXI funds, they hope to eliminate the current waiting list for CHIP.

1. This expansion was passed in October 1996.

2. Children's Health Insurance Program of Pennsylvania. (1996). Annual Report. Contract Year July 1, 1995 through June 30, 1996. Submitted by Linda A. Kaiser, Insurance Commissioner; Robert A. Bittenbender, Secretary of Budget; and Daniel F. Hoffman, Acting Secretary of Health. (p. 4).

3. Section 702(a) of Act 113.

4. 1995-1996 CHIP Annual Report, p. 4.

5. 1995-1996 CHIP Annual Report, p. 7.

6. Williams, S., (December 8, 1997). Child Health Gains May Hinge on Aggressive Outreach. Medicine and Health Perspectives. 51 (47), 1-4.

7. 1995-1996 CHIP Annual Report, p. 7.