CHIPRA created two new options to do premium assistance – the first through Section 301 in Title III which establishes a new option for states that have separate state CHIP programs, and the second, also found in Title III, established a new option that was added to the Medicaid statute – the elusive “1906a.” This creates a new child-only option to do premium assistance in Medicaid. And other parts of Title III, as I discussed in the second part of this series , seek to remove barriers states face in running premium assistance programs. The intent of the new options was to provide federal support for the kind of premium assistance programs that make the most sense – kids receive coverage that is just as good or better – and federal and state dollars are used in a clearly cost-effective manner.
The language of these two sections is quite similar though differences in the underlying programs means in practice there are some ways in which they differ. Both options clearly require that kids have a “wraparound” benefit for services and cost-sharing protections so that they are not worse off in a premium assistance context. Both prohibit the subsidization of coverage in the individual market which is likely to be less comprehensive, more expensive, and by definition does not have an employer contribution to bring the costs down. Both require a 40% employer contribution to ensure that the coverage is cost-effective. (Note: I personally think it would be fine to get rid of this 40% requirement and just make sure that states have a rigorous cost-effectiveness test.) And the definition of cost-effectiveness is altered to explicitly include administrative costs.
Let’s spend a minute on this last point – the inclusion of administrative costs in the cost-effectiveness definition. This is an important change because today some states include these costs and some don’t in their assessments of cost-effectiveness. In programs with low enrollment and often-high administrative costs, this could be a very important piece of data to determine whether the program is a worthwhile use of public funds. Apparently Congress agrees, because the Patient Protection and Affordable Care Act (i.e. the health reform law) extends this new CHPRA definition to existing Section 1906 Medicaid programs, which as we discussed in Part 1, 29 states have today. (PPACA also makes some technical changes to the CHIPRA cost-effectiveness definition to clean it up but it would be REALLY boring and TMI to explain those.)
So are these new options really going to work? The language is fairly complex and states are not rushing to pick them up – wisely, I would say, given the limited payoff we have seen from premium assistance programs in the past. So far only one state, Okahoma, has had a state plan amendment approved to operate a new Section 301 premium assistance program. However, another feature of the CHIPRA law did lead to a mini-burst of interest because, in yet another example of somewhat irrational public policy making when it comes to the politics of premium assistance, having one of these new options in place helps a state to qualify for a CHIPRA performance bonus. I say irrational because the intent of the performance bonus provision is to streamline enrollment procedures, and adding a premium assistance program certainly does not do that. But there it is, so a number of states were intrigued by comments made by CMCS Director Cindy Mann, who suggested at our recently held regional meeting in Tampa, that a state could flip their 1906 program to a 1906a program in order to meet this test.
To date Wisconsin and possibly Washington have received approval to do so. But it’s not quite as easy as it sounds at first blush. Two issues may deter states from making the switch. The first is that 1906a appears to include language that says that parents who are enrolled in the employer-sponsored coverage must also receive wraparound coverage even if they are not otherwise eligible for Medicaid. In states where parent eligibility is lower than kids, this is not likely to be a popular idea -even though it would be nice for parents to have those added cost-sharing protections and benefits that their private insurance might not cover. In fact there are a few states that we have heard from who are not pursuing the flip for this reason. Second, enrollment in1906a is voluntary whereas 1906 is not, so states will have to offer families the opportunity to opt-out on a monthly basis. This may have other repercussions especially for those families who are using the subsidy to purchase their coverage through a small employer – these policies often include requirement that the employer must cover a certain number of lives for a 12-month period. So some states might find this disruptive.
So it remains to be seen whether these new options really take off, and there are reasons to think that they won’t. It may be that the old tried and true Section 1906 option in Medicaid remains the most viable route for states seeking to do premium assistance. And, yes, I think I am going to have to conclude this series in a 4th installment bringing us full circle to the future of premium assistance in 2014 when health reform kicks in…..