Options to Extend Health Coverage in Delaware

Key Background Observations n Preponderance of uninsured are working families with incomes between 100% and 200% of poverty. We concentrate on these people. n For these people, the challenge is to make coverage affordable. They will require subsidies. n So federal and state governments will have to incur new financing if the problem is to be solved. n We acknowledge we cannot solve the problem. At best, our approaches would cover about 1/4 of the 96,000 uninsured.

Background (cont.) n No state has solved this problem, and no state can do it alone. n Often there is a trade-off between cost and equity: efforts to prevent “crowd out” result in treating people differently even though their need is the same. n We consider these policies as if adopted separately, but if adopted together, they would have interactive effects that would change cost and “take-up” estimates.

Background: Federal Poverty Level

Safety Net Support: Limited Benefit Plan Approach n “Coverage” program offering ambulatory benefits u Services include primary care, prescription drugs, diagnostic procedures, and limited specialty care. n Affordable for low-income individuals: u No premiums or annual deductible u Nominal copayments for office visits and prescription drugs n Cost is 100% state (no federal) unless special financing is used.

Limited Benefit Plan Target Populations n Individuals age 19 to 64 with incomes between 100% and 200% of poverty without regard to employment status; not necessary to be a parent of a minor child. u Income level above Medicaid level. u Ages 19 to 64 because children have access to CHIP and seniors have access to Medicare. u Eligibility based on income without regard to employment status. Individuals may be employed but health insurance is unavailable or not affordable.

Limited Benefit Plan Advantages n Limited benefits (no acute care covered) makes coverage more affordable than full insurance – allows limited dollars to cover more individuals. n Encourages use of primary and preventive care – before illness becomes serious, chronic or costly. n Safety net system, such that we have with our CAP program, can receive payment for services.

Limited Benefit Plan Disadvantages n Continues reliance on hospitals to fund the cost of care for the uninsured (in part through cost- shifting). n Availability of ambulatory care without premiums may reduce likelihood of low-income employees choosing to pay for employer-sponsored coverage. n Requires disclosure of all household income. n State funds not matched by employer or federal (unless Medicaid special financing is used).

Limited Benefit Plan Cost and Impact on Uninsured

One-Third Share Plan Approach n Affordable health care “coverage” for employees of low-wage businesses. n Affordability achieved by: u Subsidization: employer and employee together pay 2/3 or less of the total cost of coverage. u Streamlined benefits: Coverage is less extensive than commercial insurance. F For example, the scope of benefits is structured to level at which employer and employee shares of premiums are less than $50 each per month.

One-Third Share Plan Target Population n Employees of low-wage businesses and their dependents n Businesses: u Have not offered health insurance for a set period u Have average (median) employee wages less than threshold (e.g., $10 per hour) n Employees: u Work more than X hours per week u Do not have access to Medicare, Medicaid, etc.

One-Third Share Advantages n Affordable health care is available to those that have not been able to afford it in the past. n Causes new employer money to be contributed to employee health care. n Employees use their available funds to purchase organized health care rather than to pay for services out-of-pocket as funds allow.

One-Third Share Disadvantages n n Establishing benefits and “premiums” is complex. n n The legal structure may be problematic if the coverage is less comprehensive than licensed insurance. n n Very intensive effort required to “sign up” businesses. Inequitable treatment of similarly situated businesses, and crowd-out potential.

One-Third Share Cost and Impact on Uninsured

SCHIP Expansion Approach n Through a new 1115 waiver, use S-CHIP funds to cover parents of minor children in families with incomes between 100% and 200% of poverty. n New HIFA waiver authority allows flexibility in development of the scope of benefits and the amount of beneficiary “cost-sharing” (such as copayments and premiums). n Possible component to subsidize employer- sponsored coverage when it is available.

SCHIP Expansion Target Population n Parents of minor children in families with incomes between 100% and 200% of poverty. (The children are eligible for Medicaid or S- CHIP.) n Unlike Delaware’s Medicaid 1115 waiver, this excludes single individuals, childless couples, and parents of adult children.

SCHIP Expansion Advantages n Federal government pays 65% of the cost of coverage to the extent of Delaware’s unused SCHIP allocation. n Under an 1115 waiver the state can secure federal funds while limiting the state’s financial obligation. (E.g. State’s can “close” enrollment.) n Can use an existing administrative system. n More children already eligible for Medicaid or CHIP will be newly enrolled.

SCHIP Expansion Disadvantages n Possible “welfare” stigma. n Limited to parents of minor children. n Availability of “free” coverage for significant number of full-time working parents may create greater incentives (than child-only coverage) for employers to drop existing private coverage. u Key issue of what income levels are chosen and what the state does to coordinate coverage with employers.

CHIP Expansion Cost and Impact on Uninsured

Subsidized Purchasing Pool Approach n Carriers to submit bids for a defined comprehensive, but not rich, benefit package, assuming normal-risk population. n Pool negotiates with carriers and decides which health plans to offer, depending on the value. n State, rather than insurers, absorbs cost of adverse selection and perhaps provides additional subsidy. n Employers pay minimum of 50% of premium if no state premium subsidy, 33% if state subsidy.

Subsidized Purchasing Pool Target Populations n Anyone (employee not offered coverage or an individual) with household income below 300% of poverty (approximately $53,000 for family of 4). n Any firm with 10 or fewer employees. n Any firm with average wage level of $10 per hour or less. n (All values are for illustration and estimating purposes only; subject to change.)

Subsidized Purchasing Pool Advantages n Offers normal-priced coverage to populations that often have to pay substantially more than average, with choice of several plans. n Provides a fair way of spreading the costs of covering high-risk people— cost comes from state general revenues (the total population)— unlike approaches which assess only insured plans and not self-insured employers/employees.

Subsidized Purchasing Pool Disadvantages n Need to craft provisions to prevent the pool from becoming merely a high-risk pool, which will be challenging. n Merely making coverage available will not ensure that target populations will take advantage of it.

Subsidized Purchasing Pool Cost and Impact on Uninsured