Innovative State Strategies to Insure Children

CaliforniaKids is a non-profit organization sponsored by private donations that was founded July 30, 1992. The program was initially based in Los Angeles, but has since expanded to twenty-four other counties in California. CaliforniaKids offers children a limited health insurance product that focuses on preventive care. The program coordinates with Medi-Cal, the state Medicaid program, to obtain care for children who need inpatient treatment or other serious care that CaliforniaKids does not provide. CaliforniaKids partners with community organizations to identify and enroll eligible children. Children enrolled in CaliforniaKids pay no monthly premiums, but are responsible for small co-payments for their care. CaliforniaKids has provided coverage for over 18,000 children since its inception in 1992.¹

There has not been a lot of state support for CaliforniaKids due to lack of available state funds. However, CaliforniaKids has received support at the local/community level to identify and enroll eligible children. Community organizations that partner with CaliforniaKids include: school nurses (most of the enrollees come from schools); Head Start and Healthy Start programs; child care councils; the Child Health, Disability, and Prevention Program (CHDP); Access for Infants and Mothers (AIM); the Boys and Girls Club; and Big Brothers, Big Sisters.

According to 1995 data, there were 1.7 million uninsured children in California through age 18. Roughly 400,000 of these met the requirements for Medi-Cal but were not enrolled.²

II. Program Design

A. Options Considered for Coverage

CaliforniaKids created an organization based on philanthropic support in order to build a basic model for children’s health insurance and then expand as more funding became available. The program was initially based in Los Angeles, but as more financial support was received it was expanded to the following counties: Alameda, Contra Costa, El Dorado, Fresno, Kern, Kings, Madera, Merced, Orange, Placer, Riverside, Sacremento, San Bernardino, San Diego, San Francisco, San Luis Obispo, San Mateo, Santa Clara, Shasta, Solano, Stanislaus, Tulare, Yolo, and Ventura County.

Important issues considered when designing the program included:

Cost/funding

	Impact
	Enrollment
	Benefits
	Premiums
	Co-payments

Uninsured children ages 2-18 who are unmarried, ineligible for coverage under any federal or state health benefit program, not currently enrolled under a private health care contract, and enrolled and attending school (if school-age) are eligible for CaliforniaKids if their family income is below 200% of the poverty level. In August 1997, a pilot program was begun in San Diego that will expand the income eligibility level up to 300% of the poverty level in that county.³

Doctor's Visits:	Yes ($5 co-pay for office visits).
Health Screening:	Yes
Immunization:	Yes
Sick Care:	Yes
Prescriptions:	Yes
Dental Care:	Yes ($10 co-pay). Initiated 11/95.
Eye Glasses:	Yes ($10 co-pay for eye exams). Initiated vision care11/94.
Screening and Hearing Aids:	Yes
Emergency:	Yes
Outpatient:	Yes
Inpatient:	No

D. Provider Network

CaliforniaKids utilizes a managed care, capitated system to maintain cost-effectiveness, to minimize risk and unnecessary administrative expense due to excessive claims processing, and to provide a "medical home" for enrolled children. The network maintains choice and is sensitive to access, culture, language, gender, and age of child. Over 15,000 health care providers are contracted to provide services throughout the State and a 24-hour nurse hotline is available to all members to provide health care information and re-direct care from the emergency room to a lower cost, appropriate alternative. Plans donate their direct administrative expenses. CaliforniaKids partners with medical groups and independent physician associations (IPAs), which offer wellness education to the plan's members. Services are administered by Blue Cross of California, Delta Dental, Vision Service Plan, Wellpoint Pharmacy, and Access Health.

E. Sources of Financial Support for the Program

CaliforniaKids is sponsored entirely by private donations.

Actuaries initially estimated that it would cost $400 per member per year or $33 per month to operate CaliforniaKids.⁴ Benefits at that time included outpatient visits, ER, and prescriptions. There was a $5 co-payment for all services except for emergency room visits, which had a $25 co-payment. After the first year of implementation, it was discovered that the benefits package was only costing $22 per member per month, so benefits were expanded to include vision care. The following year, CaliforniaKids costs were still less than $33 per member per month, so dental benefits were added as well. In addition, CaliforniaKids contracted with Access Health to provide a 24-hour hotline, staffed by a nurse, to answer questions and divert patients away from emergency room use.

There is a $5 co-payment for office visits, $10 for dental care, $10 for vision care, and $10 for prescriptions. There are no premiums.

F. Marketing of Program

Schools are the primary resource for identifying eligible children (e.g., school nurses, Head Start programs, and Healthy Start programs). Utilization of the Child Care Councils in each county provides outreach to hundreds of day care centers. CaliforniaKids also uses brochures, pamphlets, and folders containing information sheets. Materials are available in Spanish for enrollees.

Residents of California ages 2-18 who are unmarried, ineligible for coverage under any federal or state health benefit program, not currently enrolled under a private health care contract, and enrolled and attending school (if school-age) are eligible for CaliforniaKids. Families must be below 200% of the federal poverty level (FPL).

CaliforniaKids asks for a copy of the IRS 1040 form, and current paycheck stubs, and copies of verification of any Social Security, disability, or child support payments to verify income level.

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

CaliforniaKids utilizes a one-page, mail-in application form. Along with a completed application, the parent must include two current pay stubs and a recent copy of their IRS 1040 tax statement to verify income. All eligible children in a family are enrolled at the same time. CaliforniaKids works closely with school nurses to ensure that families are provided assistance in filling out the application. Providers, WIC clinics, and welfare offices can all assist in helping families fill out the application, but the application must still be mailed to CaliforniaKids. It takes 2-6 weeks to enroll a child. CaliforniaKids closes enrollment on the 20th of each month.

The program does not currently have a waiting list. As CaliforniaKids expands the program to 300% in San Diego, there will be more marketing and a greater potential for a waiting list to develop.

III. Implementation

During the first month of implementation, 46 children were enrolled. Since inception, 18,000 children have been served. Currently 8,500 are being served.⁵

MONTH	YEAR	ENROLLMENT⁶
July	92	46
Jan	93	153
July	93	298
Jan	94	735
July	94	2000
Jan	95	3200
July	96	4200
Jan	96	5826
July	96	7521
Jan	97	8250

IV. Administration

CaliforniaKids does not have a formal relationship with the State of California. It is a private organization sponsored by donations.

C. How Premiums, Copays, and Deductibles are Collected

Cost Per Child: $33/month or $400/year.⁷

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

CaliforniaKids does not provide inpatient care. Children requiring inpatient services are referred to Medicaid.

CaliforniaKids coordinates with AIM, WIC, Head Start, Medi-Cal, and the Child Health, Disability, and Prevention Program (CHDP).

Coordination with Medicaid is done on a case-by-case basis. When a child needs inpatient care CaliforniaKids contacts Medi-Cal.

Other state programs have enrollment information for CaliforniaKids and can assist families in filling out the application.

H. State Laws the Program is Required to Comply With

V. Policy Issues

Some adverse selection occurs because school nurses target sick children that do not have health coverage. In order to compensate for adverse selection, CaliforniaKids requires all eligible children in the family to enroll at the same time.

CaliforniaKids limits substitution by not offering inpatient care. Employer-sponsored insurance usually provides inpatient care, so there is no incentive for a family to drop employer coverage to participate in CaliforniaKids. CaliforniaKids doesn’t have any data on substitution. However, anecdotal information (from talking with families) suggests that if families did drop employer coverage, it was because it wasn’t affordable or didn’t offer needed services. As they expand the program in San Diego to include families up to 300% FPL, they will probably have more information on substitution. CaliforniaKids is a relatively small program, so substitution hasn’t been a real concern.

VI. Program Impact

A. Impact on Number of Uninsured Children in State

Since its inception, CaliforniaKids has provided health coverage to over 18,000 children.⁸

VII. Future of Program

A. Lessons Learned

CaliforniaKids would make the following recommendations to a state that is planning on starting a children’s health insurance program: 1) prevention is most important, because that will help the majority of children and will provide the "biggest bang for the buck;" 2) the program should be user friendly and simple; 3) it’s important to treat your population with dignity (i.e., require co-payments, provide a traditional insurance card); 4) philanthropic support is not the answer because it will only reach a limited number of children.

In August 1997, CaliforniaKids launched a pilot program in San Diego. The program was expanded to include families up to 300% FPL based on a sliding scale fee. CaliforniaKids has noticed that often families' incomes improve after one year and exceed the eligibility level of 200% FPL. By expanding the program to 300% FPL, they hope to build a bigger bridge between Medi-Cal and employer sponsored insurance.

The Packard Foundation has funded an 18-month multi-method evaluation being conducted by the University of San Francisco's Institute for Health Policy Studies to evaluate member satisfaction, comparisons to the commercial and Medi-Cal populations, health outcomes, the lapse/turnover rate, and utilization. The evaluation results will influence the vision of the program.

1. Interview, February 1998.

2. California's Working Families & Their Uninsured Children: Policy Building Blocks for Change. Children Now. March 1997

3. Interview, Summer 1997.

4. Interview, Summer 1997.

5. Interview, February 1998.

6. Interview, May 30, 1997.

7. CaliforniaKids pamphlet.

8. Interview, February 1998.

Colorado

I. Overview

The Colorado Child Health Plan (CCHP) was established in 1992 as a community-based health care reimbursement program for low-income children. CCHP operates as a health maintenance organization that is administered by the University of Colorado Health Sciences Center. The program initially targeted rural counties with a low number of safety net providers, and it built its own network of physicians. Recent legislation established the Children’s Basic Health Plan (CBHP), a program which will expand eligibility under CCHP up to age 18 and extend the network into every county in the state (HB 1304). CBHP will be a full benefit program administered by private HMOs. The CBHP will be funded in part by the Title XXI block grant.

Colorado initially chose to create CCHP rather than apply for a 1115 Medicaid waiver with the hope that more providers would be willing to participate in the program. Colorado’s political climate includes a very strong anti-government sentiment and a substantial push to privatize. Because of this, Colorado officials are pleased that the Title XXI legislation will not force them to write an 1115 waiver to draw down the new funds.

The Colorado Children’s Campaign was a big force behind passage of both the original Colorado Child Health Plan and the new Children’s Basic Health Plan (HB 1304). The local chapter of the American Academy of Pediatrics is also very involved. The Governor’s wife was a spokesperson for the original CCHP.

When the Colorado Child Health Plan was initially marketed in the Northeast region of the state, it was presented as a private insurance plan costing $25 per year. The reason for this marketing campaign was to avoid the "welfare stigma." The effort was unsuccessful in enrolling large numbers of children because residents apparently thought the plan was a scam. In the Western region of the state, however, county resource centers, public health departments, schools, and other community groups rallied around the program. These Western counties set up a system so those individuals rejected from Medicaid automatically received a Colorado Child Health Plan application.

Community program buy-in has been an ongoing problem in Colorado. The greatest difficulty advocates faced was not setting up a subsidized insurance plan for children, but convincing the legislature to set up an insurance plan run by the state. The new Children’s Basic Health Plan legislation includes clauses that specifically call for certain parts of the program to be privatized.

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 72,000 in Colorado. 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 Approximately 40,344 of these children are eligible for the Colorado Child Health Plan.²

II. Program Design

A. Options Considered for Coverage

The primary rationale for forming the Colorado Child Health Plan was to give families access to the health care system. This meant helping families to overcome the cost of health care and to gain trust in a children's health insurance program. In order to encourage both enrollment and utilization of the health care system, CCHP identified a vast number of potential access problems for families and worked to overcome them. The CCHP application form was made simple enough so that people would not be discouraged from applying. The program was set up as an health maintenance organization (HMO) to reduce costs. However, this decision may have actually had a bigger impact on quality than on cost, since the CCHP population is very transient. Without CCHP, children tended to drift from physician to physician, in part because parents would build up bad debt at one physician's office and be too embarrassed to go back. Having an assigned primary care physician through the HMO structure of CCHP provides children with a medical home and some consistency in their medical care.

The target population of the Colorado Child Health Plan is children age twelve and under with incomes up to 185% of the poverty level who are not eligible for Medicaid. Under the new Children’s Basic Health Plan, the target population will expand to include children up to age eighteen. Enrollment in FY 1996 was 4,893 children. In FY 1997 target enrollment is 6,217 children, and in FY 1998 target enrollment is 12,041 children.

It was estimated that in FY 1996, 40,344 children were eligible for CCHP by virtue of age and income. CCHP hired Mathematica Policy Research, Inc. and RAND under a Robert Wood Johnson Foundation grant to calculate the number of children eligible for the program and to project those figures out to FY 1998.³

C. Services Included in the Benefit Package

The benefit package was modeled after the Blue Cross/Blue Shield Caring Programs. There is a maximum annual benefit of $10,000 per child. The program expansion under the Children’s Basic Health Plan will include inpatient and mental health care. Benefits include:⁴

	Doctor visits: Yes.
	Health screenings: Yes.
	Immunization: Yes.
	Emergency: Yes. Requires approval by primary care physician.
	Outpatient: Yes. Pays current Medicaid + 20%. Allows 48 hour patient observation.
	Prescriptions: Yes.
	Dental care: No.
	Routine Vision Services: Yes.
	Eyeglasses/Contact Lenses: Yes.
	Mental Health: No.
	Inpatient-hospital care: No.

D. Provider Network

CCHP is administered by the state of Colorado through the University of Colorado Health Sciences Center. The program has a statewide network of pediatric physicians. Primary care physicians are reimbursed on a capitated basis and bear risk. Medical specialists are reimbursed on a fee-for-service basis.

E. Sources of Financial Support for the Program

Funding is obtained through a combination of state appropriations and private donations. Sources include: the state General Fund; public funds consisting of a portion of the Medicaid teaching adjustment paid to University Hospital; cash reserves and interest paid on those reserves; private donations; and enrollment fees. Blue Cross/Blue Shield HMO donates all claims processing services.

FY 97-98:⁵
	State General Fund Appropriation-- $1,013,598
	Used $571,345 of University Hospital’s funding for Indigent Care Program to obtain federal funds match of $650,000 from Medicaid in the form of a teaching hospital adjustment payment. University Hospital makes quarterly payments of $162,500 to CCHP.
	Legislation appropriated $211,300 of spending authority to the program in enrollment fees.
	Legislation appropriated $650,000 of spending authority for private donations-- including $100,000 from Blue Cross/Blue Shield. Colorado Group Insurance Association funds a scholarship program for families who can not pay the $25 enrollment fee.
	BVP Media, Inc. donated TV and radio public service announcements.
	113 pharmacies donate 5 common pediatric drugs for a $2 co-pay.
	Miles Advertising donated the development of the CCHP logo and the early outreach literature.

No information on initial costs is available at this time.

	$2 co-payments for doctor visits, health screenings and prescriptions.
	Providers are not required to collect these co-payments, but they are encouraged to collect them in order to instill the value of health care services received onto the families whose children participate in CCHP.
	The enrollment fee is a $25 per child yearly payment in lieu of premium contributions, with a $150 per family maximum fee. CCHP does have formal sponsorship of any families who can not pay the $25.

The Colorado Child Health Plan devoted 11.3% of its total program budget to outreach and marketing in the most recent year for which information was available.⁶ Colorado cites the "back to school enrollment program" as their single best outreach vehicle. The Colorado Child Health Plan operates under the philosophy that people need to be exposed to the program three times before they will react. The back to school program tries to reach them three times in close succession. Television ads, radio ads, and fliers are used at the same time. In 1996 over 210,00 pamphlets were distributed to 848 Colorado schools in 42 counties.⁷ Outreach pamphlets featuring "Honey Bear" are available in both English and Spanish. Spanish speakers are also available to assist Colorado residents in filling out applications through the toll-free phone line.

Five CCHP staff members work very closely with communities and conduct local outreach training. The state staff created a database of county public and social service agencies that work with low-income families with children. The database helps state outreach workers coordinate efforts with local groups. CCHP works with schools, health departments, county resource centers, WIC, prenatal and nutrition programs, the Colorado Indigent Care Program, and with HCP, a program for children with special health care needs. CCHP cites word of mouth as their single greatest source of referral.

The target population of CCHP is children age twelve and under with incomes up to 185% of the poverty level who are not eligible for Medicaid. Under the new Children’s Basic Health Plan, the target population will expand to include children up to age eighteen.

Families must renew for the Child Health Program each year when a letter is mailed as a reminder. Of children enrolled in CCHP during FY 96, 42.6% did not renew. CCHP sent out a survey to determine the reasons. 29% moved out of area, 23% "aged out" of the program, 11.5% became Medicaid eligible, and 11.5% increased their assets and were no longer eligible. Approximately 14% of those who did not renew reported that they had acquired other insurance.⁸

CCHP is on the brink of launching an Internet based eligibility system. This will give anyone (providers, clinics, etc.) the ability to process enrollment applications.

CCHP verifies eligibility by asking for a birth certificate, documentation of any extraordinary expenses (day care, medical bills due in the next 12 months, child support/alimony, and other health insurance costs), and three months worth of paycheck stubs. If applicants cannot provide this, they must submit copies of bills as proof of monthly expenses.

CCHP also offers an easy enrollment process. If a child is enrolled in the free meal program, HCP, WIC, state prenatal program, or two other food programs, the child may automatically enroll in CCHP, provided they are not on Medicaid. If people enter the CCHP program through WIC or any of these other programs, assets are verified through the other program. CCHP realizes that people who are not really eligible for CCHP may enroll, but at the same time, they want to enroll as many needy children as possible.

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

CCHP uses a mail-in application with a $25 enrollment fee per child. English and Spanish speaking operators on the toll-free phone line offer assistance in filling out the application. Families can use a full documented application to receive a Colorado Indigent Care Program (CICP) rating or one of three "short form easy enrollment" applications. Short forms are available through WIC, HCP, CICP, Commodity Supplemental Foods, or the Free and Reduced-Price Meal Programs available through all public schools. No waiting period has ever existed for CCHP.

III. Implementation

The legislation for CCHP was enacted in July, 1990. Enrollment began in six Colorado counties in 1992. By the end of FY ’97, CCHP will be in 54 of Colorado’s 63 counties.⁹ Once the new Children’s Basic Health Plan is merged with CCHP, the program will be in every county in the state.

IV. Administration

The Colorado Child Health Plan was legislatively established and is administered by the University of Colorado Health Sciences Center. CCHP is funded through a combination of state appropriation and private donations. Senate Bill 90-25, the "Children’s Health Plan Act," was enacted by the Colorado General Assembly in 1990 and took effect on July 1, 1990. Two additional pieces of legislation, Senate Bills 93-29 and 93-36, extended the plan’s sunset date and expanded eligibility, respectively.

At the end of FY 96, administrative costs represented 30% of total program costs. The staff of CCHP prepared a working document for the Joint Budget Committee and presented it on December 11, 1996. From this, "research provided in Colorado Managed Care Review (1996), in FY 97-98 shows the Colorado Child Health Plan with $6.93 per member per month administrative expenses".¹⁰ This is reportable administrative costs only and does not include BC/BS donations. Administrative costs are contained in a variety of ways. All employees are state employees and do not have large salaries. The University of Colorado donates all indirect costs of the program including computer infrastructure. CCHP has no quality assurance or credentialling service. Because clients can simply switch primary care physicians whenever they want, providers are motivated to do a good job. Basically, the program operates as an "any willing provider" managed care organization.

C. How Premiums, Copays, and Deductibles are Collected

Doctors and pharmacies collect co-pays directly and keep them.

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

Most of the special needs kids that MCH deals with are seriously ill and eventually spend down into Medicaid if they are not already eligible. No cost-shifting to Medicaid exists.

Interaction especially occurs between CCHP and WIC, prenatal and nutrition programs, the Colorado Indigent Care Program, and HCP, a program for children with special health care needs. Public Health Nurses make an effort to enroll anyone eligible into CCHP. A short enrollment form was developed for families enrolled in one of six other programs. The nurses provide the form on the spot and help families complete it. Applications are available at all of the clinics. County social service offices refer families for Medicaid enrollment.

If children are eligible for Medicaid, the enrollment form is returned, and the family is advised to apply for Medicaid at the county department of Social Services. The State takes no responsibility for moving people into Medicaid. They depend a lot on the sites that do both Medicaid and CCHP.

It is difficult to have a seamless system between Medicaid and CCHP because their identification numbers do not match. Medicaid assigns each Medicaid enrollee a separate ID number while CCHP uses social security numbers. The new Children’s Basic Health Plan will be comparable to Medicaid so that people will not flip-flop and fall out of the system altogether as easily.

CCHP also offers a year of continuous enrollment, regardless of whether children become eligible for Medicaid. CCHP does not disenroll children within that time frame. If it is determined that a family has gone on Medicaid, CCHP simply discontinues capitation for the months that the child is covered. Some benefit and usage information is coordinated with the Medicaid program since HMO Blue covers both Medicaid and CCHP populations.

The difficulty in translating Title V users into CCHP enrollees is that Title V users are not required to register and report any finances to the state. Title V programs are not entitlements, so financial screening is not mandated. It is sometimes difficult to tell people on the spot whether they would be eligible for CCHP. No standardized registration form exists for both CCHP and Title V programs.

H. State Laws the Program is Required to Comply With

CCHP is only required to comply with three pieces of CCHP legislation. The plan’s founding legislation, Senate Bill 90-25, denies Colorado Child Health Plan enrollment to any child eligible for Medicaid and binds eligibility determination to the policies and procedures developed by the Colorado Indigent Care Program. Legislation passed in 1993 extended the plan’s sunset date to July 1, 1998. In addition, Senate Bill 36 increased the age limit for eligibility from 9 to 13 and allowed automatic health plan eligibility for families already enrolled in any of six other state programs for low-income families.

V. Policy Issues

CCHP has not tracked adverse selection. It is speculated that CCHP is not the type of program that really sick children and their parents would gravitate to because it does not provide inpatient care. The parents who are fortunate enough to establish a care network for their children are not likely to drop it for CCHP. Most chronically sick children are on SSI or in HCP; however, CCHP could be used for preventive care. Families could then buy another policy to cover catastrophic illness. The fact that anyone over 185% FPL has to pay the whole CCHP premium might also discourage adverse selection from happening.

The effects of welfare reform are yet to be seen. Some children currently on SSI will lose their eligibility. They may or may not end up going to CCHP.

In order to protect physicians, CCHP shifts some of the risk back on themselves when a primary care physician gets a "high user" enrollee. The physician simply has to mail in 6 months of medical records. Based on his or her patient diagnoses, the physician is awarded some multiple of the original capitation payment. The CCHP medical director does all reviews.

It has not been determined whether CCHP is directly responsible for any "crowding out" or not, but the substantial number of Colorado employers that refuse to provide coverage for their employees is an important issue for the state.

The private sector in Colorado has shown unwillingness to provide part-time employees with any type of coverage. Some companies hire only part-time employees to avoid offering any benefits at all. The unemployment rate in Colorado is currently the lowest it has been in 30 years, but a significant number of uninsured people remain, particularly children.

The new Children’s Basic Health Plan will allow buy-in by employers into the plan, but the current program does not.

Some families in CCHP have access to employer coverage. In fact, CCHP encourages families to carry other health insurance if it is available and to the extent that they can afford it. Some families use employer-based coverage to cover older kids who are not eligible for CCHP and use CCHP to help with the rest of the kids. This makes coverage for the whole family affordable. Currently only 15% of enrollees report having or canceling an insurance program in the past. Generally, the lower the federal poverty level of the enrollee, the worse their history of coverage becomes.

VI. Program Impact

A. Impact on Number of Uninsured Children in State

71,000 kids are eligible and only 7,000 kids are enrolled at present.¹¹ Growth has been largely limited by the way that the program expanded geographically. In counties where CCHP is present, most of which are rural, the penetration level is 40-50%.

Rural populations are more difficult to reach because fewer chances exist to convey information by word of mouth. The Colorado rural population has also historically been less likely to accept any form of charity. Historically, the urban populations in Colorado have been more willing to accept help when it is available.

The University of Colorado is currently conducting an evaluation of the program under a grant from Blue Cross/Blue Shield. The evaluation will look at well-child care in the 0-2 age group and asthma treatment in the 3-18 year old group.

As more kids are moved onto CCHP, providers can concentrate their resources on serving other populations.

VII. Future of Program

A. Lessons Learned

Respondents characterized several changes that they would consider if they were to "establish the CCHP children's health insurance program again":

	Set up Medicaid as a sliding scale premium insurance buy-in program from the beginning. Medicaid could be established as a private/public sector cooperation.
	The cost of insurance for small businesses in the private sector might be subsidized. The importance of insurance coverage for the private sector has not been emphasized enough in the past. The goal should be to ensure that all partners in the community are helping to alleviate the uninsurance problem.
	The need for a seamless health care system so that families do not fall between the cracks when they leave a particular program. A better public health infrastructure must be maintained so that kids can access care.
	The initial cost of CCHP was underestimated. More start-up money was needed.
	If CCHP had it to do over again, it would offer a full benefit package from the start.

	CCHP underestimated the depth of need for mental health programs.
	CCHP also underestimated the difficulty in getting children to enroll in the program.

CCHP is "going out of business" and merging with the new Children’s Basic Health Plan (CBHP). CBHP is viewed as a way to change how managed care is delivered to the indigent population. The CBHP will probably enjoy better community support if parts of it are privatized.

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. Colorado Child Health Plan Annual Report to the Colorado General Assembly. Submitted by the University of Colorado Health Sciences Center. Appendix K. March 1, 1997

3. Colorado Child Health Plan Annual Report to the Colorado General Assembly. Submitted by the University of Colorado Health Sciences Center. March 1, 1997. (p.22).

4. Colorado Child Health Plan Benefits Booklet. 1996

5. Colorado Child Health Plan Annual Report to the Colorado General Assembly. Submitted by the University of Colorado Health Sciences Center. March 1, 1997

6. Interview, Fall 1997.

7. Colorado Child Health Plan Annual Report to the Colorado General Assembly. Submitted by the University of Colorado Health Sciences Center. March 1, 1997. (p. 20).

8. Colorado Child Health Plan Annual Report to the Colorado General Assembly. Submitted by the University of Colorado Health Sciences Center. March 1, 1997. (p. 12).

9. Colorado Child Health Plan Annual Report to the Colorado General Assembly. Submitted by the University of Colorado Health Sciences Center. March 1, 1997. (p. 22).

10. Colorado Child Health Plan Annual Report to the Colorado General Assembly. Submitted by the University of Colorado Health Sciences

Florida

I. Overview

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.

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).

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.

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.

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.

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.

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).

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

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

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

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

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.

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.

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

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

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.

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.

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

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.

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.

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.

1. http://www.healthykids.org

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).

Massachusetts

I. Overview

Authorizing legislation for the Children’s Medical Security Plan (CMSP) was passed in 1993 to provide access to preventive and primary care services for Massachusetts' uninsured children.¹ The plan originally covered uninsured children age 12 or younger. The initial impetus for the program was increased national attention on health care reform and access to health care for all individuals. The passage of the Health Access Law in July 1996 expanded CMSP program eligibility to include adolescents up to age 18. In 1997, administration of the plan was transferred to the state Department of Public Health.

B. Support/Opposition for the Program in State

Program employees work closely with school nurses, family practice providers, the Boston Health Department, and others to promote the program and to receive input on a myriad of program issues including cultural competency. Advocacy groups involved in the program include Health Care for All, Massachusetts Community Hospitals, American Academy of Pediatrics, school health nurses, and others.

The State’s initial effort at providing coverage for children placed the program in an insurance agency (1989/90); however, the insurance agency was not capable of effectively conducting outreach initiatives and adequately serving a population entirely made up of children. Community organizations, namely Health Care for All and Success by Six, and the Maternal and Child Health Department advocated to expand the CMSP and move it to the Department of Health. In addition, the United Way regional director, also Chairman of the Board for Bank of Boston, very effectively lobbied the Governor for this change. The participation of a strong advocacy community was essential to the development of CMSP.

In moving the program to the Department of Health, outreach activities benefited from the experience of the Maternal and Child Health and Medicaid Departments. It was understood that the Department of Health would target those children who are not eligible for MassHealth (Medicaid) as well as undocumented children. The outstanding relationship between the Maternal and Child Health Department and Medicaid contributed to the success of the program.

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 69,000 in Massachusetts. 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

III. Implementation

Program accessibility was a major concern of the officials who designed the Massachusetts Children’s Medical Security Plan. Materials were developed in six languages to increase the access of different cultural groups. Community groups were recruited to assist enrolling families in the plan. There has been a focused outreach effort. The five regional health offices each have an employee designated to focus on outreach efforts for the program.

The target population for CMSP is uninsured children under the age of 19 who are residents of Massachusetts and who are not eligible for Medicaid. The number of projected children eligible for CMSP is 76,000.³ Ninety percent of the families enrolled in the program are employed but lack health insurance. Individuals have been followed through the program, and CMSP has seen that there is a substantial amount of flip-flopping of the employed/non-employed from this program to Medicaid or uninsurance status.

The Children's Medical Security Plan offers a range of benefits designed to cover the services most frequently used by children. Routine well-child check-ups, immunizations, and smoking prevention services are covered without co-payment. All other covered benefits require a co-payment of $1, $3 or $5 based on family income guidelines.⁴ Limited coverage is offered for emergency care, prescription drugs, durable medical equipment, and outpatient mental health services. CMSP does not pay for over-the-counter drugs, ambulance transport, inpatient care, dental care, or early intervention; however, children enrolled in CMSP may be eligible to receive inpatient care in any of the state hospitals or community health clinics through the state free care pool.

D. Provider Network

The Community Health Plan (CHP) and John Hancock administer the health insurance program. The Community Health Plan serves three rural counties with approximately 3,000 participants. John Hancock serves the remainder of the state, with roughly 34,000 enrollees. John Hancock reimburses its providers on a fee-for-service basis, while CHP reimburses both through capitation and fee-for-service arrangements.⁵

Any willing provider can be reimbursed for services to a child who has been insured by the Children’s Medical Security Plan. Community health clinics have complained that Medicaid reimbursed them at a higher rate, so the CMSP has begun to increase their rates to community health centers. Approximately 95% of members are within 5 miles of a provider network. Physicians have been very willing to participate in the program.

E. Sources of Financial Support for the Program

There are three sources of funding for the program: tobacco taxes, general funds, and family premium contributions.

The program conducts actuarial studies every year with Coopers and Lybrand to identify per member per month actual and estimated costs for the program. To date they have not had any problems with identifying the costs of the program. Initial costs were estimated to be a bit higher than they have actually been during implementation of the program.

Families earning 200% or less of the federal poverty level receive the insurance free of charge. Those families earning below 400% of the poverty level are charged a reduced premium rate of $10.50 per child per month, with a $32.50 maximum per family per month. Families with income over 400% of the poverty level are charged the full premium, which is currently set at $52.50 per month.

Co-payments exist for all services except immunizations, well-child check-ups and smoking prevention. Co-pays are $1 per visit for families below 200% of the FPL, $3 per visit for families below 400% of the FPL, and $5 per visit for families above 400% of the FPL. There is 100% coverage after co-payment for "acute care" office visits, minor surgical procedures, outpatient surgery for inguinal hernia or ear tubes, medically necessary eye exams, laboratory services, x-rays, and specialty consultations ordered by provider. Limited coverage exists for emergency care ($1,000 per benefit year), prescription drugs ($100 per benefit year with co-pay), durable medical equipment ($200 per benefit year), and outpatient mental health services (13 visits per benefit year with co-pay). Laboratory tests and mental health services are available only through specific network providers.⁶

The Department of Public Health is working with John Hancock to redesign the CMSP promotional materials to include program eligibility changes. An informational flier is in the development process, which will be targeted for teens and their families. Preventive health messages will be incorporated in all communications with families.

The Department of Public Health is identifying additional community efforts that can be supported to assure effective communications with families regarding the Children’s Medical Security Plan. For example, the Department is working closely with the superintendent and community leaders in Worcester to design an effective outreach campaign for the city that can serve as a model for other communities across the Commonwealth. Informational letters have been sent home with 200,000 school children in 120 school districts.⁷

Sending informational letters home with school children has worked very well for CMSP, especially in enrolling adolescents. WIC, MCH, family planning, and community health clinics have all been provided with promotional materials to distribute. CMSP has had some difficulty finding families that are not typically in touch with local or state health departments. Nurses, MCH programs, and area hospitals often reach infants and toddlers. When parents fill out emergency room forms for children, they are asked if they have insurance. If not, they are referred to CMSP.

Uninsured children under the age of 19 who are residents of Massachusetts and who are not eligible for Medicaid are eligible for the Children’s Medical Security Plan. Eligibility is based on gross income only. No assets test is conducted for any applicant. Applications are screened for Medicaid eligibility, and if the applicant is eligible for Medicaid, they are sent a Medicaid application. If the individual is not eligible for Medicaid but is eligible for CMSP, they are enrolled into the program.

The program allows for presumptive eligibility in which the content of the application must be verified within 45 days. John Hancock and the Community Health Plan prescreen applicants for Medicaid eligibility. Those individuals meeting Medicaid eligibility are not enrolled in CMSP. The plans verify family income to determine eligibility and to identify the appropriate premium if cost sharing is applicable.

There is an annual recertification process in which income, the number of children in the family, insurance status, etc. are screened to assess the family’s need for the program.

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

There is a simple one-page enrollment form to be completed. The process can be completed via mail or over the phone. Phone assistants are trained to assist individuals speaking different languages to help increase program enrollment. There is on-site registration at WIC clinics and activity centers.

Any Health or Human Services Agency can assist in the enrollment of an applicant. Individuals in each of the departments have been adequately trained to assist with mail–in or phone assisted enrollment for the CMSP or MassHealth (Medicaid) program. Therefore, if an individual is not eligible for CMSP, they will be sent a Medicaid packet with the application form and all other pertinent information. Providers at community health clinics and outpatient clinics, school nurses, and advocates have also been trained to enroll children into the program.

In the case of presumptive eligibility, there is a 45-day temporary enrollment in which a provider can fax the application to CMSP allowing the child to be covered for services upon the provider’s request; however, this must be verified within 45 days. Regular enrollment requires a processing time of approximately one-week. Phone enrollment allows the individual to be enrolled presumptively the same day.

The authorizing legislation for the Children’s Medical Security Plan was passed in 1993, and was subsequently amended in 1994, 1995 and 1996. The process of identifying and enrolling uninsured people in Massachusetts is ongoing. Having no "typical" population served by the state government makes some of the uninsured difficult to find. Working with contractors has been challenging as well as helpful in some areas such as cultural competence. A major issue has been the comprehensiveness of the package. CMSP would have liked to provide dental benefits, which are not currently provided in the package. Discussion of how benefits should be structured and what should be included has been continual.

IV. Administration

The Children’s Medical Security Plan originally resided in the Department of Medical Security, which later disbanded. Today it lies in the Department of Public Health. Much of the administrative work for CMSP has been contracted out to Unicare.⁸ Four staff members work in the state office.

The administrative costs of CMSP are $10 per member per month.

C. How Premiums, Co-pays, and Deductibles are Collected

Unicare collects premiums on a quarterly basis when bills are sent out to enrollees. Co-pays are collected by providers.

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

The program works very closely with the Medicaid program.

The program works closely with Medicaid, WIC, and school health programs. CMSP conducts joint marketing and outreach activities with Healthy Start and family planning providers so that they can become more involved in the network of toddler and adolescent providers and programs. These joint efforts have provided a basis for growth and knowledge about the program as well as concerns for the future of the program.

When the program was moved to the Department of Health, enrollment increased from 20,000 children to 36,000 children due to outreach efforts and coordination with other children’s programs.⁹

The director of CMSP meets weekly with the Medicaid program director. They also conduct joint promotions and marketing.

There is two-way communication between CMSP and Medicaid in regard to applications and denial of eligibility. If a child applies to CMSP, but is eligible for MassHealth (Medicaid), the child is enrolled in CMSP under presumptive eligibility and given an application to apply for Medicaid. The Medicaid office is made aware of the child so that they can include the child in outreach efforts.

When a child is denied eligibility for Mass Health, they are referred to CMSP. Again, CMSP grants presumptive eligibility for children needing immediate medical care because the enrollment process is much simpler than Medicaid, which requires pages of paperwork. This reduces the period of uninsurance while the child waits to be enrolled in MassHealth.

Outreach efforts have been refocused to work with WIC, the school health unit in the Department of Public health, Healthy Start, and primary care sites. Healthy Start and CMSP have a joint marketing and outreach plan focused on families who are eligible for Healthy Start and CMSP. As the CMSP program has expanded its focus to adolescents, the program has been working closely with family planning clinics in terms of outreach and services to adolescents. CMSP also works with state immunization programs and substance abuse programs.

H. State Laws the Program is Required to Comply With

There are regulations that have been explicitly stated in the law regarding the benefit package and other specifics of the program, which CMSP must comply with. There are no current evaluation efforts being conducted.

V. Policy Issues

Adverse selection has not been an issue in Massachusetts as the Children’s Medical Security Plan is mainly focused on preventive care. CMSP is not a program for sick children. The benefits are simply not there for them, as they would quickly outstrip the benefit package. When the program expanded to include adolescents, this new population utilized the emergency room and sick visits more often than preventive visits. Since then, CMSP tries to educate individuals as they join the program about the use of preventive care rather than sick care.

Substitution has not been considered a major issue for the Children’s Medical Security Plan. Individuals enrolled into the program are generally from working families without access to health insurance; however, families with catastrophic coverage can be accepted into the program. Approximately five to six years ago, Massachusetts was dealing with the problem of substitution as the rates for health care skyrocketed, but recently this has stabilized, and the problem has subsided. Unemployment in the state has declined substantially, which has encouraged employers to provide insurance coverage as an incentive for potential employees. CMSP is planning for a new phase that will include internal review boards, which will allow employers to buy-in to the program.

In preparing the financial analyses for the 1115 demonstration, crowd-out was a big concern. The two mechanisms that limit substitution are (1) cost sharing and (2) denying coverage to certain individuals based on their access to private coverage. In considering how to implement Title XXI, it seems correct to impose standard cost-sharing for individuals over a certain income level - whether they are in Medicaid or CMSP.

Another approach is an insurance reimbursement program, whereby Massachusetts will supply subsidies to small businesses (50 employees or less) to provide benefits to low-income workers. Incentives for employers to participate are based on the level of coverage they select and the type of policy. The employee will only pay 10%, while the state and the employer split the remaining cost. The 10% cost to the employee is comparable to other state insurance programs (i.e., CMSP, Common Health).

VI. Program Impact

The number of children insured through CMSP has increased from 20,000 to 36,000 since the program was moved to the Department of Public Health. The projection was set at 31,000, and CMSP has exceeded that projection. There are approximately 141,000 uninsured children in Massachusetts.¹⁰

As a result of the Community Health Plan and John Hancock being involved with the CMSP, there has been an increased interest from insurance companies. There has been increased competition among insurers and health plans to contract with CMSP.

VII. Future of Program

A. Lessons Learned

	Integrate the program into all health systems so that families are not falling into gaps.
	The program must especially link to Medicaid without attaching any of Medicaid’s stigma. Ensure that the program does not perpetuate any stigmatism by having a health card that looks like everyone else’s.

"Privatization" has been a good thing. Although this is a public program for the most part, CMSP has contracted with private companies to provide the care and to organize most of the administrative efforts. Thus, enrollees feel as if they have a private insurance product, which decreases stigmatism and increases trust.

Ensure that the program is user friendly.

CMSP put out another RFP for services in the winter of 1997. Options other than just having two vendors for the entire state are being considered. Choice is an important issue for CMSP to deal with. Efforts will be made to expand the benefit package under the current law. Recently, the program changed its pharmaceutical benefits. Originally, claims had to be sent to John Hancock for processing. Now, the Pharmacy Access Plan has added providers to the computer network so pharmacists can collect the co-pays. There are approximately 3,000 pharmacies that are a part of the Plan.¹¹

Title XXI of the Social Security Act will allow CMSP to take a look at their benefit package again. It will also allow them to have enough funding to find those missing children that have not been covered under the current program. Title XXI will be used to build on the recently expanded 1115 waiver to include kids between 133% and 200% of the federal poverty level (FPL). Families earning over 133% FPL have three choices for acquiring health insurance: MassHealth (Medicaid), CMSP, and Common Health (for disabled and seriously ill adults and children). They will also be able to purchase state subsidized employer-sponsored insurance.

On July 1, 1997, a one-time spend-down process was implemented, whereby an individual (adult or child who is severely disabled and under 200% FPL) has a six month window to achieve spend-down in order to be eligible for a Medicaid benefit package. Once spend–down is achieved, the individual can enroll in Common Health, which offers a Medicaid benefit package with a sliding scale premium.

1. MGL 118F sec 17B.

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

3. "About the Children's Medical Security Plan." The Commonwealth of Massachusetts, Executive Office of Health and Human Services, Department of Public Health. Februrary 1997.

4. "About the Children's Medical Security Plan." The Commonwealth of Massachusetts, Executive Office of Health and Human Services, Department of Public Health. Februrary 1997.

5. At the time of interview in Summer 1997, John Hancock was administerting the program. Since then, Unicare has taken over the adminstrative function.

6. "About the Children's Medical Security Plan." The Commonwealth of Massachusetts, Executive Office of Health and Human Services, Department of Public Health. Februrary 1997.

7. "Children's Medical Security Plan Program Highlights." The Commonwealth of Massachusetts, Executive Office of Health and Human Services, Department of Public Health. Februrary 1997.

8. Formerly John Hancock.

9. Interview, Summer 1997

10. Interview, Summer 1997

11. Interview, Fall 1997.

Minnesota

I. Overview

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.

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.

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

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.

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.

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.

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.

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.

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.

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

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

IV. Administration

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.

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.

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.

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.

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

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.

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

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

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

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.

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

New York

I. Overview

The Child Health Plus program was created by the New York State legislature in 1990, and by August of 1991, children had begun receiving coverage under the program. Child Health Plus originally provided outpatient services to children under age 13, but after January 1997, the program expanded to include children up to age 19. It is the largest of the thirteen non-Medicaid, taxpayer-funded child health insurance programs in the country. Fifteen insurance plans participate in Child Health Plus. Four are indemnity plans and eleven are managed care plans. The risk sharing between the state and insurers covers medical expenses only, with the agreements varying slightly according to insurer. As of July 1, 1997, the program was providing coverage to over 135,000 children. The program has estimated target enrollment over the next few years to total 250,000; this number may increase significantly due to recent federal legislation. The overall intent of the Child Health Plus Program is the following:

	To improve the health status of children participating in the program by providing a "medical home";
	To provide primary, preventive, outpatient and inpatient health insurance coverage to low income children by removing financial barriers to purchasing such coverage through an individual subsidy program;
	To increase children’s access to primary comprehensive, preventive and inpatient health care services; and
	To reduce and more effectively target bad debt and charity care expenditures in the state of New York.

New York has a long history of strong child advocacy. In the Year of the Child, 1989, a strong focus was placed on increasing preventive health services for children. Governor Pataki has taken a great interest in expanding the Child Health Plus program.

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 399,000 in New York State. 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

Child Health Plus initially had only a $20 million budget, so the benefit package was limited to the services that children utilize most. Only preventive and primary outpatient services were provided in the beginning. In the last legislative session, it was debated whether inpatient, dental, vision, and hearing benefits should be included in the benefit package. Inpatient care was deemed the most important to include, and was added to the benefit package in the fall of 1997.

Children considered eligible for the program must be either uninsured or underinsured, residents of New York State, under the age of 19, and not eligible for state Medicaid benefits. Children under age 19 in families with an income below 222% FPL are eligible for an income-variable premium subsidy. Children in families above 222% FPL are permitted to buy into the program without any premium subsidy. In 1993, 37% of children throughout New York State who were eligible for Child Health Plus were enrolled in the program (29% of eligibles in New York City and 50% from the other regions).²

Child Health Plus initially provided subsidized primary and preventive outpatient care to children under age 13. In 1997, the program extended benefits to include inpatient care, excluding inpatient services for mental health and substance abuse, and extended coverage to include children through age 18. Consumer and anti-poverty groups advocated unsuccessfully for other alternatives to a hospitalization benefit, mainly expanding the benefits to include dental care and offering families the option of buying a cheaper, basic plan without hospitalization.

The benefit package covers preventive care, ambulatory surgery, emergency care, prescription drugs, health screenings, immunization, inpatient and outpatient care, and outpatient alcohol and drug abuse services. New York State allowed insurers to offer optional benefits that included dental, vision, hearing, and speech therapy, but none of the insurers chose to offer these optional benefits.

D. Provider Network

The provider network currently consists of 15 insurance plans contracted to provide health services to enrollees, of which 11 are MCOs and 4 are traditional indemnity plans. As of October 1, 1997, 24 insurance plans, with almost all providing a managed care product, began participating in Child Health Plus. The reimbursement of providers varies by the insurer and its arrangement with providers

E. Sources of Financial Support for the Program

The program is financed through a provider surcharge established under the New York Health Care Reform Act of 1996. The premium contribution from families participating in the program is an additional funding source. Appropriations have been increased every year.

$20 million was originally appropriated for the program.

With the expansion of the benefit package to include inpatient care, a $2 co-payment was implemented for all physician visits, except for those provided on an inpatient basis, for well child care, or as otherwise prohibited by insurance law. As authorized in Chapter 922 of the Laws of 1990, a reasonable (i.e. $1 to $3) co-payment will be charged for prescriptions and nutritional supplements as defined in the original and expanded benefit packages. Insulin has no co-payment. A $35 co-payment for failure to notify an insurer within 24 hours of emergency room use and/or inappropriate emergency room use may be charged.

Premiums were also increased with the advent of expanded benefits. There is some concern that the higher premiums might affect participation, but the Department of Health felt that families would be willing to pay for the peace of mind that the inpatient benefit provides. Families with incomes between 120% and 160% of the federal poverty level will now go from paying no premium to a maximum of $36/month. Those with incomes above 160% of the poverty level will see their premiums rise 400% or more. Children in families earning less than 120% of the poverty level will continue to receive coverage for free.

New York Child Health Plus Premium Sliding Scale³

Monthly Premium	$0	$9 per child up to family maximum of $36	$13 per child up to family maximum of $52	Full premium: $58-99 per member ⁴
Percentage of Poverty	0-120%	120-159%	160-222%	+222%

The New York Child Health Plus Program allots approximately 1-2% of the total budget to outreach and marketing. Outreach and marketing materials are prepared by three different sources: Child Health Plus staff, the contracting HMO plans, and by marketing contractors. Specific state staff act as liaisons to the marketing departments of the HMO plans and to the marketing contractors. One marketing contractor was hired for New York City and one for the rest of the state. Both engaged in major activities including targeting schools and health centers, producing large volumes of mailings, and organizing meetings and presentations at which over 16,000 people attended. Any materials developed outside of Child Health Plus must be submitted and approved by the state office. There are also specific clauses in the contracts with the plans and contractors that prohibit them from using fraudulent marketing and enrollment activities.

A 1996 evaluation of Child Health Plus by The Rochester Child Health Studies Group found that rural and inner city minority children were not being reached by marketing efforts. The extent to which marketing contributed to heightened demand for Child Health Plus was not clear. Most parents heard about Child Health Plus from a friend, school, or their doctor. Very few individuals were reached as a direct result of a marketing activity such as TV, mailings, or community meetings.

Children considered eligible for the program must be either uninsured or underinsured, residents of New York State, under the age of 19, and not eligible for state Medicaid benefits.

Child Health Plus relies on the HMOs that they contract with to collect applications and determine eligibility. All insurers must request a pay stub or W2 form to verify income eligibility. There is presumptive eligibility so if a child wants to enroll in the program, but doesn’t have the paperwork completed, they can be enrolled for 60 days. Enrollment under presumptive eligibility begins as soon as the application is received and is made permanent when the necessary documentation is submitted. The child is dropped from CHP if the family does not submit documentation by the end of the presumptive eligibility period.

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

Enrollment is done by mail. There is a 1-800 number for assistance in filling out the form. Some plans reported that the staff available to process incoming applications was only one half-time employee. If the number of applications exceeded the staff resources available to process applications, the result was a longer waiting period for potential applicants’ coverage to be approved and instituted.⁵ Children are enrolled for a 12-month period, and they are recertified annually based on their family's gross income.

III. Implementation

The Child Health Plus program was passed by the New York State legislature in 1990, and by August of 1991, children began receiving coverage under the program.

In September 1990, organizations that met the statutory criteria were invited to submit proposals to implement Child Health Plus. This noncompetitive submission was pursuant to a Request for Plans process issued by the Department of Health in consultation with the State Department of Insurance and the Department of Social Services; 1,600 qualifying organizations received the RFP. Nine proposals representing 15 insurers were received in response to the RFP. Reviewers assessed the submitting entity’s knowledge, experience and capability, project design, cost, implementation time frame, sufficiency of provider panel to meet demands of target enrollment, as well as provision of primary and preventive care. Insurer marketing plans were examined for their cost, effectiveness and interaction with community-based networks to assure strong grass roots outreach and sensitivity to different communities.

IV. Administration

A. How Program Fits within the State Structure

Administrative expenses represent 10% of total costs.⁵

C. How Premiums, Copays, and Deductibles are Collected

Individual providers collect co-payments. A family is given a thirty-day grace period when they fail to pay their child's premium. During this time they are sent a letter reminding them to pay the premium. If they do not pay by the end of the thirty-day grace period, they are dropped from the program.

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

The package includes inpatient care.

Child Health Plus interacts with Medicaid, Welfare, WIC, and the Prenatal Care Assistance Program (PCAP). The closest interaction is with the Medicaid program.

The State Department of Social Services (DSS) coordinates with Child Health Plus on referrals between the Medicaid and children's programs. The county DSS offices refer children and families to Child Health Plus. In addition, DSS provides guidance to families regarding assessment of Medicaid and/or Child Health Plus eligibility and procedures for terminating Child Health Plus when Medicaid eligibility is established. Families are not required to participate in spend-down, although they are encouraged to apply for Medicaid if their family income situation changes and it appears that they might be eligible.

Other state programs refer to Child Health Plus on an informal basis. These include Welfare, WIC, and the Prenatal Care Assistance Program (PCAP).

H. State Laws the Program is Required to Comply With

Child Health Plus must comply with state insurance law. The program’s legislation required that an evaluation of the program be conducted.

V. Policy Issues

When insurers submitted premium requests, the premium was structured to account for adverse selection. An extra 10% was added to the premium to compensate for adverse selection.

While the increase in monthly premiums was not created as a mechanism to deal specifically with substitution, limiting substitution will be one of the outcomes. The premium of $9-$13 is more than most people will pay for employer-based insurance, so families will be discouraged from dropping employer coverage for the Child Health Plus Program.

VI. Program Impact

VII. Future of Program

Outreach and marketing are very important. Even with current marketing efforts, Child Health Plus still only has 30% penetration.⁷ States creating new children’s health insurance plans should decide on a package that will serve the most children. Processes to monitor enrollment and quality should also be developed.

The only changes in the future to Child Health Plus will be changes that are necessary to comply with federal legislation. Due to Title XXI, there will be many states struggling in the next few months. The impact of federal dollars will be tremendous. Child Health Plus did a procurement in February 1997 that will need to be adjusted for the federal dollars.

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. Evaluation of Child Health Plus in New York State: Summary. The Rochester Child Health Studies Group. April 1996.

3. Child Health Plus: Your Kids need healthcare. Now you can affort it! Percent of pverty calculated from this NY Department of Health pamphlet.

4. The full premium for NY Child Health Plus depends on the insurance company and the location. For example, insurance companies in NY City have the highest premiums.

5. Evaluation of Child Health Plus in New York State: Summary. The Rochester Child Health Studies Group. April 1996.

6. Evaluation of Child Health Plus in New York State: Summary. The Rochester Child Health Studies Group. April 1996.

7. Interview conducted, Summer 1997.

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

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

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.

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

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.

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.

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.

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

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.

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.

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.

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

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

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

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.

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.

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.

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.

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

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.

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.

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.

Tennessee

I. Overview

TennCare is a Medicaid 1115 Waiver program that began January 1, 1994. On that date, Tennessee shifted the coverage of nearly 800,000 Medicaid enrollees into the TennCare managed care program. The state also began offering TennCare coverage to uninsured or uninsurable persons at this time.¹ Tennessee residents were eligible for TennCare under the uninsured category if they did not have insurance on March 1, 1993. Approximately 400,000 state residents who qualified as uninsured or uninsurable took advantage of this offer and enrolled in TennCare.

By January 1, 1995, TennCare had reached 90% of its target enrollment,² and the TennCare program was having problems assuring adequate funding. As a result, the state closed enrollment for the uninsured population. Currently, to qualify for TennCare one must be Medicaid-eligible, uninsurable, or rolling off the Medicaid program. In addition, individuals can apply to remain on TennCare if other insurance is not available to them within a 30-day period after disenrollment.

On April 1, 1997, enrollment into TennCare was re-opened to all children under age 18 without employer-based insurance. There is no uninsurance requirement. There is no intention of closing enrollment to children at any time in the future.

As of February 7, 1998, total enrollment in TennCare is approximately 1,226,283, of which 833,371 are Medicaid eligibles and 392,912 are in the uninsured/uninsurable categories.³

Political support has been instrumental in the TennCare expansion for children, which was enacted April 1, 1997. Both the Republican administration and the Democratic legislature were strongly in support of the expansion, and it has been a top priority in the state.

The effectiveness of TennCare hinged on the participation of Blue Cross/ Blue Shield (BCBS), the largest insurer in the state. However, the state had leverage in dealing with BCBS because the state employees’ contract is a significant chunk of BCBS’s business in the state.

The major opposition to TennCare came from the Tennessee Medical Association (TMA) which had not been included in the initial planning discussions. TMA has unsuccessfully battled the initiative in court, but they appear more opposed to the speed of implementation than to the program itself.

Hospitals were in favor of TennCare because:

	It eliminated the provider tax; and
	The financing structure included additional financing through pools to facilitate the transition from DSH (disproportionate share hospital) and GME (Graduate Medical Education) payments and to prevent adverse selection.

According to the U.S. Bureau of the Census, the number of uninsured children (ages 0-19) at or below 200% of poverty in Tennessee is 166,000. This figure is based on the March 1995-1997 Current Population Surveys.

II. Program Design

The most controversial decisions were made at the outset of the TennCare program, such as the decision to utilize a Medicaid expansion to cover the uninsured population, which required a very rich benefits package. The children’s expansion that occurred on April 1, 1997 was not controversial.

Currently, Medicaid eligible persons, children under age 18 with no access to health insurance,

dislocated workers who previously had health insurance through employers and become uninsured due to a bona fide closure of a business or plant, and persons with proof of uninsurability, are eligible for TennCare coverage.⁴

The University of Tennessee Center for Business and Economic Research projected that 68,000 children are uninsured in the state. Tennessee set as its target to enroll 50,000 of those children in the program. The General Assembly legislated that if by December 31, 1997, TennCare hadn't enrolled 75% of that target population, enrollment would be opened to all children below 200% of the federal poverty level, regardless of their access to employer-based insurance. As of January 31, 1998, 28,214 uninsured children had been added to the program through open enrollment since April 1, 1997.⁵

Services include: inpatient hospital care, outpatient surgery and care, lab and x-ray, newborn services, hospice care, dental services, vision services, home health care, pharmaceuticals, durable medical equipment, medical supplies, ambulance transportation, transportation, community health services, renal dialysis, EPSDT, rehabilitation, chiropractic services, private duty nursing, speech therapy, sitter services, convalescent care, and organ transplants.

One public policy issue is that the TennCare benefits package is richer than the public employees benefit package. Dental and vision are not offered to working government staff and their families, but they are offered to TennCare enrollees.

D. Provider Network

Before TennCare, there was only one managed care organization (MCO) with experience with the Medicaid population under the 1915(b) Waiver. TennCare did not do a competitive bid for contracts with managed care organizations. Instead, the state laid out the terms and conditions of their managed care plan and invited plans to participate at the established rates. If plans could prove that they could provide the services, they could contract with the plan. Twelve MCOs contracted with TennCare in the beginning. For the first three years, Tennessee allowed the plans to operate as preferred provider organizations (PPOs). By January 1, 1997, these had to be converted to health maintenance organizations (HMOs). The contracting process has not changed, but it would be difficult for a new plan to enter and to capture enough of the patient population to make the plan viable.

On January 1, 1996, the University of Tennessee-Knoxville MCO sold out to BCBS. On January 1, 1997, Phoenix health plan purchased another small plan based out of the University of Tennessee. Thus there are now only 10 MCOs servicing the TennCare population. Phoenix also recently merged with Health Net, so there will soon be only 9 MCOs in the market.

Each year, enrollees are given 45 days to change their MCO starting with October 1. The MCO change takes effect on every January 1st.

E. Sources of Financial Support for the Program

TennCare was built on the theory of reducing costs through managed care. The reduced costs for Medicaid recipients would allow Tennessee to insure other people, and this would reduce the number of charity cases in the state. It seemed unlikely that providers would lower their charges when charity care fell, and TennCare used this to bargain with the MCOs. However, as a result of no longer admitting the generally healthier uninsured population into the program, the patient mix has been compromised. Charity cases are increasing now, and the TennCare population is unhealthier on average. TennCare did not want to give the MCOs more money without getting more services. By adding another healthy population (uninsured kids) to the patient mix, capitation rates can remain low.

TennCare was financed by pooling federal, state, and local expenditures for indigent health care, including $2.3 billion for the TennCare Program in the 1997-1998 fiscal year’s budget. Managed care savings, family cost-sharing, and discounts on the capitated rate all contributed to the financing of TennCare. Pooled resources total $3.661 billion, of which $2.138 billion is used to fund the current year of the TennCare program.⁶ The remainder is used to fund long-term care programs, Home and Community Based Services Waiver programs, and Medicare crossovers through the Medicaid system, Medicare premiums, and administration of the total program.

Projected costs for FY 1997-98 without reform were $5,993,751,000. Projected costs for TennCare during the same time period are $3,823,901,000. This results in savings of $2.2 billion.⁷ Program costs were estimated by projections of historical Medicaid data. All services except home care, long term care, and fee for service payments to the Department of Mental Health and Mental Retardation were converted to managed care arrangements.

The per member per month cost was discounted approximately 30% for the reduction in charity care. For example, in the first year costs were estimated at $1,641 and were discounted to $1,210.⁸ Different rates were established for different rate categories, which have been increased by a percentage since the first year.

TennCare Premium Sliding Scale⁹

Percentage of Poverty	0-100%	101-119%	120-139%	140-169%	170-199%	200-209%	210-219%
Individual Premium	$0	$14.25	$17.50	$23.50	$32.75	$73.50	$80.50
Family Monthly Premium	$0	$24.50	$32.25	$47.50	$70.50	$183.50	$200.75

All enrollees above 100% of the poverty level pay a monthly premium for TennCare that is determined by a sliding scale based on income. Some examples are given above. Monthly premiums for uninsurable enrollees with incomes above 400% FPL are $231.50/month for individuals and $578.75/month for families. There are no co-payments for children.

The primary challenge of opening up TennCare to all uninsured children on April 1, 1997 was how to do outreach to enroll these children. TennCare mailed applications to every family that had an application denied for uninsured status since January 1, 1995, as well as to all families on food stamps who were not already enrolled. There was also outreach to WIC families. To engender community support, TennCare used local health departments as enrollment sites. State officials held community meetings in all 95 counties in the state. They showed a video on TennCare to help communicate what it is, how to enroll, its purpose, and other information. The easy one-page applications were on hand.

A consumer group also helps with outreach. Flyers have been sent to every school and day care center in the state for children to take home to their parents. This has proven to be a very inexpensive and effective form of marketing.

Eligibility requirements for children currently entering the program are only that they are state residents, under 18 years of age, and uninsured on the day they apply.

While presumptive eligibility exists for pregnant women, there is none for children. To provide proof of uninsurability, individuals must have a letter of denial from an insurance company that is licensed in the State of Tennessee. To verify which individuals do not have access to employer coverage, TennCare mailed a form to all employers, except the major ones whom they knew offered insurance, and asked them to specify whether or not their employees were offered health insurance.

The Tennessee Department of Human Services determines Medicaid eligibility for most categories. The Social Security Administration makes decisions regarding eligibility for Medicaid for disabled individuals. The Tennessee Department of Labor determines bona fide closures of businesses or plants.

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

When the program began, TennCare applications were processed through a central location and enrollees received notice of their acceptance by mail. This was a problem because no one had direct communication with TennCare officials, and enrollees had little opportunity to learn about managed care. Less than 5% of Tennessee residents were enrolled in managed care prior to TennCare, so this presented quite a problem. The application was eventually reworded, and local health department staff were asked to conduct a 15-minute enrollment interview with each prospective enrollee. By asking the questions in person, the staff is able to immediately tell the applicant if they are eligible or not, ascertain that the applicant understands the enrollment questions, collect premiums, and do patient education about managed care and preventive services (e.g. EPSDT). Applicants schedule an appointment at the health department, bring a check stub, and bring the form filled out by their employer stating that they have no access to insurance. Unemployed applicants simply bring in a statement that they are unemployed. For the applicants’ convenience, the Health Department will make a copy of the application, date stamp it, and keep it on file. A TennCare application can also be received by calling the TennCare Hotline.

On April 1, 1997, TennCare re-opened enrollment to all uninsured children in the state through a HCFA(now known as CMS) approved initiative. There has been an influx of children since then. Approximately 70,000 children were estimated to be eligible. Due to TennCare’s previous experience and expertise, this enrollment process has been a smooth one. In each of the 95 county health departments, there is a computer system tied into the main TennCare system through which health department staff can enroll children. Children are eligible for services on that day in an emergency, and normal enrollment into the program requires only three days. The process has gone very smoothly because families understand managed care much better now, and they come prepared to choose a physician and enroll all members of the family in the same MCO.

A listing of the provider networks is available at each health department along with a phone number that they can use to ask questions of the MCOs. In this way, enrollees can make educated decisions about which health plan to join. Health department staff are also trained to assist enrollees in the grievance and appeal process if a claim is denied. Community acceptance of TennCare has skyrocketed with this new arrangement, since local health departments have always been a well-respected entity throughout Tennessee.

III. Implementation

TennCare was developed and implemented in one year. The concept of TennCare was approved in April 1993, the waiver was submitted in June 1993, and the program was implemented in January 1994. There were two primary reasons why the program was implemented so quickly:

	The state wanted the fiscal savings immediately; and
	There was a desire to have the program well under way while the legislature was out of session to avoid lobbying against it.

As a result of the speed of the initiative, however, there was limited involvement by most key stakeholders. Enrollment increased by 400,000 in the first year (one-third of the estimated 1.2 million eligible). Eligibles enrolled into MCOs through the mail (and were given one of top three choices of health plans).

Implementation problems included: the speed of change, limited enrollee and provider education about the new system, the substantial volume of telephone inquiries, and problems with illiteracy. In addition, many plans had not fully formed their provider panels due to the lack of time, so beneficiaries could not get a list providers associated with each plan or ask their physician which plans they were going to be in. Due to these problems, 40-50% of Medicaid eligibles did not select a plan and were assigned one.

There were 481,618 children covered as of June 1997. As of January 31, 1998, there were 28,214 uninsured children added through open enrollment since April 1, 1997.¹⁰

IV. Administration

A. How Program Fits within the State Structure

TennCare was moved out of the Department of Health in 1995 to the Department of Finance and Administration. In 1997 it was moved back to the Department of Health. This seemed more logical, as it is now in the same department as the local health departments and maternal and child health.

Administrative costs account for 3.57% of total program costs.¹¹ This includes eligibility verification, claims administration, application processing, outreach with the Department of Health, and benefits education. Costs are kept low by maintaining a small staff. The focus is on provision of services to enrollees rather than on administration.

A major overhaul of the grievance and appeal process occurred last fall, when all program staff were trained to assist enrollees in this process. TennCare and health department personnel serve as advocates for their enrollees during this process.

C. How Premiums, Copays, and Deductibles are Collected

Plans are paid a monthly capitated rate for each covered life, which is adjusted by age, sex and disability ($113 per member per month for MCO services). Mental health and substance abuse services are provided by two behavioral health organizations (BHOs) under the TennCare Partners Program administered by the Tennessee Department of Mental Health/Mental Retardation. The BHOs are paid $22.93 per month per TennCare enrollee and each of the 1,250 non-TennCare enrollees.¹²

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

Currently, much formal and informal contact occurs between the Bureau of Maternal and Child Health (MCH) and TennCare. MCH has an official TennCare liaison who meets with officials at TennCare once a week. There are 10-15 grassroots organizations that are currently monitoring TennCare. MCH works with TennCare in responding to any inquiries or concerns that those organizations present. In addition, MCH gave daylong courses in understanding TennCare to all of the county clinic nurses in Tennessee’s 95 counties. The education of the nurses has been tremendously helpful to TennCare enrollees who have been denied services by their MCO, since the nurses are now able to assist in filing an appeal to the MCO.

Many other children's health programs in Tennessee have coordination of referrals through the local health departments; although they do not all have the same application. WIC eligibility is determined at the local health departments based on income and health problems. Children's Special Services (CSS) is undergoing the most radical change in their operations as a result of TennCare because their rolls are dropping. CSS has had to alter its mission to focus on care coordination rather than on direct service provision. CSS acts as an advocate for patients when they receive care from other sources.

Ninety percent of children with special health care needs are enrolled in TennCare. Therefore there is a lot of interaction between TennCare’s MCOs and the Department of Maternal and Child Health. There are eleven MCOs currently participating in TennCare, so MCH spends a lot of time negotiating with individual plans about the proper provision of health care services for children with special needs. In cases where the child is denied services, appeals to the plan, and is denied again, MCH will often provide the services through the CSS program. This usually does not occur with direct medical care, but rather with therapies or special medical devices.

H. State Laws the Program is Required to Comply With

The program must comply with the laws that formed TennCare. The agency and program are constantly under scrutiny.

V. Policy Issues

Three MCOs in TennCare have experienced adverse selection with children:

Vanderbilt, which contains a large children's hospital in its network; A charity care hospital in Memphis which also has a children's hospital in its network; and The University of Tennessee-Knoxville.

These three MCOs have adverse selection because most of the sick children in the state were affiliated with physicians in their networks before the advent of TennCare. When the children enrolled in TennCare, they chose the MCO that had their physician.

Substitution is not a problem for TennCare, because families with access to employer-based insurance are not eligible for TennCare. There is a direct computer link between TennCare and the Department of Labor, where employers report their insurance offerings, so that the county health centers that do enrollment can immediately see if the prospective enrollee is eligible for other insurance.

If TennCare is opened up to all children below 200% FPL in 1998, it is likely there will be a substitution impact. The greatest concern is that employers might drop coverage due to such an expansion. Although there has been no evidence so far that employers are dropping coverage due to TennCare, the University of Tennessee is analyzing this issue in its annual report on the program. The incentive is great under open enrollment for employers not to offer family coverage. This will not adversely affect the children, but it may lead to spouses not being covered. Also, by opening the program to this population, it may put strains on the capacity of TennCare to cover all its enrollees. Consumer advocates, however, have pushed the state to open coverage to all children since they say that the TennCare premiums are high enough above 200% FPL to provide a disincentive to families to purchase TennCare.

Tennessee has not pursued using TennCare as a group insurance package, nor does it plan to in the future. TennCare enjoys a "Cadillac" package of benefits, and therefore they have had to be very stringent in quality monitoring. It is not easy for MCOs and providers to coordinate with their requirements, and it is much easier for them to control their services directly with employers.

VI. Program Impact

Of the original 400,000 uninsured individuals who enrolled in TennCare, approximately half were children. Since enrollment was opened to all children, they have been enrolling 1,000-1,500 more children per week.¹³ As of January 31, 1998, there were 28,214 uninsured children added through open enrollment since April 7, 1997.¹⁴

Many more children are insured than were prior to TennCare; however, a question to pursue is whether there has been a change in the quality of care received by the previous Medicaid enrollees because of the switch to managed care. There is a lot of concern about whether children are getting adequate EPSDT visits. They are starting three studies to determine this:

	A parent survey to see if children are being offered the services by their physician and whether they are actually receiving them;
	Quality assurance chart reviews for EPSDT; and
	An examination of provider data from MCO records.

TennCare is beginning to get the first quality assurance reports. The first one stated that pregnant women enrolled in TennCare have better birth outcomes than the commercial population in Tennessee.

VII. Future of Program

A year ago, TennCare began contracting for managed care mental health services through two behavioral health organizations (BHOs). This program is called TennCare Partners. Each enrollee is assigned a BHO. There have been a lot of problems with people not receiving the treatment they feel they deserve.

The expansion for children has been a tremendous success. That process will be emulated in many future expansions. As more children are enrolled, however, outreach will become more difficult, and it will become harder to identify eligible children. The children who are already enrolled are the easiest children to reach. Families must sometimes be convinced of the importance of providing insurance for their children. TennCare is identifying the pockets in communities that need to be targeted. For example, local ministers have been asked to read from the pulpit about TennCare in the Shelby County African American community.

TennCare has learned from the mistakes made during the initial implementation phase. The involvement of local health departments could have been used earlier to help people enroll and to advocate on their behalf. It has proven much more effective for people to enroll in person than to do mail-in enrollment. TennCare has created a system that is not burdensome to either the enrollee or the health department. The local health departments are open in the evenings and on Saturday for appointments. The enrollment process has become more meaningful, since the health department staff take the time to assure that the enrollee understands the benefits.

1. http://170.142.16.205/health/tenncare

News releases, radio announcements, the participation of the Tennessee Medical Association, pediatric associations, and local health departments have all boosted enrollment. TennCare will continue to look for small ways to open enrollment to the uninsured, with the eventual goal of opening enrollment again to all uninsured Tennessee residents. A pressing goal of TennCare is to stabilize the carve-out for mental health. The eventual goal is to reunite the BHOs and MCOs, and offer them as one benefit. In the future, there will be an increased focus on quality assurance, especially for children. TennCare is inspecting MCO compliance with well-child and EPSDT requirements, as well as services for special needs children. Tennessee is analyzing its options for Title XXI funds.

2. http://170.142.16.205/health/tenncare

3. 2-7-98 website figure at http://170.142.16.205/health/tenncare

4. http://170.142.16.205/health/tenncare/eligibil.htm. Eligibility information was updated on the TennCare website as of 9-4-97.

5. http://170.142.16.205/health/tenncare/kids.htm

6. http://170.142.16.205/health/tenncare/

7. Interview, Summer 1997.

8. Interview, Summer 1997

9. Source: http://170.142.16.205/health/tenncare/premiums.htm

10. http://170.142.16.205/health/tenncare/kids.htm

11. Interview, Summer 1997

12 http://170.142.16.205/health/tenncare

13. http://170.142.16.205/health/tenncare/kids.htm

14. http://170.142.16.205/health/tenncare

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

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.

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

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.

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.

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.

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

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.

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.

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.

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

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

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.

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.

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

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.

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.

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.

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

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.

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

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

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.