Innovative State Strategies to Insure Children. Washington


The following information regards the Washington Basic Health Plus program only. The Healthy Options program addresses the needs of children whose parent(s) are on Medical Assistance in Washington state. Healthy Options is administered by the Medicaid agency.

I. Overview


A. History and General Description of Program

In 1993, Washington State passed legislation to create the Basic Health Plus program, a Medicaid expansion for children under 200% of the federal poverty level. These children were previously eligible for health insurance through the fully state-subsidized Basic Health Plan.1 The impetus for forming a new program exclusively for children was to take advantage of the federal funding available through a Medicaid expansion. In addition, the children receive the more comprehensive Medicaid benefit package under the program at no cost to their families. However, provider networks have been aligned between the Basic Health Plus program and the Basic Health Plan so that parents and children can still visit the same physicians. Basic Health Plus is administered jointly by Medical Assistance Administration (a department of the Washington Department of Health and Social Services) and the Washington Health Care Authority. The Health Care Authority also administers the Basic Health Plan.

B. Support/Opposition for Program in State

In 1991, the Legislature passed a law setting up a health care access and cost containment commission. This commission gave recommendations to the 1993 Legislature, and the Health Services Act emerged directly from these recommendations. The focus of the law was cost, quality and access. In the same year, new tobacco, alcohol and provider taxes were created to support the Act. These helped fund the Basic Health Plan and the children's expansion. Except for the business community and some of insurers, most people rallied behind the recommendations of the commission.

Many feared for the program when both the House and Senate went Republican in 1997. State officials believed that there would be a cutback in children's eligibility. However, that has proven to be politically unfeasible because Basic Health Plus is too popular. Editorials appeared in every newspaper in the state in support of the program in the spring of 1997. The legislature refused additional funds, but eligibility levels were not changed.

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 Washington State is 109,000. This figure is based on the March 1995-1997 Current Population Surveys.


II. Program Design


A. Options Considered for Coverage

In addition to addressing the difficulties of outreach to eligible children, another pressing issue is helping enrollees understand how to operate in a managed care environment.

The Basic Health Plus program was designed to maximize federal funding. Therefore, no other options besides an expansion of Medicaid were considered. The 200% federal poverty level was chosen to match the Basic Health Plan limit.

Welfare stigma remains a major issue for the Basic Health Plus program. There are many parents in the Basic Health Plan who choose not to put their children in Basic Health Plus and keep them in the Basic Health Plan despite the monthly premiums and the less extensive coverage. Some of these parents were once on welfare and refuse to ever accept a "handout" again. Others feel it is necessary for their dignity to pay something in return for the care provided. Currently there are between 8,000 and 10,000 children who are enrolled in the Basic Health Plan who are eligible for Basic Health Plus.

B. Target Population

Children ages 0-19 whose families earn less than 200% of the poverty level are the target population of Basic Health Plus. The 200% level was chosen because it is identical to that of the Basic Health Plan, so that both parents and children in the same families would be eligible for health care. The 200% federal poverty level was also sufficiently low that Washington would receive a full federal match.

A recent study showed that enrollment in the two plans is not just concentrated in the Seattle/Tacoma area (urban area). A significant number of individuals are on the waiting list for the Basic Health Plan from the rural counties. This is evidence that the marketing efforts have been successful. However, parents have trouble differentiating between the two programs. There is a need to ensure that parents understand that there is no wait to enroll in the Basic Health Plus program, even though there is a wait for adults wishing to enroll in the Basic Health Plan.

C. Services Included in Benefit Package

The Washington Basic Health Plus program has the same rich benefit package traditionally provided under the state Medicaid program. This includes all preventive services, plus benefits such as inpatient care, dental care, eyeglasses and hearing aids. Basic Health Plus provides routine screenings of up to $125 per child per calendar year without co-payment (this does not apply to well-baby care). Immunizations and well-child visits are covered up to a maximum of $400 per calendar year for children ages 1-4. Children receive a 50% discount on glasses and a 25% discount on contact lenses. There is an unlimited inpatient stay, but care must be authorized within 48 hours of admission.

D. Provider Network

Originally both the Basic Health Plan and Basic Health Plus were doing their own managed care procurements. The inefficiency of this was quickly realized, and efforts were made to streamline and synchronize their operations. By 1995, the two agencies were working with almost identical managed care plans. The attempt to have matching provider networks continued, and in the last procurement process, the programs share provider networks. There are currently fourteen managed care plans contracting with Basic Health Plus.

In 1997, the two agencies submitted one joint RFP for insurers to cover state employees, Medicaid, and Basic Health Plus (a total of 950,000 lives). A true incentive was offered for insurers to compete for contracts, since they will only be offering existing contractors the opportunity to bid for contracts in the next three years. Tremendous integration has occurred between the Basic Health Plan and Basic Health Plus.

E. Sources of Financial Support for the Program

The program is funded through a combination of state and federal funds through the Medicaid match. State funds are obtained primarily through state taxes on cigarettes and alcohol.

F. Estimation of Initial Costs


G. Cost-Sharing Arrangements

There are no premiums, deductibles, or co-payments for children in families below 200% FPL who are enrolled in Basic Health Plus.

H. Marketing of Program

Enrollment was much slower than anticipated in 1994 and 1995. The program worked a great deal during that time period with schools, community centers, churches, etc. This targeted marketing has paid off in increased enrollment. One of the reasons that enrollment might have been low at first was that families were adverse to the stigma of Medicaid and public assistance. However, the program has done considerably well overall as the number of uninsured children in Washington has decreased to 7.7% from 11.4% at the onset of the program.

I. Eligibility Criteria

Children participating in Basic Health Plus must be under age 19, live with their parent(s) or guardian, and be U.S. citizens or lawfully admitted. If a child is not a U.S. citizen, he or she can still enroll in the Basic Health Plan with the usual co-payment and premium costs.

J. Verification Process

The state Department of Social and Health Services verifies eligibility, and the Medical Assistance Administration does the budgeting. Applicants must submit proof of income for the most recent 30 days or complete calendar month (or for the previous three months, if the applicant prefers that income be averaged). Photocopies of wage stubs or a signed tax form 1040 may be submitted as proof.

K. Enrollment Process and Waiting Period

Basic Health Plus maintains a complete enrollment history from February 1989-present. There is currently no waiting list for Basic Health Plus.

There are three different ways that children enroll in Basic Health Plus:

Referral from the Basic Health Plan when parents sign the family up. Calling the direct 1-800 line, which is advertised in childcare settings, schools, etc. Through the local welfare office. It is possible to do the entire enrollment process by mail.

Unfortunately, recent focus groups have shown that families continue to be confused about who is eligible for the Basic Health Plan versus Basic Health Plus. When people lose their eligibility for Medicaid they can enroll in the Basic Health Plan. Currently, approximately 40% of new Basic Health Plus enrollees were referred by the Basic Health Plan. Enrollment continues to increase as projected, but some families may not realize that their children are eligible.


III. Implementation


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

The idea for Basic Health Plus was conceptualized in 1994, and implementation began six months later. There were unanticipated problems, such as understanding terminology used by the two agencies. "Eligibility" and "enrollment" meant different things for Medicaid and for the Basic Health Plan, which is more similar to private insurance. This made it difficult to communicate and understand what was happening with a particular account.


IV. Administration


A. How Program Fits within the State Structure

The Health Care Authority oversees both the Basic Health Plan and Basic Health Plus. The Basic Health Plan is a separate state agency. Basic Health Plus is part of the Medicaid agency, the Medical Assistance Administration. The three organizations work in close cooperation. The Health Care Authority also oversees the public employee benefits plan.

B. Administrative Costs of the Program

Currently, 6.8% of the subsidized premium budget is used for administrative costs. This figure was above 7% last year, so they have been successful in bringing down costs. Their administrative costs are higher than other programs, however, since they do income determinations in-house. The primary mechanism that the plan uses to hold down costs is to use as much technology as possible (e.g. a new document imaging system) to save employees time and allow them to work more efficiently. They are working toward "first call resolution", so that when a member calls with a problem with their account, it can be resolved on-line during that phone call.

Major improvements in their services and costs have come through enhancements in the telephone system. At the peak period of enrollment, Basic Health Plan was receiving 10,000 calls per month. The interactive voice response system has allowed most calls to be handled exclusively by computer. They are currently changing the "1-800" phone lines to make the messages shorter so that less time is spent on the phone by enrollees and the lines are not tied up. The goal during periods of open enrollment is that enrollees will be able to switch their plans automatically through the phone system.

A 1994 Hospital Association member survey reported that 90% of members were happy with the services of the Basic Health Plan but felt that prices were too high. In response, in 1995, premium contributions were restructured so that the plan would be more affordable. However, people are still not happy with the phone system, as they would prefer to speak to a live person. However, the plan is not funded for sufficient administrative help to staff the phones. Because it is a state program, they have a specific allotment of full-time employees.

C. How Premiums, Copays, and Deductibles are Collected

Not applicable. Basic Health Plus has no premiums, deductibles, or co-payments for children under 200% FPL enrolled in Basic Health Plus.

D. Cost-Shifting to Medicaid

Not applicable. All children who are eligible for Medicaid have already been enrolled in Basic Health Plus, the Medicaid sister organization of the Basic Health Plan.

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

The Health Care Authority, which administers the Basic Health Plan, coordinates with the Department of Social and Health Services, which administers Basic Health Plus, to provide a uniform application for parents and children applying to the two programs.

F. Coordination with Medicaid

Children and their parents enroll into Basic Health Plus and the Basic Health Plan, respectively, with the same application form. The Department of Social and Health Services does the eligibility verification for both programs and enrolls the children, then forwards the list of eligible names to both agencies.

All children who are eligible for Basic Health Plus are encouraged to participate, since the program is funded by half state funds and half federal funds, while the Basic Health Plan is funded only through state funds and individuals’ contributions to the premium.

G. Coordination with Other Children’s Programs

When the Basic Health Plan was open for immediate enrollment, a joint application was sent to the families. The form was made to not look like a Medicaid form, but it did say Medicaid in some of the fine print. The form was submitted to the Basic Health Plan, which screened it for children in families with income of 200% FPL or less. If such children were found, the two agencies collaborated to enroll the kids in Basic Health Plus while enrolling the parents in the Basic Health Plan. The children immediately began receiving fee for service care, and were switched into the managed care plan when their parents submitted their first premium check, so that the whole family would appear to be enrolled in the "Basic Health Plan" at once.

Washington State is starting to enroll SSI children in managed care now, so there is a lot of coordination between the Children with Special Needs Department and Medicaid. When Medicaid expanded eligibility in 1992 to include pregnant women up to 185% FPL, there was close work with the Title V Maternal and Child Health workers. Maternal and Child Health workers have also been very involved in outreach and enrollment efforts, with most coordination occurring at the local level. The program is also working with insurance plans to ensure that the social work and other support provided to pregnant women are covered by the plans.

H. State Laws the Program is Required to Comply With


V. Policy Issues


A. Adverse Selection

There is not any evidence of adverse selection into Basic Health Plus. Competition is fierce among insurers to do business with the program, since their group of children is considered less risky than the state employee population.

However, there has been adverse selection in the Basic Health Plan population who are above 200% FPL and pay the full premium. The Basic Health Plan has traditionally been cheaper than the private market, and plans have been losing money off of the non-subsidized sector of Basic Health Plus for years. Premiums will go up in January 1998 and this may partially correct the problem of adverse selection.

B. Substitution of Employer Coverage

Anecdotal evidence suggests that parents are substituting Basic Health Plus for employer-based insurance. However, there are restrictions that prevent substitution from occurring on a wide scale: children must be under 19, live at home, be a US citizen or legal resident, and be from families below 200% of the poverty level. No analysis of substitution has been done, however.

Washington does not ask people whether they dropped coverage to enroll in Basic Health Plus, so it is difficult to determine whether there has been substitution in the state. RAND conducted surveys in October 1994 and October 1996, and in that two-year period during the Basic Health Plan and Basic Health Plus expansions, the percentage of people covered by employer coverage did not decrease significantly. The total number of uninsured in the state only dropped slightly during that time, but the percentage of uninsured kids fell from 11.4% to 7.7%. 2

Washington is generally not concerned about substitution. The state has chosen to take the public health approach rather than the prudent spending approach. The consensus is that if children were switched to Basic Health Plus, they were probably switched because their former coverage was not as good, so the switch is a positive one. In addition, it is believed that children should not be penalized if their parents' employers decided to drop coverage.


VI. Program Impact


A. Impact on Number of Uninsured Children in State

The number of uninsured children in Washington State has decreased from 11.4% of children to 7.7% of children. 3

B. Other Direct Impacts

There is much closer coordination between state agencies as a result of the creation of the Basic Health Plus plan.


VII. Future of Program


A. Lessons Learned

The most difficult part of implementing the Basic Health Plan and Basic Health Plus was the immense cultural changes that had to occur in state government. While the Basic Health Plan is a separate state agency that has always contracted with managed care organizations, Medicaid was just getting into managed care at the time of the expansion. When the two programs first attempted to offer the same managed care plans to the parents and children, there were difficulties coordinating. The separate computer systems of Basic Health and Medicaid were the most challenging factor to integrate. Now the program coordination is working tremendously well.

Washington State officials believe that states that are creating new children’s health insurance programs should consider completely separating them from Medicaid, and states with different programs for adults and children should handle them under one umbrella agency. In Washington, the two agencies often duplicate work and possess information systems that do not communicate with each other. Coordinated marketing has also been difficult due to the differences between the two programs.

B. Vision of the Future of the Program

Basic Health Plus will continue in its present form without many changes. The program is now considered an entitlement, and politicians would find it very, very difficult to decrease the eligibility limit. There is massive support in the state for children's health insurance coverage.

Washington State cannot use any of the new Title XXI funding for children who were covered on June 1, 1997, so none of their children are eligible. Funds can only be accessed if they expand eligibility further to 250% of the federal poverty level. Plans for using the money will be made after the legislative session begins, and probably won't be ready until the summer of 1998. It will take about a year afterward to implement the program and begin enrollment.

1. The Basic Health Plan was established in 1988 to provide for Washington residents who are under 200% of the poverty level. Adults below 200 % of the federal poverty level who are not eligible for Medicaid can still receive coverage under that plan.

2. Interview, Summer 1997

3. Interview, Summer 1997