6
State and Private Insurance Initiatives

For more than a decade, many states have had public and/or private programs to provide health insurance coverage for low-income children. These programs have taken three general approaches: Medicaid expansions beyond mandatory levels, state-financed subsidy programs, and private initiatives (Gauthier and Schrodel, 1997; Gehshan, 1997; Johnson and McDonough, 1998).

The State Children's Health Insurance Program (SCHIP) of the Balanced Budget Act of 1997 was designed to build on these state experiences and to give states flexibility in expanding children's health insurance coverage for low-income, uninsured children. Under SCHIP, states will be designing and implementing new programs, as well as expanding Medicaid programs, in the years ahead.

As of April 1, 1998, the six-month anniversary of the program, eight states had federally approved SCHIP plans. Four plans were Medicaid expansions, two were state-designed programs, and two were combination approaches. SCHIP plans had been submitted for federal approval by 15 states, and 22 states were still in the planning phase. Two of the four states with approved Medicaid expansions (Alabama and South Carolina) were planning a second, later expansion through a state-designed program (National Economic Council, 1998; NGA, 1998). The variety in responses suggests that states are taking advantage of the flexibility in SCHIP design.

This chapter begins with a general discussion of the kinds of decisions that are involved in designing and implementing children's health insurance programs, with an emphasis on the factors involved in state-level decision making. The chapter continues with some profiles of state-financed, non-Medicaid children's insurance programs that were implemented before the national SCHIP legislation was passed, including information on the financing and design of the programs, eligibility requirements, covered benefits and services, cost-sharing, and the numbers of children served. Some of these programs are likely to be expanded or replicated under SCHIP.

The chapter also gives examples of private sector initiatives undertaken by insurers and health plans across the country. In summary, the chapter describes some of the key lessons learned from previous experiences in implementing state and private children's health insurance programs.

Background

In the early to mid-1990s, the most frequent children's health insurance expansion strategy (in 30 states) was broadening the criteria for Medicaid eligibility to cover children 1 year of age and older. Eight states had developed state-financed subsidy programs for non-Medicaid-eligible, uninsured children



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6 State and Private Insurance Initiatives For more than a decade, many states have had public and/or private programs to provide health insurance coverage for low-income children. These programs have taken three general approaches: Medicaid expansions beyond mandatory levels, state-financed subsidy programs, and private initiatives (Gauthier and Schrodel, 1997; Gehshan, 1997; Johnson and McDonough, 1998). The State Children's Health Insurance Program (SCHIP) of the Balanced Budget Act of 1997 was designed to build on these state experiences and to give states flexibility in expanding children's health insurance coverage for low-income, uninsured children. Under SCHIP, states will be designing and implementing new programs, as well as expanding Medicaid programs, in the years ahead. As of April 1, 1998, the six-month anniversary of the program, eight states had federally approved SCHIP plans. Four plans were Medicaid expansions, two were state-designed programs, and two were combination approaches. SCHIP plans had been submitted for federal approval by 15 states, and 22 states were still in the planning phase. Two of the four states with approved Medicaid expansions (Alabama and South Carolina) were planning a second, later expansion through a state-designed program (National Economic Council, 1998; NGA, 1998). The variety in responses suggests that states are taking advantage of the flexibility in SCHIP design. This chapter begins with a general discussion of the kinds of decisions that are involved in designing and implementing children's health insurance programs, with an emphasis on the factors involved in state-level decision making. The chapter continues with some profiles of state-financed, non-Medicaid children's insurance programs that were implemented before the national SCHIP legislation was passed, including information on the financing and design of the programs, eligibility requirements, covered benefits and services, cost-sharing, and the numbers of children served. Some of these programs are likely to be expanded or replicated under SCHIP. The chapter also gives examples of private sector initiatives undertaken by insurers and health plans across the country. In summary, the chapter describes some of the key lessons learned from previous experiences in implementing state and private children's health insurance programs. Background In the early to mid-1990s, the most frequent children's health insurance expansion strategy (in 30 states) was broadening the criteria for Medicaid eligibility to cover children 1 year of age and older. Eight states had developed state-financed subsidy programs for non-Medicaid-eligible, uninsured children

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TABLE 6.1 State Initiatives to Expand Coverage to Children (as of May 1997) Individuals Covered Subsidy Programs for Children and Families Subsidies to Employers Other   State Only State and Local State and Private     Children California Florida Iowa       Massachusetts Colorado Kansas       Minnesota   Michigan       New York   Montana       Pennsylvania   North Carolina       Vermont   New Hampshire     Families Massachusetts (2)     Florida Iowaa   New Jersey     Maine New Yorkb   New York (2)     New York Oregonc   Washington     Washington   a Tax deduction b Pilot voucher program c Tax credit to small employers SOURCE: Gauthier and Schrodel (1997, p. 7). living in low-income families. Four states had developed subsidy programs for families. In addition, private programs were operating in 25 states (Gauthier and Schrodel, 1997) (see Table 6.1). As of May 1997, only six states (Alaska, Illinois, Indiana, Nebraska, Nevada, and South Carolina) had no public or private subsidized insurance programs and had not expanded Medicaid eligibility to children over age 1. Eight states (Alabama, Idaho, Louisiana, Mississippi, Ohio, Oklahoma, Texas, and Wyoming) had only private Blue Cross and Blue Shield Caring Programs for Children and provided no state assistance (Gauthier and Schrodel, 1997; Gehshan, 1997). Many of the states choosing Medicaid expansions have considered the relative administrative and fiscal advantages of altering an existing program when compared with designing and implementing new state programs (Mann, 1997). Medicaid already has an administrative structure in place in every state, and its administrative costs are low. Medicaid's contracts and rates have already been negotiated and provider networks, payment systems, and benefit packages have been established. In addition, the federal matching payments provide an incentive to expand Medicaid by reducing the amount of money that states need to provide from their own budgets (Dorn et al., 1998; Mann, 1997). However, some states have preferred to sponsor separate, independent programs that are distinct from Medicaid. Several states have funded programs that subsidize coverage for children through selected commercial insurance or managed care plans. The level of the subsidy typically varies on a sliding scale, with full subsidies for children from families with the lowest income levels and higher premium levels and copayments for children from families with higher levels of income. Some states

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have relied primarily on private initiatives and have provided some financial support through special taxes on tobacco or alcohol (see Table 6.1). Some programs have focused on children, whereas others include families. The most frequently mentioned advantages of separate state programs are that they avoid the stigma of the traditional welfare system and allow the states to experiment according to local economic and social needs, preferences, and resources (Lipson and Schrodel, 1996). State-based programs also are not subject to federal requirements about eligibility, the benefit package, provider payment rates, copayments, and other regulations that accompany the use of federal funds for Medicaid. Designing Children's Insurance Programs For more than a decade, states have been funding programs that provide insurance for children who are not eligible for Medicaid and who do not have private insurance. State-designed, non-Medicaid insurance programs typically develop contracts with private-sector health plans and providers at market rates, so that the subsidized children and families receive the same coverage as the privately insured groups in their communities (GAO, 1996). State-sponsored programs may be administered by the state or by a nonprofit agency or corporation that agrees to administer the benefits, determine eligibility, and oversee the contracts with health plans that contract to deliver the care to the enrolled population. By acting as the purchaser on behalf of a pool of subsidized children and families, states can negotiate better rates than small employers or parents are likely to be able to receive on their own (Nichols et al., 1997). For low-income working parents, these subsidized programs offer an attractive alternative to being uninsured or paying a substantial portion of their earnings to buy their own insurance. Coverage offered through public programs may of course differ from the coverage offered to individuals with employer-sponsored or private individual coverage. In fact, private health benefit policies purchased by employers or individuals do not always cover the scope of benefits covered through the Medicaid program. However, some parents prefer a private program because it is not associated with welfare, even if it offers a reduced benefit package (McDonough, 1997). The design and implementation of programs for children's health insurance involve a complex set of questions. As described in the following sections, these include decisions about the eligibility for the program, the scope of benefits to be provided, sources and extent of financing, impact on the insurance market, and procedures for outreach and enrollment once the program is implemented. The traditional public health model is to throw money at certain institutions and let them take whoever comes through their doors. We have used that model in Massachusetts, where we have a very sophisticated and deep network of community health centers. But we have found that people are more likely to avail themselves of preventive and other services when they have a sense that they are covered under an insurance plan. Holding an insurance card is an essential piece of people's dignity that gets them to appropriate services. John McDonough Massachusetts Legislature, Boston, MA Public Workshop, June 2, 1997

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Levels of Eligibility The decision about who will be included in the population that is eligible for the program is usually one of the first to be addressed in designing a children's insurance program. In general, uninsured children are the target group, but each state needs to determine the maximum income limit for eligibility (see Table 6.2). This decision involves determinations about how far existing resources will stretch, including whether additional resources can be generated if there is a shortfall or whether enrollment will simply be closed or capped when it reaches a certain point. In most cases, states try to work from their Medicaid eligibility criteria and to prevent gaps in coverage, so that children up to a certain income level will be eligible for one of the two programs. Other questions about eligibility concern the age ranges of eligible children and whether individual children or families will be served. States that have age limits on eligibility because of resource limitations may have difficulty explaining to parents why one child in the family is eligible for a program and another is not. Thus, a state might choose to limit its program to certain cities, counties, or regions to avoid the problem of seemingly arbitrary age limits. A few states have chosen to target entire families for their programs. For example, Health Access New Jersey is a statewide program for children and adults, and the Massachusetts Medical Security Plan provides subsidized coverage for families whose wage earners are unemployed. However, because of resource constraints, the majority of state-sponsored insurance programs focus on children, and some also extend eligibility through adolescence (see Table 6.2). Whether or not you limit eligibility based on income, do you cap your program out, for instance, where people over 400 percent of poverty are simply not eligible for your coverage? Or do you design the program such that people over 400 percent of poverty are eligible, but they pay the full premium and you have a sliding scale below it? States have had very different responses to that question. Jane Horvath National Academy for State Health Policy, Portland, ME Public Workshop, June 2, 1997 The question of eligibility also involves fundamental views about the nature and purpose of insurance. The higher the parents' income, the greater the likelihood that children will be covered by their parents' employer. If a state program offers generous benefits and subsidizes the cost, there is potential that employers will drop existing coverage or that parents will switch to the new state plans. This is described by different terms, including substitution or replacement of coverage, or crowd-out (Chollet et al., 1997; Cutler and Gruber, 1997; Dubay and Kenney, 1997). There are a variety of opinions on the likelihood, nature, and extent of coverage replacement. Some of the presenters in the committee's public workshop believe that any replacement of private coverage by public funds should be avoided, whereas others believe that a certain amount of substitution of coverage is reasonable if it reduces the burden of out-of-pocket expenses, improves children's access to care, and reduces the overuse of emergency rooms, with their associated higher costs of care. As part of the SCHIP accountability process, state program plans are required to describe their intended strategies for preventing substitution of coverage (IOM, 1998). Based on evidence that substitution becomes more likely as levels of income increase beyond the poverty level, the SCHIP legislation set the highest eligibility level at 200 percent of the federal poverty level, which is an annual

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TABLE 6.2 Eligibility Criteria for Programs Providing Health Care Coverage For Children (as of May 1996) Name of the Program Year Started Maximum Incomeª Age of Eligibility Florida Healthy Kids 1992 No limit 1-19 Massachusetts' Children's Medical Security Plan 1994 No limit 0-18 New Hampshire's Healthy Kids 1995 No limit 0-20 New York's Child Health Plus 1991 No limit 0-18 Tennessee's Tenn Care 1994 No limit 0-64 Washington's Basic Health Plan 1989 No limit 0-64 Massachusetts' Medical Security Plan (MSP) 1990 400% 0-64 California's Access for Infants and Mothers (AIM) 1992 300% Pregnant women and children <2 Hawaii QUEST 1994 300% 0-64 Minnesota Care 1992 275% 0-64 Health Access New Jersey 1995 250% 0-64 Rhode Island's Rite Care 1994 250% 0-17 Pennsylvania's Children's Health Insurance Program 1993 235% ages 1-5 185% ages 6-15 1-15 Vermont's Dr. Dynasaur 1989 225% 0-17 New York's Regional Pilot Projects 1989 200% 0-64 Colorado's Child Health Plan 1992 185% 0-12 Michigan's Caring Program for Children 1991 185% 1-18 North Carolina's Caring Program for Children 1987 185% 0-19 Montana's Caring Program for Children 1992 150% 0-19 Iowa's Caring Program for Children 1989 133% 0-18 Kansas' Caring Program for Children 1989 133% 0-18 SOURCE: Gauthier and Schrodel (1997, p. 18). ª Percent refers to percentage of the federal poverty level

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gross income of $32,100 for a family of four. The legislation allowed an exception to this eligibility requirement for states that as of June 1997 provided Medicaid to children with family incomes above 150 percent of poverty. Those states may use SCHIP funds to cover children whose family incomes are above 200 percent of poverty, up to 50 percentage points above the state's Medicaid eligibility level. When you think about the crowd-out issue, you have to look at the parents' insurance status. What you see is that parents don't have insurance and they delay their own care, because they are busy taking care of their children. Forty-six percent of our children were uninsured for six or more months. That is an important thing to factor into this question. If they have been uninsured for six months, they didn't come into our program from some other source of coverage. And 12 months later, only 61 percent of our kids were still in our program. So we're not here building a generational entitlement program. Charles LaVallee Western Pennsylvania Caring Program for Children, Pittsburgh, PA Public Workshop, June 2, 1997 There has been a lot of talk about crowd-out, but there is very limited evidence that at the lowest end of the income spectrum, you are crowding out private insurance. Private insurance largely does not exist for the parents in these working families. Diane Rowland Kaiser Commission on the Future of Medicaid, Washington, DC Public Workshop, June 2, 1997 There is a lot of pressure and debate on the question of when public coverage should let off and when private coverage should begin. Where is that transition area in which you might be providing some public subsidy, but not a full public subsidy? It's a gray area, and there is going to be heavy debate about where the cut-off point should be. Kay Johnson George Washington University, Washington, DC Public Workshop, June 2, 1997

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There is a notion in social insurance that if we are going to create safety nets for people, then somebody has to pay. There is a notion of equal justice or horizontal equity, which argues that if you and I both make $30,000 a year and you buy insurance but I don't, then I rely on the safety net, and you end up paying for me. This is the argument we use in requiring everyone to pay some Social Security tax. We say that people making $20,000 or $25,000 a year can't afford to buy insurance, but most of them are paying for health insurance in the form of lower cash wages. To say then that other people who don't pay for insurance through lower cash wages cannot afford it is part of the dilemma. If we say they can't afford it and we resubsidize them, that causes substitution, and we end up in a netherworld. There is still a gap between the tax system and the welfare system. Eugene Steuerle The Urban Institute, Washington, DC Public Workshop, June 2, 1997 Scope of Benefits Questions about the scope of benefits are more often about how generous a benefit package the state can afford than about what kinds of benefits are recommended by experts in children's health. Given a limited amount of resources, does a state choose to cover more uninsured children with a minimal set of benefits, or does the state choose to provide more comprehensive services, in which case fewer children will be covered? Most states have decided on a comprehensive benefit package rather than catastrophic coverage (see Table 6.3), but there often are limitations or restrictions on coverage for mental health, dental care, inpatient hospitalization, disabilities, or chronic conditions. Some states believe that offering a generous benefit package will encourage employers and families to drop employer-based coverage, particularly when the existing scope of private coverage is limited, as is typically the case with small employers. States with benefits exclusions have been motivated primarily by budget constraints and less by concerns about crowd-out, although the limited packages do seem less likely to attract working families who already have coverage (Chollet et al., 1997). Program Financing State programs derive their funding through a variety of financing streams. These may include state general funds, special taxes on tobacco or alcohol, taxes on providers or employers, funds generated from the sale or conversion of not-for-profit hospitals, contributions from employers or insurers, and donations from philanthropic organizations. Some states, such as Florida, are considering using funds from a tobacco settlement for their SCHIP, and other states with budget surpluses may use some of those funds for expansion of children's health insurance coverage (NGA, 1998). Successful competition for funding depends on the prominence of support for children's health insurance in the state, the proportion of uninsured children in the state, the nature of the provider networks, the involvement of children's health advocates, the views of the governors and legislatures about public insurance, and many other factors (Dorn et al., 1998). One of the major financing questions is whether the families will pay premiums and copayments and, if so, what the amounts will be. Many state-subsidized health insurance programs require that participants share in the cost of their insurance, which not only reduces the public costs of the program

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TABLE 6.3 Scope of Benefits of Programs Providing Health Care for Children Name of the Program Benefit Level Number of Contracting Plan Annual Cost Per Child (dollars) California's Access for Infants and Mothers (AIM) Comprehensive 9 NAª Florida Healthy Kids Comprehensive 8 612 Hawaii QUEST Comprehensive 5 NA Minnesota Care Comprehensive 8 792 New Hampshire's Healthy Kids Comprehensive 1 804 Health Access New Jersey Comprehensive 6 NA New York's Child Health Plus Comprehensive 15 432-678 New York's Regional Pilot Projects Comprehensive 4 NA Pennsylvania's Children's Health Insurance Program Comprehensive 5 636 Rhode Island's Rite Care Comprehensive 4 840 Tennessee's Tenn Care Comprehensive 10 505 Vermont's Dr. Dynasaur Comprehensive 2 446-533 Washington's Basic Health Plan Comprehensive 18 492-720 Massachusetts' Children's Medical Security Plan Basic/standard 1 NA Colorado's Child Health Plan Limited 0 350 Iowa's Caring Program for Children Limited 1 350 Kansas' Caring Program for Children Limited 1 204 Massachusetts' Medical Security Plan Limited 2 450-540 Michigan's Caring Program for Children Limited 1 615 Montana's Caring Program for Children Limited 1 360 North Carolina's Caring Program for Children Limited 1 312 SOURCE: Gauthier and Schrodel (1997, p.15). ª NA = not available.

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but also makes the programs seem less like welfare for the families who participate (Ku and Coughlin, 1997). States vary significantly in their subsidy structures and in the use of sliding-scale premiums (see Table 6.4). Massachusetts uses three broad income levels to determine the level of cost-sharing (200, 300, and 400 percent of the federal poverty level). Other states have more income categories with smaller ranges of income, so the share of the premium is a similar percentage of income across all income levels (Gauthier and Schrodel, 1997). A recent Urban Institute study examined the relationship of premium levels and program participation in three states with subsidized insurance programs (Minnesota, Tennessee, and Washington). The study found that when families were charged one percent of their income, 57 percent would join a program; when the charge was 3 percent, 35 percent would join; and when the charge was 5 percent, only 18 percent would participate (Ku and Coughlin, 1997). Florida Healthy Kids found that families stayed in the program when the premium was increased from $5 to $10 per month, but an increase from $10 to $15 a month caused more families to drop out. Some states have provided state tax relief for individuals who purchase insurance or enroll in a health plan in the private market. For example, Iowa has allowed self-employed residents to deduct 100 percent of the cost of their health insurance, and Oregon offered a tax credit to small businesses to provide health insurance for their employees (Gauthier and Schrodel, 1997). These strategies can give more responsibility and flexibility to consumers, but they are difficult to implement because of the lack of a structure or mechanism for providing information about the programs or helping consumers make their own decisions. Also, because state tax levels are low, the financial incentives are relatively limited (see Appendix A). There has been a great deal of discussion about vouchers to allow individuals to purchase their own insurance, but only one state—New York—has passed legislation to implement a voucher pilot program (Gauthier and Schrodel, 1997). Another important issue for states to consider is the possible impact on the insurance risk pool if they design a separate program for children only. Children are relatively healthy, so the average costs they impose on risk pools are less than the average costs for other individuals. Although many in the children's health community believe that it is appropriate to focus attention on children's access to health care, there may be far-reaching and long-term consequences affecting other sectors of the population if children are ''carved out" of risk pools. Key Outreach and Enrollment Issues Once eligibility and scope of benefits have been defined and financing has been made available, the outreach and enrollment strategies will determine the program's success in reaching the intended groups of children and families. For example, is there one enrollment process for all programs, or does each program have a separate process? Are families expected to come to a central location for information, do outreach workers visit day-care centers and clinics, are mail-in applications distributed to schools and businesses, or can families apply by telephone? The easier it is for applicants to enroll, the more likely it is that Medicaid-eligible children will be identified. States that want to cap Medicaid enrollment may be reluctant to do outreach or to streamline their application procedures. Profiles Of State-Sponsored Programs This section describes some of the state-sponsored programs that were developed in the early 1990s: Florida Healthy Kids, Massachusetts' Children's Medical Security Plan, Minnesota Care, New York's Child Health Plus, and Tenn Care. These programs were chosen because of their variety of approaches to eligibility, financing, and outreach and enrollment and because their experiences can provide guidance for other states in developing and modifying SCHIP in the years ahead. Although Tenn Care was based

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TABLE 6.4 Premium Subsidy Structure for State-Subsidized Insurance Programs State Program <100% FPL <100-200 FPL % 200-300% FPL 300% + FPL CA AIM Not eligible Not eligible Partial subsidy Not eligible CO Child Health Plan Partial subsidy Partial subsidy/Not eligible as income nears 200% FPL Not eligible Not eligible DE Diamond State Health Plan Full subsidy Not eligible Not eligible Not eligible FL Florida Healthy Kids Partial subsidy Partial subsidy/ No subsidy as income nears 200% FPL No subsidy No subsidy HI Hawaii QUEST Full subsidy No subsidy No subsidy Not eligible MA MSP-Direct Coverage Full subsidy Full subsidy Not eligible Not eligible MA MSP-Premium Assistance Partial subsidy Partial subsidy Partial subsidy Partial subsidy MA Children's MSP Full subsidy Full subsidy Partial subsidy Partial subsidy MN Minnesota Care (Families) Partial subsidy Partial subsidy Partial subsidy/Not eligible as income nears 300% FPL Not eligible MN Minnesota Care (Adults) Partial subsidy Partial subsidy/Not eligible as income nears 200% FPL Not eligible Not eligible NJ Health Access Partial subsidy Partial subsidy Partial subsidy/Not eligible as income nears 300% FPL Not eligible NY Child Health Plus Full subsidy Full subsidy/Partial subsidy as income nears 200% FPL No subsidy No subsidy NY Regional Pilot Projects Partial subsidy Partial subsidy Not eligible Not eligible OR Oregon Health Plan Partial subsidy Not eligible Not eligible Not eligible PA Children's Health Insurance Program Full subsidy Full subsidy/Not eligible as income nears 200% FPL Not eligible Not eligible TN Tenn Care Full subsidy Partial subsidy Partial subsidy Partial subsidy VT Health Access Plan Full subsidy/Partial subsidy as income nears 50% Not eligible Not eligible Not eligible WA Basic Health Plan Partial subsidy Partial subsidy No subsidy No subsidy NOTE: FPL = federal poverty level. SOURCE: Gauthier and Schrodel, 1997, Table 6.

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on a Medicaid waiver, it is included because the Tennessee implementation experience has been so instructive for other states. Florida Healthy Kids The Florida State Legislature established the Florida Healthy Kids Corporation in 1990 in response to data indicating that both child health and school performance were declining while the number of uninsured children was continuing to grow. Recognizing the relationship between child health and illness and school performance, Healthy Kids provides comprehensive care to children ages 5 to 19 by offering insurance through the schools. The program uses the income criteria of the National School Lunch Program to set sliding premium rates (Shenkman et al., 1996). The only eligibility requirement is that the child have no other medical insurance coverage. The Healthy Kids program officially began enrolling children from the Volusia County school district in February 1992. By 1997, the program had expanded to five additional counties and covered more than 45,000 children (Gauthier and Schrodel, 1997). It has helped to provide comprehensive health care coverage to more than 20,000 children in 11 school districts across the state, and further expansions are planned under the state's proposed SCHIP. The $26 million program is funded through a combination of sources, including state funding (50 percent), family premiums (33 percent), and contributions from school districts, hospital authorities, children's services councils, and community organizations (17 percent) (Shenkman et al., 1996). Limited provider networks offer the covered services, which include immunizations, primary and specialty physician visits, inpatient and outpatient hospital care, vision and hearing care, prescription drugs, rehabilitation, organ transplants, preexisting conditions, and certain mental health services. Copayments are charged for certain products or services: $3 for prescription drugs, $25 for nonemergency use of an emergency room, $10 for mental health services, and $10 for eyeglasses. There is a lifetime cap of $1 million dollars on these services (Hill et al., 1993). Another distinctive trait of the program is that it is not just for low-income families. All children enrolled in school may join if they do not have any other health insurance. Families with incomes under the federal poverty level pay nothing toward the cost of coverage; families with incomes of between 101 and 135 percent of the pay $3 per child a month; families with incomes between 136 percent and 185 percent pay $16 per child a month; and families with incomes above 185 percent of poverty can purchase coverage for the full monthly premium of $57 per child (Hill et al., 1993). The program's full premium stands at $684 annually. As of 1997, 98 percent of program enrollees received some form of subsidy, and almost two thirds did not pay a premium. According to an evaluation done by the Institute for Child Health Policy at the University of Florida, the Healthy Kids program saved taxpayers and hospitals more than $13 million in health care costs in 1996. Hospitals reported a 30 percent decrease in pediatric charity cases and a 70 percent decrease in emergency room visits during the first year after a Healthy Kids program was implemented in a community. Uninsured children were found to be eight times more likely to seek care in an emergency room than those enrolled in the Healthy Kids program. The level of family satisfaction with the program has been reported to be higher than 90 percent (Shenkman et al., 1996). The Balanced Budget Act of 1997 allowed Florida to use its 1997 Healthy Kids benefit package as an approved SCHIP program. With funding from the Robert Wood Johnson Foundation, several other states are planning to replicate the Healthy Kids program in the near future. Massachusetts' Children's Medical Security Plan The Massachusetts legislature created the Children's Medical Security Plan (CMSP) in 1994 in response to the state's growing Medicaid costs and the growing number of uninsured children. At that

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time, the Medicaid program had been increasing by 22 percent annually for the previous 4 years. In the late 1980s, an estimated 90,000 children were uninsured, and by 1995, that number had grown to 160,000 despite Medicaid expansions for children (Greenberg and Zuckerman, 1997). In 1996, the Massachusetts legislature passed the Access to Health Law, expanding Medicaid coverage for children and modifying CMSP to reach low-income children not covered by Medicaid. Previous legislation mandating that employers provide coverage or contribute to a state fund was scheduled for implementation in August 1996, and pressure from businesses had generated interest in either repealing the mandate or replacing it with an alternative, more limited program (Greenberg and Zuckerman, 1997). Children's health insurance expansions in Massachusetts have been financed through a reallocation of the state's pool of money for uncompensated care and through a 25-cent increase in the cigarette tax (Greenberg and Zuckerman, 1997). In Massachusetts, the Medicaid program is available to uninsured children and adults with incomes up to 133 percent of the federal poverty level. All other children are eligible for CMSP, which provides a limited package of primary and preventive care services. Inpatient hospital care is not covered, and coverage for prescription drugs and mental health is limited. We found extraordinary political salience in linking children's health and tobacco taxes. People generally look at tobacco taxes differently than any other kind of tax, and most of the public generally like raising cigarette taxes. When you link it with using the funds to buy health care for children, the support just simply goes through the roof. John McDonough Massachusetts House of Representatives, Boston, MA Public Workshop, June 2, 1997 CMSP is partly supported by participant cost-sharing. For families with incomes of up to 200 percent of the poverty level, participation is free. Families with incomes of between 200 and 400 percent of the federal poverty level may buy into CMSP for a monthly premium of $10.50 per child. Families with incomes higher than 400 percent of the federal poverty level pay the full cost of about $52.50 per month (Johnson and McDonough, 1998). Through 1997, CMSP had covered 31,000 children up to age 19. The program is administered separately from the Medicaid program, and the application, enrollment determination, and outreach staff are different. Because families must apply to different agencies to enroll in the two programs, it is difficult for families to make transitions between the programs when their financial circumstances change. However, the separation of programs has made CMSP more appealing to families who prefer to avoid a welfare program, even though the Medicaid benefits are much more extensive and cost-sharing is greater with CMSP (McDonough, 1997). Minnesota Care and Children's Health Plan Minnesota's Children's Health Plan was one of the first state-financed programs to subsidize coverage for children. In 1987, the Minnesota legislature allocated a 1-cent increase in the cigarette tax to help finance the development of the Children's Health Plan. The program was implemented in July 1988, and in 1992, it was incorporated into Minnesota Care, the state's subsidized health insurance program for individuals who are not eligible for Medicaid. As of March 1997, Minnesota Care covered 53,000 children under the age of 21, or approximately 40 percent of the uninsured children in Minnesota (Gauthier and Schrodel, 1997).

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The Children's Health Plan originally limited program eligibility to children ages 1 through 8 in families with incomes below 185 percent of the federal poverty level and provided a restricted benefit package of ambulatory, preventive, and primary care services. The intent of the program was to ensure that the greatest possible number of children had at least some kind of basic coverage (Hill et al., 1993). After various Medicaid eligibility expansions, the Children's Health Plan raised its upper age limit. In January 1991, the program began to cover all children under age 18 in families with incomes below 185 percent of the federal poverty level. Minnesota Care funding comes from a 2 percent excise tax on hospitals and health care providers and from monthly enrollee premiums, which are based on a sliding scale. Families with incomes greater than 275 percent of the federal poverty level are not eligible for a subsidy, on the assumption that other policies will be available to these families in the private market (Call et al., 1997). The program pays a monthly capitation to contracted health plans for a comprehensive array of services, and enrollees choose their health plan at the time of enrollment. There are no copayments for children. The program's one-page, mail-in application forms are available from schools and health and social services agencies, and applications can also be completed by telephone. In addition to meeting the income guidelines, there is a 4-month waiting period after losing insurance coverage from another source. This provision is intended to discourage those who seek to replace private coverage with the state-subsidized plan. The Minnesota Department of Health estimates that Minnesota Care saves the state and federal government $1.8 million each month by meeting the state's cost-containment goals and growth limits (Minnesota Health Information Clearinghouse, 1996). The programs have different benefit packages. Most of the programs have started out with a prevention and primary care program, i.e., not a lot of mental health coverage, not a lot of inpatient coverage. As these programs become more popular and as people understand what they are paying for and what the insurance risks are, the programs have been expanding. Jane Horvath National Academy for State Health Policy, Portland, ME Public Workshop, June 2, 1997 New York's Child Health Plus In September 1991, the state of New York introduced Child Health Plus, a plan that uses state funds to purchase private health insurance for eligible low-income children. Child Health Plus is financed through the state's system of reserving funds for uncompensated hospital care, supplemented by enrollment fees and premium payments. With an enrollment approaching 160,000 by the end of 1997, Child Health Plus is the largest of state children's insurance programs. New York still has one of the highest rates of uninsured children: about 557,200 children still have no coverage, and state officials plan to double the number of children enrolled in Child Health Plus over the next 3 years (Johnson and McDonough, 1998). Based on legislation that was enacted in 1996, all children aged 2 to 19 whose family income is below 120 percent of the federal poverty level are eligible for comprehensive benefits, and those with incomes from 120 to 222 percent of the federal poverty level are eligible with a sliding scale. Families with incomes above 222 percent of the federal poverty level pay the full cost of the premium. Premiums range from $477 to $656 per year depending on the region and specific health plan (Hill et al., 1993). The Child Health Plus benefit package covers a wide array of ambulatory, preventive, and primary

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care services but excludes more costly benefits such as mental health, nursing home, and home health care services. Although inpatient services were originally excluded, they were added to the list of covered benefits in 1997. At the same time, the state extended eligibility in the Child Health Plus program to children up to age 18, thus more than doubling the number of eligible children (Gehshan, 1997). Among the advantages of New York's Child Health Plus program are its simple application process, which makes it easy for families to enroll in the programs. In contrast to the Medicaid program, providers are reimbursed at private insurance rates established by the plans. In addition, children and families covered under this program are able to avoid the stigma and the administrative burdens that are often associated with the Medicaid program (Hill et al., 1993). Tenn Care On January 1, 1994, the state of Tennessee replaced its Medicaid program with a comprehensive health care reform plan called Tenn Care. This program extended health care coverage to approximately 1 million people in the Medicaid population and to 400,000 uninsured people through a system of managed care. To implement the program, the state government contracted with 12 managed care organizations to deliver all Medicaid services and to handle claims processing in exchange for a monthly payment per enrollee. Tenn Care initially had an enrollment cap of 1.3 million, which was later raised to 1.4 million. By January 1, 1995, Tenn Care reached 90 percent of its target enrollment and closed enrollment to uninsured individuals (The Commonwealth Fund, 1996). It reopened to children in April 1997, and state officials anticipate that about three fourths of the 68,000 eligible children will be enrolled in the program (Gauthier and Schrodel, 1997). Criticism of Tenn Care has been focused on the inadequacy of the provider networks and the implementation process. According to a 1995 report of the U.S. General Accounting Office, providers receive 20 to 50 percent less than Medicaid payments for some forms of surgery and X-rays, although fees for visits and consultations are slightly higher than those paid by Medicaid. As a result of low levels of state payments, almost half of the managed care companies participating in Tenn Care reported losing money in the first year of the program. The largest participant, Blue Cross/Blue Shield, reported a loss of $8.8 million (GAO, 1995). After its initial problems with implementation, the proportion of the population with insurance in Tennessee is among the highest of any state. The overuse of emergency rooms and inpatient hospitalization has dramatically decreased. Patients report that it is easier to develop a relationship with their physicians because they now have a regular primary care provider. Some estimates suggest that Tenn Care has saved as much as $1 billion compared with the projected Medicaid costs, which were increasing at an annual rate of 20 percent (Gauthier and Schrodel, 1997). Private Programs Privately sponsored programs have been developed by health plans across the country. Among the plans that have been involved in children's health programs are Aetna Health Plan, Atlanta; Blue Shield Plans in California, Colorado, Georgia, North Carolina, and Ohio; Group Health Cooperative of Puget Sound; Harvard Pilgrim Health Plan; Kaiser Permanente in California, Colorado, Maryland, Virginia, and the District of Columbia; Physicians Health Plan of Greater St. Louis; Prudential Health Care Plan of the Mid-Atlantic; US Health care; and others (AAHP, 1998). These programs have included school-based health centers and fitness programs, immunization programs, disease management programs for inner-city asthmatic children, teen substance abuse programs, and AIDS education programs.

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This section profiles two private-sector approaches to providing health care coverage for children. Blue Cross and Blue Shield Caring Programs operate in several states and together provide subsidized coverage for more children than any other private program. "Kaiser Permanente Cares for Kids," which was started in California in 1997, is part of a national subsidy program for uninsured people that will be expanded by Kaiser Permanente in the next few years. Caring Programs Blue Cross and Blue Shield Caring Programs offer subsidized coverage for primary and preventive services for low-income children in 25 states. Although the particular designs of each program vary slightly, most Caring Programs cover outpatient care, well-child visits, immunizations, primary care for illnesses and accidents, emergency services, laboratory and X-ray services, and outpatient surgery. Caring Programs serve uninsured children who are under age 19, live in low-income families, and do not qualify for Medicaid. Caring Programs receive the majority of their funding from the private sector, although Pennsylvania and Massachusetts have provided additional support for children's health benefits by increasing the state cigarette tax. In Iowa, Kansas, Missouri, Montana, and North Carolina, the state also provides some subsidies. Local businesses, foundations, religious organizations, civic groups, schools, unions, and individuals sponsor children in the Caring Programs. Many community contributions are matched by the participating Blue Cross and Blue Shield plans. All administrative services are donated by Blue Cross and Blue Shield, so every dollar contributed is used towards providing health care coverage for children. The annual premium across all of the programs averages about $270 (Hill et al., 1993). Determining eligibility is straightforward and simple. The applications are never more than one page, no restrictions are imposed on assets, no income verification is required, and families pay no enrollment fee. Also, because Caring Programs were created to supplement Medicaid, their plans require that potentially eligible children first apply for Medicaid. When outreach, public education, and enrollment efforts identify children who are eligible but not enrolled in Medicaid, children are referred to the Medicaid program (Hill et al., 1993; LaVallee, 1997). Despite their continued growth, most Caring Programs still remain relatively small. The Western Pennsylvania Caring Program has the largest enrollment of all the plans, and, in cooperation with the state, provides health insurance for 60,000 children. Yet together these two programs reach only 21 percent of the children currently eligible in that service area (Gauthier and Schrodel, 1997). The dependence on charitable donations limits the expansion possibilities of the Caring Programs. Presently, most of the programs have waiting lists for coverage. However, Caring Programs have assisted thousands of families who otherwise would have been unable to access health care for their children (Lief, 1997). Kaiser Permanente Cares for Kids A total of 1.8 million children in California are uninsured. About 84 percent of the uninsured children in California come from working families, including 60 percent with parents who work full time (Brown et al., 1997). Medi-Cal, the state's Medicaid program, covers 25 percent of the children in California, but 835,000 children who live in low-income, working families are ineligible for Medi-Cal. California's health insurance rates are among the highest in the country, making them unaffordable for low-income families. In June 1997, Kaiser Permanente announced that it would donate $100 million over five years ($20 million annually) to subsidize health care coverage for up to 50,000 children a year in California. Children in California who are eligible for "Kaiser Permanente Cares for Kids" (between 200 and 275

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percent of the federal poverty level) will be identified through a collaboration with schools as well as through a partnership with the Health Insurance Plan of California (HIPC). The program's outreach will be conducted in conjunction with state enrollment efforts for "Healthy Families" and Medi-Cal. Kaiser Permanente will refer children who are not eligible for its program to other sources of coverage. Children enrolled in "Kaiser Permanente Cares for Kids" will receive a comprehensive benefit package, including inpatient and outpatient services, prescription drugs, and vision care. Families will pay a sliding scale premium. Two demonstration projects will be established to explore models of collaboration between schools and Kaiser Permanente to enhance health service delivery for children. Coverage is expected to begin in September 1998. To enhance its initiative in California, Kaiser Permanente has assembled a statewide coalition to provide a coordinated policy forum to address the problem of the remaining uninsured children in the state. Other businesses and health plans are being approached to participate, and long-term plans include working with legislators to develop and secure the passage of legislation to expand access to coverage. The "Kaiser Permanente Cares About Kids" initiative is part of a broader national effort by Kaiser Permanente to provide subsidized health care for low-income children. In Denver, Colorado, Kaiser Permanente has committed to covering up to 1,300 low-income children through a pilot program called "School Connections," in which eligible children will be able to receive health care at school-based health centers or at Kaiser Permanente's medical offices. In Maryland, Virginia, and the District of Columbia, Kaiser Permanente has developed partnerships with county government, hospitals, and other providers to cover up to 3,200 low-income uninsured children, with Kaiser Permanente providing the majority of the subsidy. Beginning in 1999, Kaiser Permanente will increase its funding for subsidized care, including an additional $10 million allocated to covering uninsured children in other Kaiser Permanente divisions, for a total of $30 million being devoted to covering uninsured children. Children's Programs in Other Health Plans In addition to Caring Programs and Kaiser Permanente, several other insurers and health plans across the country have smaller children's health initiatives (AAHP, 1997). Many of these initiatives involve partnerships with state departments of health, hospitals, advocacy groups, and other health plans. They include immunization campaigns, programs designed to improve access to care, health education, and child safety and violence prevention programs. Among the initiatives are the following: Medica, a subsidiary of Allina Health System, uses multidisciplinary teams to help diagnose and treat children with chronic illnesses and disabilities, and allows pulmonologists to be designated as gatekeepers for children who are under their care. Mercy Health Plan, Pennsylvania's largest network model health plan for Medicaid beneficiaries, has an educational program for children with asthma to improve routine and primary care and reduce emergency room use. OmniCare Health Plan has developed a partnership with the Detroit Department of Health and a school-based health program to provide primary care examinations, health education activities, and immunization fairs for students and their families. UniHealth in southern California provides vaccinations at community-based clinics and in schools and churches. United Health Care of Ohio provides free immunizations to children living in Franklin County, Ohio.

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Summary And Implications During the past decade, states and private insurers have taken a variety of steps to extend health insurance coverage to low-income children. These strategies have included expansions of Medicaid, the development of state-sponsored programs involving subsidies for private coverage, state support for privately sponsored programs, and privately sponsored initiatives designed by private insurers and health plans. Although the majority of these programs have not been evaluated systematically, they have helped to reduce the number of uninsured children. Yet more than 11 million children are still uninsured. With the new SCHIP legislation, some of these programs may be replicated, and several new and innovative programs also may be designed and implemented. One of the most fundamental questions for each of these programs concerns eligibility. As these and other state programs continue to be implemented and modified in the years ahead, it will be important to monitor the extent and impact of coverage as well as of coverage substitution (IOM, 1998). Even with full subsidies for coverage, whether Medicaid or another type of program, there are still eligible children who do not enroll in any program. Much more needs to be learned about the ways in which families make decisions about health insurance coverage and about the financial and nonfinancial factors that influence their decisions about how to spend the family's financial resources. Along with more research about families, there is a need for better outreach strategies, more widespread and culturally sensitive public education efforts, streamlined enrollment processes, and other approaches that will support families and caretakers and help them to make the best decisions about their children's health care. In the child health area, states have undertaken a variety of projects to improve their services and promote "best practices" in the healthy development of children. In recent years, states also have taken many steps to improve their accountability to their citizens, including providing better public information on the performance of state programs. SCHIP offers states flexibility in program design. In return for that flexibility in design, the committee believes that states have the responsibility to implement the program as fully as possible, to provide as much public information as possible about the program, and to coordinate SCHIP with other state and private programs in the states to maximize children's opportunities to receive access to care. References AAHP (American Association of Health Plans). 1997. AAHP Fact Sheets: Chronic Care. Washington, D.C.: AAHP. AAHP. 1998. Health Insurance for Children. Washington, D.C.: AAHP. Brown ER et al. 1997. 1.6 Million California Children Have No Health Insurance; Most Come from Families with at Least One Working Parent. [http://www.ph.ucla.edu/sph/pr/wr97119.html] Call KT, Lurie N, Jonk Y, Feldman R, Finch MD. 1997. Who is Still Uninsured in Minnesota? Lessons From State Reform Efforts. Journal of the American Medical Association 278(14):1191-1195. Chollet DJ, Birnbaum ML, Sherman MJ. 1997. Deterring Crowd-Out in Public Insurance Programs: State Policies and Experience. Washington, D.C.: Alpha Center. Commonwealth Fund. November 1996. Academic Health Centers: The Tenn Care Experience. Briefing Note from Karen Davis. New York: Commonwealth Fund. Cutler DM, Gruber J. 1997. Medicaid and Private Insurance: Evidence and Implications. Health Affairs 16(1):194-200. Dorn S, Teitelbaum M, Cortez, C. 1998. An Advocate's Tool Kit for the State Children's Health Insurance Program. Washington, D.C.: Children's Defense Fund. Dubay L, Kenney G. 1997. Lessons From the Medicaid Expansions for Children and Pregnant Women: Implications for Current Policy. Statement for the United States House Committee on Ways and Means, Subcommittee on Health, Hearing on Children's Access to Health Coverage. April 8, 1997. [http://www.urban.org/TESTIMON/dubay.html] Gauthier A, Schrodel SP. 1997. Expanding Children's Coverage: Lessons from State Initiatives in Health Care Reform. Washington, D.C.: Alpha Center.

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GAO (U.S. General Accounting Office). 1995. Medicaid: Spending Pressures Drive States Toward Program Reinvention. Washington, D.C.: GAO. GAO/HEHS-95-122. GAO. 1996. Health Insurance for Children: State and Private Programs Create New Strategies to Insure Children. Washington, D.C.: GAO. GAO/HEHS-96-35. Gehshan S. 1997. State Options for Expanding Children's Health Insurance: A Guide for Legislators. Washington, D.C.: National Conference of State Legislatures. Greenberg J, Zuckerman B. 1997. State Health Care Reform in Massachusetts: How One State Expanded Health Insurance for Children. Health Affairs 16(4):188-193. Hill I, Bartlett TL, Bostrom MB. 1993. State Initiatives to Cover Uninsured Children. The Future of Children 3(2):149-151. IOM, 1998. Systems of Accountability: Implementing Children's Health Insurance Programs. Washington, D.C.: National Academy Press. Johnson K, McDonough JE. 1998. Expanding Health Coverage for Children: Matching Federal Policies and State Strategies. New York: Milbank Memorial Fund. Ku L, Coughlin TA. 1997. The Use of Sliding Scale Premiums in Subsidized Insurance Programs. Washington, D.C.: Urban Institute. [http://www.urban.org/entitlements/premium.htm] LaVallee C. 1997. The Caring Program. Presentation to the Committee on Children, Health Insurance, and Access to Care. Public Workshop, June 2, 1997, Institute of Medicine, Washington, D.C.. Lief L. Kids at Risk. U.S. News and World Report, April 28, 1997. Lipson DJ, Schrodel SP. 1996. State-Subsidized Insurance Programs for Low-Income People. Washington, D.C.: Alpha Center. Lurie N, Pheley L, Finch M. 1995. Is Minnesota Care Hitting Its Target? Minneapolis, MN: Institute for Health Services Research, University of Minnesota School of Public Health and Hennepin County Medical Center. Mann C. 1997. Why Not Medicaid? Using Child Health Funds to ExpandCoverage Through the Medicaid Program . Washington, D.C.: Center for Budget and Policy Priorities. [http://www.cbpp.org/1119mcaid.htm] McDonough JE. 1997. The Massachusetts Children's Medical Security Plan. Presentation to the Committee on Children, Health Insurance, and Access to Care. Public Workshop, June 2, 1997, Institute of Medicine, Washington, D.C.. Minnesota Health Information Clearinghouse. 1996. What is Minnesota Care? St. Paul, MN: Minnesota Department of Health. National Economic Council and Domestic Policy Council. 1998. Implementation of the Children's Health Insurance Program: Six-month Progress Report. Washington, D.C.: The White House. NGA (National Governors Association). 1998. National Governors Association Center for Best Practices, State Implementation Plans of Title XXI, The State Children's Health Insurance Program, as of March 12, 1998. [http://www.nga.org/MCH/ StateImplementation.htm] Nichols LM, Blumberg LJ, Acs GP, Uccello CE, Marsteller JA. 1997. Small Employers: Their Diversity and Health Insurance. Washington, D.C.: Urban Institute. [http://www.urban.org/health/smemployers.htm] Shenkman E, Pendergast J, Reiss J, Walther E, Bucciarelli R, Freedman S. 1996. The School Enrollment-based Health Insurance Program: Impacton Health Care Use of Low-income Children . American Journal of Public Health 86:1791-1793.