A Report from Families USA
February 1998
Premiums and Cost-Sharing: Proposed by States under Title XXI, The New Children's Health Insurance Program
REPORT SUMMARY:
The Choice of Medicaid or a Separate State Program Affects Affordability
The Children's Health Insurance Program (CHIP) permits states to expand health insurance coverage for children by either expanding the Medicaid program or creating or expanding a separate state health insurance program. If the state chooses to expand Medicaid, coverage is certain to be affordable: Medicaid will not permit costs to be passed on to the families of newly eligible children. (However, states can seek "waivers" of Medicaid rules, and a few states have gotten waivers of Medicaid cost-sharing rules). If the state chooses to expand or create a separate state program, families can be charged premiums and copayments, subject to certain restrictions.
Affordability Affects Participation and Access to Care
State choices on premiums and cost-sharing will directly affect how many people enroll in the new program and what services they use. Charging premiums will reduce participation in the program, and the higher the premium, the fewer the families who will enroll. For example, one study estimated that if a premium scale were set at 1 percent of income, only 57 percent of the uninsured would participate, and if the scale were set at 3 percent of income, only 35 percent would participate. Copayments and other kinds of cost-sharing will discourage families from seeking needed care and will penalize the sickest beneficiaries the most.
Families USA has published a Guide to Cost Sharing and Low-Income People that surveys the research literature on these issues and recommends ways to minimize some of the problems associated with cost-sharing. A Fact Sheet based on the Guide is available on our web page:
CHIP Requires Basic Affordability Protections
CHIP does not permit cost-sharing for well-baby and well-child care, including immunizations. In addition, CHIP protects lower income families from being charged more than higher income families. Finally, CHIP restricts the amounts that families can be charged. Different restrictions apply depending on whether family income is below or above 150 percent of federal poverty levels.
Charges Imposed on Lower Income Families Must Be Nominal
CHIP permits nominal premiums and copayments for families with incomes at or under 150 percent of poverty. Federal rules define how high these "nominal" charges can go. Permitted premium costs are $19 per month or less, depending on family size and income. Copayments for outpatient care currently range from $1 to $3, depending on the cost of the service, but will soon be adjusted upward to from $1 to $5. See the February 13, 1998 letter to state officials from the Health Care Financing Administration, HCFA, the federal agency administering the new program, available on the HCFA web page: www.hcfa.gov/init/children.htm.
The choices the state makes about how to administer cost-sharing requirements will have important implications for eligible families. How will premiums be collected? How will premiums be adjusted if family income changes? If a family misses a premium payment, what kind of notice and collection process will the state use? If families are disenrolled for nonpayment, what rules will apply to re-enrolling? How will the state monitor copayments to determine when families have reached the payment ceiling, and how will families and providers be notified when no further copayments can be charged? What notice and appeal process will be available to families who are disenrolled in error or charged too much? The experience of states that have used cost-sharing in Medicaid 1115 demonstration projects suggests that these and other implementation issues, if not carefully addressed, will create additional barriers to care.
COST-SHARING PROPOSALS: AN INTERIM REPORT
As of mid-February 1998, 17 states have filed state plans describing how the state proposes to implement its children's health insurance program. Eleven of these 17 state plans include some kind of cost-sharing; the other six states do not. HCFA must review these plans for compliance with the law. Only after a plan is approved by HCFA, can the state begin to draw down its federal matching funds. So far, only three states—Alabama, Colorado, and South Carolina—have approved plans. Of these three, only Colorado is charging premiums and copayments.
The 17 states that have filed plans are: Alabama, California, Colorado, Connecticut, Florida, Illinois, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, and Tennessee. Eight of the 17 plans are Medicaid expansions only: Alabama, Illinois, Missouri, Ohio, Oklahoma, Rhode Island, South Carolina, and Tennessee. Traditional Medicaid does not permit cost-sharing for children's services. However, Rhode Island and Tennessee are seeking to expand comprehensive 1115 Medicaid waiver programs in which families can be charged premiums and/or copayments, and Missouri's plan is also a comprehensive 1115 Medicaid waiver. Five states combine Medicaid expansions with separate state programs: California, Connecticut, Florida, Massachusetts, and New Jersey. The separate state plans in these combination states all include some cost-sharing. The remaining four states create or expand separate state insurance programs that include cost-sharing: Colorado, Michigan, New York, and Pennsylvania.
The accompanying tables describe the premiums and copayments proposed in 11 states: the three states with Medicaid waivers, four of the five states with combined programs, and the four states with only separate state plans. (New Jersey's combined plan was not available to us at the time this chart was prepared). describe the premiums and copayments proposed in 11 states: the three states with Medicaid waivers, four of the five states with combined programs, and the four states with only separate state plans. (New Jersey's combined plan was not available to us at the time this chart was prepared).
Bear in mind that, except for Colorado, these rates reflect proposed charges. In some cases, the charges are higher than permitted, and HCFA should not approve such charges. For example, in Colorado, HCFA questioned the originally proposed charge of $15 for the non-emergency use of emergency transportation for families under 150 percent of poverty. Federal rules permit charges for inappropriate use of emergency services; these charges are limited to twice the nominal charge, but twice the $3 maximum copayment amounts to only $6—not $15. Colorado lowered its copayment. Colorado had also originally proposed to charge premiums to families under 100 percent of poverty levels and to charge a per child premium with no per family ceiling. It chose to moderate both those policies.
For a print copy of this report, contact Families USA at 202-628-3030.
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