State Policy Choices to Help Health Reform Achieve its Promise for Low- Income Children and Families Stan Dorn Senior Fellow, Urban Institute  NASHP Conference: October 4, 2011 THE URBAN INSTITUTE

This presentation is based in large part on prior work Stan Dorn, Ian Hill, Genevieve Kenney, and Fiona Adams, How Can California Policymakers Help Low- Income Children Benefit from National Health Reform? Prepared by the Urban Institute for The California Endowment, July 2011, Children_WP_v2_final_pws.pdf Genevieve M. Kenney, Victoria Lynch, Jennifer Haley, Michael Huntress, Dean Resnick and Christine Coyer, Gains for Children: Increased Participation in Medicaid and CHIP in 2009, prepared by the Urban Institute for the Robert Wood Johnson Foundation, August 2011, Stan Dorn, The Basic Health Program Option under Federal Health Reform: Issues for Consumers and States, prepared by the Urban Institute for the State Coverage Initiatives Program of AcademyHealth, a National Program Office for the Robert Wood Johnson Foundation, March 2011, Stan Dorn, Matthew Buettgens, and Caitlin Carroll, Using the Basic Health Program to Make Coverage More Affordable to Low-Income Households: A Promising Approach for Many States, prepared by the Urban Institute for the Association for Community Affiliated Plans, September 2011  Note: this report contains state-specific cost and coverage estimates for BHP Ongoing research for The 100% Campaign (Children’s Defense Fund-California, Children Now, and The Children’s Partnership) 2

THE URBAN INSTITUTE Outline of Presentation I.Potential gains for children and families under the Patient Protection and Affordable Care Act (ACA) II.Obstacles to achieving those gains III.State policy strategies to overcome those obstacles 3

POTENTIAL GAINS FOR CHILDREN I. 4

Potential gain #1: More eligible children enroll in Medicaid and CHIP Most eligible children are enrolled today But most remaining uninsured children are eligible Source: Kenney et al

THE URBAN INSTITUTE Why might more eligible children enroll? More of their parents receive coverage Enrollment into Medicaid and CHIP is streamlined The individual mandate The “welcome mat” effect  Publicity and outreach surrounding a new program brings in many who qualified under the old program 6

Potential gain #2: Parents of low- income children gain coverage Percentage of children and parents without coverage, by federal poverty level (FPL): 2009 What happens to children when their parents gain coverage? Children more likely to enroll Children more likely to obtain necessary care If parents are treated for mental health problems, children more likely to thrive Source: Urban Institute tabulations of 2010 CPS-ASEC. 7

Why might low-income parents gain coverage? Eligibility for Medicaid and CHIP in the median state: January 2011 (FPL) Eligibility for subsidies under the ACA (FPL) Source: Heberlein et al

THE URBAN INSTITUTE Potential gain #3: uninsured children who are ineligible for Medicaid and CHIP gain coverage Some uninsured children become newly eligible for subsidies—  Those whose incomes are too high for Medicaid and CHIP but at or below 400 percent FPL  Certain lawfully resident immigrants  Their immigration status makes them ineligible for Medicaid and CHIP because their states have not implemented CHIPRA options for expanded coverage  Includes children who were legalized during the past 5 years Some uninsured children who are ineligible for subsidies gain coverage because of—  The individual mandate  Insurance market reforms, in the case of special needs children 9

OBSTACLES TO ACHIEVING THOSE GAINS II. 10

THE URBAN INSTITUTE Obstacles to increased enrollment and receipt of care Systems for eligibility determination, enrollment, and retention often discourage participation Limited funding for application assistance  Federal exchange grants may not pay for Navigators, so other strategies needed Public climate hostile to health reform Limited provider participation in Medicaid and CHIP reduces access to care  So even if more children and parents enroll, some will have difficulty obtaining essential services 11

THE URBAN INSTITUTE New challenges with subsidized coverage in the exchange Premium charges will likely deter enrollment by some low-income families Out-of-pocket cost-sharing may deter utilization of some essential services The risk of owing money to IRS at the end of the year if income turns out to exceed projected levels could deter enrollment by some low-income families who qualify for tax credits 12

THE URBAN INSTITUTE Premiums and actuarial value of coverage for a family of three, at various income levels qualifying for subsidies under the ACA FPLMonthly pre-tax income Monthly premium Actuarial Value (AV) 150 $2,316$93 94% 175 $2,702$139 87% 200 $3,088$195 87% 225 $3,474$249 73% 250 $3,860$311 73% 13 Note: assumes 2011 FPL levels.

THE URBAN INSTITUTE Examples of health plans at various actuarial value levels IncomeAVPlan example Annual deductible Office visits Inpatient hosp. Prescr. drugs 150% FPL 93%Average HMO plan offered by employers None$20 copays $250 co- pay $10/$25/ $45 copays 175% FPL 87%Federal Blue Cross- Blue Shield $250$15$100 co- payment, then 10% 25% of all costs Source: Congressional Research Service,

THE URBAN INSTITUTE Maximum repayment obligation for tax credit recipients, by income Single filerJoint filer <200 percent FPL$300$ percent FPL $750$1, percent FPL $1,250$2,500 15

THE URBAN INSTITUTE Federal CHIP risks ACA  Requires maintenance of effort (MOE) through 2019  Continues CHIP funding through 2015 If MOE is repealed, or CHIP allotments end, CHIP children will probably be subject to the same exchange subsidy rules that apply to their parents Implications  CHIP children will be ineligible for subsidies if they are offered affordable employer-sponsored insurance (ESI)  ESI is considered affordable based on the cost of worker-only coverage. The cost of dependent coverage is irrelevant!  Children’s costs may rise and benefits fall, since exchange subsidies are less generous than most CHIP programs 16

STATE POLICY STRATEGIES TO OVERCOME THOSE OBSTACLES III. 17

THE URBAN INSTITUTE Streamlining enrollment Take advantage of—  Greatly enhanced federal funding to update eligibility- side information technology (IT) and link it to reliable data about eligibility  90/10 Medicaid match and 100% exchange dollars available through December 31, 2015  Free IT and other exchange products from Early Innovator states and Enrollment UX 2014 Whenever possible—  Permit consumers to begin applications by self- identifying and consenting to disclosure of data  Use data matches rather than applicant documentation to establish eligibility 18

THE URBAN INSTITUTE Streamlining enrollment, continued Simplify the initial application process by saving some questions for later  Ask about non-MAGI eligibility only after MAGI-based eligibility has been determined  Ask about eligibility for other public benefits only after the health application is complete Have one entity determine eligibility for all health programs Do not put questions on the application form to distinguish newly eligible adults from adults who could have qualified in 2009  Use other methods to claim enhanced federal match for new eligibles  Provide the same benefits to newly eligible adults and other adults Expedite enrollment through data matches with SNAP and children’s Medicaid/CHIP records Note: as our understanding of recent regulations increases, more key decision-points will become clear 19

THE URBAN INSTITUTE Application assistance and outreach The importance of application assistance. For example:  In a low-income Latino community in Boston, CBO assistance raised eligible children’s participation from 57% to 96% (Flores et al. 2005) Strategies  Recruit safety net providers to sign up patients  Use exchange call centers to complete applications  Combine Medicaid, CHIP, and exchange dollars into one system of consumer assistance that helps low-income households apply for insurance affordability programs and enroll into coverage  Leverage participation of local businesses and philanthropies  Consider special outreach targeted at Latinos and young adults 20

THE URBAN INSTITUTE Medicaid provider participation: Strategies to consider Selective contracting to remedy targeted access problems Help consumers locate participating providers Tele-medicine Increased use of non-physician and non-dentist providers FQHC contracting with community-based dentists, using cost-based reimbursement Streamlined claims payment Coordinated planning by local providers Ultimately, may need targeted reimbursement rate increases in many states  Federally funded increases for 2013 and 2014, while helpful, are time-limited and exclude many important providers and services 21

THE URBAN INSTITUTE Two ways of using the Basic Health Program (BHP) option to build on current programs and make coverage more affordable for low-income parents 1.Create an integrated, rebranded program to serve all low-income residents of the state  Adults up to 200% FPL and children up to income- eligibility limits for CHIP receive Medicaid/CHIP-level coverage  Sliding-scale cost-sharing possible, as income rises above 133% FPL  In the “back room,” combine federal dollars under BHP, Title XIX, and Title XXI 2.Expand a separate CHIP program to include adults up to 200% FPL, continuing current benefits and cost-sharing levels 22

THE URBAN INSTITUTE Subsidy eligibility under the ACA, without BHP: Using the example of CA, where “Healthy Families” provides CHIP coverage to 250% FPL ChildrenAdults – citizens and qualified immigrants Adults – lawfully present immigrants who are not qualified >400% FPLNo subsidies % FPLExchange % FPL Healthy FamiliesExchange % FPL 0-138% FPLMedi-Cal Exchange 23

Subsidy eligibility under BHP approaches 1 and 2 ChildrenAdults >400% FPLNo subsidies % FPL Exchange % FPL Golden Bear Care Exchange % FPL Golden Bear Care 0-138% FPL ChildrenAdults >400% FPLNo subsidies % FPL Exchange % FPL Healthy Families Exchange % FPL Healthy Families 0-138% FPLMedi-Cal 24 Approach #1Approach #2

THE URBAN INSTITUTE Federal law #1: Who qualifies for BHP? Requirements  MAGI at or below 200 percent FPL  Ineligible for Medicaid that covers essential health benefits, CHIP, Medicare  Citizen or lawfully present immigrant  No access to affordable, comprehensive ESI Major groups in 2014, under current law  Adults percent FPL  Lawfully present immigrants percent FPL, ineligible for Medicaid and CHIP. E.g.:  Green card holders during their first five years  Citizens of the Marshall Islands, other COFA nations 25

THE URBAN INSTITUTE Federal law #2: What happens to consumers in BHP? No subsidized coverage in the exchange State contracts with plans or providers  All essential benefits must be covered  Premiums may not exceed levels that would be charged in the exchange  Actuarial value may not fall below specified levels  MLR may not fall below 85 percent Note: states can provide more generous coverage, such as the coverage furnished by Medicaid and CHIP 26

THE URBAN INSTITUTE Federal law #3: BHP dollars The Federal government pays 95 percent of what it would have spent for tax credits and OOP cost-sharing subsidies if BHP members had enrolled in the exchange  Could be a little higher, depending on HHS interpretation Federal dollars  Go into state trust fund  Must be spent on BHP enrollees 27

THE URBAN INSTITUTE Potential advantages to families of these approaches to BHP Parents get much more affordable coverage, so more likely to enroll and obtain needed care. According to Urban Institute modeling of average costs per adult:  Annual premium payments fall from $1,218 to $100 under this approach to BHP  Annual out-of-pocket spending falls from $434 to $96  Total annual savings: $1,456 No risk of year-end tax debts to IRS, so enrollment more likely Parents and children together in same plan Access to safety-net plans 28

THE URBAN INSTITUTE Other potential advantages State can save money by shifting Medicaid beneficiaries into federally- funded BHP  States could instead shift them to the exchange’s individual market, but that would greatly raise beneficiaries’ costs without saving more money for states  Eligibility groups vary by state. Examples may include:  Adults covered through 1931 and 1115 waivers  Pregnant women  Lawfully resident immigrants now covered with state-only money  Women with breast and cervical cancer  Medically needy : special advantages of BHP, since it can be structured to slow “spend- down” Churning between Medicaid and the exchange, which raises administrative costs and undermines continuity  BHP approach #1 helps, because families up to 200% FPL remain in the unified low-income program  Moving the threshold from 133% FPL to 200% FPL reduces churning, because higher income levels have fewer subsidy-eligible people and less income volatility  BHP approach #2 doesn’t help, because it involves 3 subsidy programs for adults, rather than 2 29

THE URBAN INSTITUTE Potential disadvantages to families of this approach to BHP More limited access to providers, since provider payments may be at or near Medicaid levels  Urban Institute modeling shows, to cover adults with Medicaid-level benefits and typical CHIP cost-sharing, average annual amounts of:  $4,600 in baseline BHP costs  $5,665 in federal BHP payments o Allows provider payments > Medicaid o But this depends on how the exchange is administered  Notwithstanding this increase  BHP adults would have more limited provider networks than in the exchange  BHP implementation could place increased demand on Medicaid networks Limited access to commercial plans 30

THE URBAN INSTITUTE Other potential disadvantages Smaller exchanges  Exchanges still large: cover 8.2 % rather than 9.8% of residents < age 65, in average state  Some potential reduction in leverage and increase in per capita administrative charges Potential for higher average risk in individual market Inherent uncertainty of a new federal program Providers gain less from the ACA, because BHP:  Reduces the expansion in private coverage  Increases the expansion in public coverage 31

THE URBAN INSTITUTE One final BHP comment BHP can keep CHIP-level coverage for many CHIP children if:  Federal lawmakers repeal ACA’s maintenance-of-effort requirements; or  Federal CHIP allotments end after 2015 In either case, BHP could cover non-Medicaid children if they:  Have family incomes at or below 200 percent FPL; and  Are not offered ESI that the ACA considers to be affordable 32

THE URBAN INSTITUTE Conclusion Low-income children and families can experience significant gains under the ACA Important obstacles may limit those gains State policy choices can go a long way towards overcoming those obstacles 33