Sponsored by The Robert Wood Johnson Foundation's State Coverage Initiatives Program
Conducted by AcademyHealth

Q: Please clarify the trend that Mr. Gabel mentioned that more employers are offering health insurance for the first time.

A: [Gabel] Compared to 1989, among small firms, there are more small firms percentage-wise offering health insurance. Small employers, however, are very difficult to survey and have a particularly low response rate. This is especially true for the very small firms (<25 employees).

[Nichols] This trend also matches the point that I made in my presentation that the main reason for offering insurance is to attract workers. The job market has grown tighter and tighter and employers have needed to offer coverage in order to attract much needed labor.

Q: Is there any correlation between offer rates and number of mandates? What is the prevalence of employers who ask to see proof of insurance in order for an employee to turn down insurance? What is the prevalence of employers subsidizing low-income workers at a higher level than higher income workers?

A: [Nichols] There is little correlation of offer rates to mandates. Since most employers already offer those mandated benefits, they merely anger some people but do not raise premium rates. In regards to your first question, we have not done much research on that, but I can tell you that insurers for small firms often require a 75 percent take-up rate.

[Gabel] On the third question, our survey shows that less than one percent of workers had income-related deductibles or income-related premiums. On the second question, I believe the rhetoric on benefits mandates is greatly over-stated.

Q: State policymakers are nervous about increased cost and cost-shifting to employees and the effect on take-up. How many years of double-digit premium increases can employees bear before such a shift occurs?

A: [Gabel] I believe that it is only a matter of time when unemployment rates rise and health insurance will no longer be necessary to attract employees.

[Nichols] Firms offer insurance to compete for workers by reducing employees' wages. Therefore, when workers get frustrated that they are no longer getting the pay raises to cover the cost-shifting, take-up rates may decrease.

Q: Why is the elasticity of demand for health insurance for the self-employed higher?

A: [Nichols] There appears to be something special about the human nature of a self-employed individual. They seem to be risk-takers as indicated in their decision to self-employ. In this way, they are more likely to alter their coverage status in response to price changes.

Q: How has cost-sharing changed over time?

A: [Gabel] I am convinced that Americans are paying a smaller share of their health care bill than ever before. I did a study comparing 1991 and 1997 consumer expenditures and it showed a decline in what Americans paid out-of-pocket. I feel the major reason for this is the switch from indemnity to HMO coverage. This is particularly true not for premiums but for co-insurance, deductibles, and uncovered expenses. Coverage is better in most areas except for mental health and substance abuse coverage.

Q: In your research on copays, has the trend for pharmaceutical copays been equally as flat as other services?

A: [Gabel] Our data from 2001 will show a dramatic increase in pharmaceutical copays.
Note: The data will be published in a forthcoming Health Affairs article.

Q: Even though prescription drug costs appear to have increased the cost of claims, might the prescription drug companies say that these same prescriptions have caused hospital stays to decrease?

A: [Gabel] No published study that I know of shows this connection.

Q: I am from Georgia where some legislators want a small-employer buy-in to the state employees' plan. Should we be worried about crowd-out if this occurs?

A: [Nichols] Workers tend to be healthy. Small firm employees tend to be very healthy. Therefore, they may not affect the risk pool as much as one may think. A positive result may be that these small employers can take advantage of the state's economies of scale.

Q: Jon Gabel, please clarify what is meant by the term "defined contribution?"

A: [Gabel] There is no single definition. Instead, it is a continuum of philosophies between two extremes. On one extreme, give employees money and allow them to buy health insurance. On the other end is a plan that gives a fixed absolute contribution and the employee bears the financial risk if he/she chooses a more expensive plan. The bottom line is that it involves transferring more financial risk to the employee.

Q: With regard to Len Nichols' state variation figures, what database did they come from?

A: Much of the information came from the Agency for Healthcare Research and Quality Web site at www.ahrq.gov under "MEPS," "Survey Instruments," and then "IC" for Insurance Component.

Q: Since the Family Health Insurance Assistance Program (FHIAP) eligibility is 100 to 170 percent FPL, what about families at 99 percent FPL?

A: [Santa] The program was designed to be for the 100 to170 percent FPL bracket, but there is no floor on the program. The family at 99 percent FPL, therefore, could either be eligible for Medicaid, but also allowed to be in FHIIAP. We do not force Medicaid eligibles into Medicaid. The reason for the absence of a floor is the large churning of people within the 90 to125 percent FPL bracket. FHIAP was designed to catch people who fall off the Medicaid cliff.

Q: Will FHIAP subsidize any employer plan?

A: [King] Yes. We decided that if state regulators approve the plan, it is good enough for FHIAP to subsidize eligible employees.

Q: Is the Oregon plan administratively expensive and cumbersome?

A: [King] Yes. Since the state acts as the biller and payer for about 5,000 people, there is 12 to 13 percent administrative cost. More members, therefore, would decrease this percentage.

Q: When you add dental to the Colorado CHP+, how will the per member per month (pmpm) cost change?

A: [Ladon] Dental will add about $10 pmpm, but we did not want to include it in the study because most employers do not offer dependent dental coverage.

Q: Looking at the overall approach of subsidizing employees, how are these budget-limited approaches much different than a tax credit? Aren't we just setting ourselves up for a situation like that in Oregon, running into problems such as long waiting lists? How far does this approach really get us?

A: [Ladon] Colorado recognizes this problem. Currently the state is studying the potential problems and trying to find strategies for multiple funding sources. This model will address the important issue of the transient nature of workers and portability of insurance.
Note: This model, when complete, will be available at the Colorado Coalition for the Medically Underserved Web site (www.ccmu.org), as well as under the "State Reports" section of the SCI Web site.

[Santa] Last year at this time, Oregon was looking at an individual mandate with a tax credit and realized that it was way too expensive.

Q: If a state offers employer buy-in using SCHIP and the family does not meet various standards, the benefit standard, or the five percent limit on out-of-pocket expenditures, is the new rule that the state can give the family the choice between employer-based coverage or public coverage?

A: [Austein Casnoff] My understanding is that without an 1115 Waiver, this is not the case.

Q: It seems that if that choice was allowed that it would be a way to help states cut administrative expenses and allow states to expand these programs.

A: [Austein Casnoff] I will raise these issues with my colleagues at CMS. I would also like to stress the importance of getting in touch with CMS before developing coverage expansion proposals. There are many specialists that can be contacted at CMS, and I recommend directing inquiries in regards to Premium Assistance to Terese Klitenic at (410) 786-5942 or Tklitenic@cms.hhs.gov

Q: In the BadgerCare HIPP program, will the state buy in to self-insured plans? How do you look at that benefit structure?

A: [Schneider] Actually, we did not include self-funded plans, but we did gather information about them. About 20 percent of employers in Wisconsin have self-funded plans so we are looking into that right now. Our hope is to start buying into them. My understanding is that it is feasible, but there may be resistance because some view this population group as an expensive one.

Q: In your presentation on BadgerCare, you said that you give enrollees the option about whether to reimburse the employee, the employer, or the plan directly. Which approach is most commonly taken?

A: [Schneider] We have had a pretty even split between reimbursing employees directly and having payments go to the employer. Some enrollees had concerns that they would not be able to come up with the money to pay the premiums (even though they would eventually be reimbursed). Those employees have preferred that their employer be reimbursed directly.

Q: How many people are currently enrolled in the Rhode Island RIte Share program?

A: [Brewster] We have 49 people enrolled and 33 employers participating thus far. We have marketed to about 200 to 250 employers since February/March but we have not done extensive marketing yet. Only a handful of the employers we have talked to have said "no way." Most employers are still considering joining.

Facilitator: Rhode Island is taking a different approach by doing the cost-effectiveness determinations on a program level rather than on a case-by-case basis. It is a very interesting approach and, as far as I know, unique among employer buy-in programs. But there are some adverse selection issues there in terms of the average family size that you will enroll in the buy-in program versus direct public program enrollment.

Q: In Rhode Island, have you run into privacy concerns with employees not wanting their family income to be disclosed and not wanting their employers to know that they are in a public program?

A: [Brewster] This has only been a problem, thus far, with undocumented parents. The concern from the advocacy community was that we would be communicating with employers who were employing undocumented residents and that the social security numbers would not match. There is a place on the application allowing the employee to approve that the state may contact his or her employer. There is another statement indicating that family income will not be disclosed, though the employer will have a general sense as a result of the relationship between the employer and the employee.

Q: How do you deal with open enrollment in Rhode Island?

A: [Brewster] Health Reform Rhode Island put into law that RIte Share eligibility approval would be a qualifying event. So, once someone is eligible, employers know that their employees can sign up immediately. If the employer has a waiting period, these employees either stay in the RIte Care program (if they are already in it) or are covered under fee-for-service for a few weeks.

Q: Have you been in operation long enough to encounter the problems that arise when an employee on RIte Share changes jobs? What systems do you have in place that take care of that?

A: [Brewster] This has not been a problem yet. RIte Care is always the safety net, so if they lose RIte Share eligibility, they are in RIte Care effective immediately. All of the enrollment facilitators know that if someone drops out of RIte Share, they are put into RiteCare immediately.

Q: When someone leaves group coverage and becomes eligible for COBRA or portability, does Rhode Island pay for that?

A: [Brewster] We have not encountered that situation so it has not been discussed yet. My guess is that if it is under $450/month that we would pay COBRA, but this issue is on our to-do list.

Q: Can you elaborate on what you said in your presentation about how more employers are starting to use cafeteria plans and how that affects RIte Share?

A: [Brewster] Sometimes employers that offer cafeteria plans will offer to pay their low-income employees $1,000/year (for example) that they can put toward other benefits if they do not take up the employer coverage that is offered. In this case, they might get covered through RIte Care. So, we are trying to pull people over and get them in the best situation and we are pushing against that effort of the employer. It is just not what we want to hear from an employer.

Q: Have you anticipated what would happen if you had a very sick child who was previously covered under RIte Care, who then moves into a small employer plan under RIte Share, and subsequently the premiums for that group goes up astronomically? Do you have back-up plans to deal with this issue?

A: [Brewster] This is certainly not my expertise, but market reforms did implement some rate bands that I think will control for some of what you are referring to. That is certainly a concern for employers, along with the general misconception that all Medicaid eligibles are sick. Education is also needed around that issue.

Q: I am very interested in New Jersey's experience with their 1115 waiver to add parents using SCHIP funds. You mentioned that you had 117,000 adults. I know that in addition to adding parents of SCHIP children that you are also covering childless adults. Of this 117,000, how many are childless adults?

A: [Doderer] Of the 117,000, the single adults and childless couples make up 23,000 to 25,000 of this total. We basically took what we had with the General Assistance program in New Jersey and incorporated them under our waiver.

Q: Now that you have parents in your SCHIP program, when you look at the cost-effectiveness of buying into an employer plan, will you be able to look at the cost of the parents and the children or can you only take into account the children's costs since Title XXI is a children's funding stream?

A: [Doderer] We do look at both the adults and children up to 200 percent FPL. For 200 percent to 350 percent, we only look at children, because adults are not eligible above 200 percent FPL.

Q: So you are using federal funds to subsidize parents as part of the base?

A: [Doderer] Yes, we are allowed to use SCHIP funds up to the limit of our allotment; over that, we have to use other funds, such as tobacco settlement money.

Comment from Questioner: I think this is an important point, because it may make employer buy-in programs more feasible. Understanding that that is permitted is really good news.

Q: Once someone goes into the Premium Assistance program and they become ineligible for group coverage, will they stay in private sector through COBRA or portability or will you bring them over to the public program?

A: [Doderer] We consciously decided not to keep anyone in premium support if they lost their coverage. Instead, they will revert to our NJ Family Care program. One problem that we ran into in the federal regulation of Medicaid was that if a person has been out of their managed care program for more than three consecutive months, you cannot automatically put them back in the same managed care plan. Instead, you have to offer them the choice of what plan they want. We had to create, in our system, a mechanism to carry these people temporarily. They stay in a fee-for-service status until they can re-enroll and choose a managed care company. That is part of our waiver and we are getting federal match on that. It can take anywhere from a few days to a month to re-enroll back into managed care.

Q: What is the enrollment thus far in the New Jersey Premium Assistance plan?

A: [Doderer] Our outreach just began in May. One family of three was enrolled on 7/1/01, the start of the program. There will be 12 enrolled as of 8/1/01. We have about 20 people enrolling in the next six months who are in large employers and we have to wait for their open enrollment. Our target is for 5,000 to 7,000 individuals by 6/30/02.

Q: If the goal is to dramatically reduce the number of uninsured in New Jersey and the premium support is the only option, what single obstacle would you most like to remove, regardless of the practicality of eliminating that obstacle?

A: [Doderer] We have found this to be a very labor-intensive process. We spoke with Massachusetts while developing our plan and they told us that it can take on average 60 to 120 days to process an application for these programs. You have to look at the employer, you have to seek out a lot of information from them, you have to look at one or more plans that the employer might offer, and you have to do cost-effectiveness tests. I would like to decrease the work involved and cut this window to 30 days.

Q: So is reducing federal regulations the answer?

A: [Doderer] Eliminating some federal regulations could help do this, but I do not live in a dream world.

Q: Do employer subsidies for the Kansas tax credit come from state-only funds? Can any federally qualified insurance plan use the tax credit?

A: [Schwartz] It is federally funded through an 1115 waiver if insurance is offered for the first time. Otherwise, the subsidy comes from state-only funds. Yes, any federally qualified insurance plan can use the tax credit.

Q: Mr. Schwartz said that part of the struggle with the credit is that brokers do not promote the tax credit. Why is this so?

A: [Schwartz] I would imagine that is because the agents do not get anything extra if their client enrolls in this plan. They may feel it is only extra time for them to go through that option with the client, as well as learn about the option itself.

Q: What is Massachusetts' participation rate?

A: [Cook] In the small group market (less than 10 workers), it is 100 percent.

Comment by Schwartz: A recent survey asked employers who knew about the plan, why they had not taken advantage of the option. They answered that five years was not long enough. They did not want to get embroiled in the plan, get their employees used to the plan and then after five years have to fund it themselves. Also, tax credits are simple and politically palatable: conservatives feel that anything that gets rid of taxes is desirable and liberals feel that it is still a subsidy "no matter how you dress it up." Therefore, use "tax credits" instead of "appropriation."

Q: Why is Blue Cross/Blue Shield against the tax credit? This is new business that they have not had in the past.

A: [Schwartz] I am not quite sure, but it is possibly because the credit is not in line with what they have done before; it is a wrinkle, an extra complication for the insurer.

Comment from Audience: Do not let the response of the Blues in Kansas discourage you, however. The Blues are helping us put our tax credit together in Idaho.

Q: Do your programs result in better selection for insurers or worse selection, because this may be the reason that the Blues are not getting excited about these plans?

A: [Cook] I think that there is a myth - we encountered it when we were first developing our plan - that what we were working on would bring an uninsured population into the insurance marketplace, resulting in a negative impact on the rest of the population. Our experience with direct coverage programs and premium assistance is that the pmpm costs compare quite favorably with that of the Medicaid population, which is a more or less high utilizing population.

Q: What about the equity concerns of plans that help all employers regardless of whether they offer health insurance already (Massachusetts) and those that help only those that are offering for the first time (Kansas)?

A: [Cook] There are two equity issues to consider. First, and somewhat tied into the crowd-out argument, is that someone should not be penalized for having done the right thing. Second, subsidies often go to the very wealthy. We rationalize it by asking the employer to adjust the withhold relative to a benchmark. We also rationalize it because we help to compensate those who take on extra administrative burden. In Kansas, the two-year look-back was pretty much an arbitrary decision.

Q: Does the employer have to offer dependent coverage to be eligible for Healthy NY? When you say there is a 50 percent minimum contribution by the employer, does that refer to the individual or family coverage?

A: [Cresho] The 50 percent refers to the contribution to employee coverage. The employer does not have to provide dependent coverage to be eligible for Healthy NY. If they do offer dependent coverage, they are still only responsible for contributing 50 percent of the employee premium.

Q: You said that in New York many employers were under the impression that they could only offer this program to low-income employees. What created this misperception?

A: [Cresho] Even after a year of educating people about this program, most of the information did not trickle down to our customer service representatives. As a result, many employers received incorrect information about the program.

Q: Can you tell me why New York decided to provide stop-loss coverage to all individual high-cost cases instead of looking at the profitability of the plan's whole line of business and then seeding losses only if they lost money on average?

A: [Cresho] Stop-loss is not my area, but my understanding is that it was seen as a way to take some of the risk out of the market. There was an issue about unpredictability for some of these groups.

Q: What impact on premiums does the Healthy NY stop-loss feature have? Can you translate it into a percentage of premiums?

A: [Cresho] We estimate that on average it will save small employers 10 percent to 15 percent.

[Chollet] Remember that New York is one state that put guaranteed issue and full community rating into effect early on. In that particular market, therefore, a high-risk pool made no sense. Since Healthy NY is, in effect, cost-triggered and not diagnosis-triggered, it is a very reasonable and inventive alternative to a high-risk pool in a state that has a regulatory base that would make a high-risk pool unnecessary.

Q: What is the impetus in Arizona for restructuring the risk or being concerned about restructuring the risk if you have a comfortable margin on indemnification of losses?

A: [Cheatham] I would not say that it is a comfortable margin since the legislature has to fund it, and it comes to about $500 per member per year. I do think that that's cheap in the larger scheme of things though. We believe that Healthcare Group was originally structured at a time when there was no other help in he marketplace. We now need to be self-supporting again and we need to market, restructure, and reach out to the small businesses that need us. Ideally, we would be self-supporting and be able to help this portion of the population that has some risk. But we don't think we should be pulling against the state except for catastrophic reserves. We also do not want to be a risk pool; even though we have become one, that was not the original intent of the program.

Q: Deborah Chollet, you mentioned that community rating decreases coverage and Tony Cresho mentioned that in his state where there is community rating that they have had to develop a state-sponsored subsidy program to get more people into the market. Leigh mentioned that her program in Arizona is community rated whereas the rest of the market is not, so subsidies are needed. The insurance market would argue, based on this information, that community rating does decrease coverage and that having risk rating is a better way to get the healthy people into the pool. I am interested what your research indicates. Are there states that have risk rating that can demonstrate that they have had a major impact on the number of uninsured?

A: [Chollet] In my research to date, I have not seen it. In addition, I have not seen that if you go back to no community rating that you will have the symmetric effect and the market grow larger. To restrict the ability of insurers to rate health is a conscious decision about equity/fairness in the market. I once questioned a state's insurance department about what happened in their market when they went to pure community rating. The insurers claimed that their population became older, not necessarily sicker, but older. The insurance department was not able to say from what they had observed that there was a drop in coverage. The statistical results of how coverage levels change in response to community rating are not robust, so you need to take them with a grain of salt. There are conclusions in that information, but they are not dramatic. In states that have community rating laws in place, I personally do not believe that they can boost coverage by allowing insurers to tailor rates to very healthy people.

Q: Deborah, you mentioned age briefly when you spoke of the insurers' observations about what happened when they went to community rating. As we know, age correlates with wage and income but not nearly as much with health status, and since risk aversion varies considerably with age, particularly among males, a bigger impact on coverage may come from a situation in which age rating is not allowed. I think it is true that New York is the only state to prohibit age rating entirely. The data that I see does show a lot fewer young workers working for small firms. So, it seems to me that there probably is an effect there.

A: [Chollet] I actually have been able to peel away this effect in some statistical work that I did and I found no significant impact of age rating. I was surprised that I did not find any impact. I did find an impact with health rating, but not age rating. I also found that there is some impact on insurers' loss ratios, which seem to rise when there is a composite rate band, but nothing on the individual age or health rating. I would have thought the same thing as you are suggesting, but I have not been able to produce that result.

Q: In Oregon, we have been debating the pros and cons of a high-risk pool in the small group market (less than five workers). If you had a high-risk pool for a small group, would it relieve the state of the guaranteed issue requirement? If the state could argue that everyone has coverage using our high-risk pool, could the insurers then go back to underwriting?

A: [Chollet] I am not sure, but my reading of HIPAA is that it would prohibit that. Furthermore, there is no provision in HIPAA for waivers of any kind, so I do not think you can do it in a small group market. Basically, that leaves you with indemnification of losses strategies in this market.