1. Options to Extend Health Coverage in Delaware

2. 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.

3. 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.

4. Background: Federal Poverty Level

5. 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.

6. 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.

7. 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.

8. 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).

9. Limited Benefit Plan Cost and Impact on Uninsured

10. 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.

11. 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.

12. 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.

13. 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.

14. One-Third Share Cost and Impact on Uninsured

15. 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.

16. 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.

17. 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.

18. 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.

19. CHIP Expansion Cost and Impact on Uninsured

20. 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.

21. 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.)

22. 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.

23. 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.

24. Subsidized Purchasing Pool Cost and Impact on Uninsured