In this Issue:

1. Many States Looking for Innovative Ways to Expand Coverage to New Populations

2. Federal Fiscal Year 2006 Budget Update

3. New SCI Brief: State and Community Collaboration

4. SCI Announces New Grant Funding for States

5. 2005 AcademyHealth Annual Research Meeting, June 26-28 in Boston

6. Materials Now Available from ERISA Cyber Seminar

7. Cover the Uninsured Week, May 1-8, 2005

8. Coming Soon from SCI

9. Reports of Interest

1. Many States Looking for Innovative Ways to Expand Coverage to New Populations

Currently, 46 state legislatures are in session, three states (Utah, Virginia and Wyoming) have adjourned for the year, and the Louisiana Legislature has yet to convene. Facing increasing numbers of uninsured, many state legislators and governors are looking for innovative ways to expand health insurance coverage. Countering the common myth that the uninsured are primarily unemployed, the data show that the majority of the uninsured (80 percent) are either employed or are dependents of those who are employed. As a result, many states are exploring strategies that will target this population, thereby reducing the rate of uninsurance.

Outside of ways to expand Medicaid and SCHIP, state legislators are looking at a variety of public-private strategies to reduce the number of uninsured. These include creating incentives for small businesses to offer health insurance to their employees as well as changing state tax codes to encourage Health Savings Accounts (HSAs). This article provides an update on some of the legislation being considered by state legislators to address the problem of access to health insurance. Most of the bills discussed below have either already been signed into law or have passed one house or both houses, signaling a strong possibility that the bills will be enacted this year.

A majority of the working uninsured are employed in small businesses. Small businesses are less likely to offer insurance to their employees and employees of small employers are less likely to take-up any insurance that is offered. These low offer and take-up rates occur for a number of reasons including: small employers employ more low-wage, part-time, or high-turnover workers who may not be eligible or cannot afford health insurance premiums; administrative costs per policy are higher for small employers; and many small employers operate with marginal profits and cannot afford to contribute to the premium, thus affecting the take-up rates by their employees. Legislators in a number of states are taking various steps to stem rising health insurance premiums for small businesses.

- North Carolina legislators are considering legislation (H.B. 20) that would give a tax credit to small employers that pay at least half of their employees' health insurance premiums. The bill calls for a $400-per-year credit for each employee insured and would apply to any business with 25 or fewer employees. The bill has garnered significant support in the House and is expected to move forward.

- Indiana S.B. 459 would allow small businesses that make health insurance available to their employees and their employees' dependents through at least one health benefit plan to obtain a credit against the business's state tax liability for the first two taxable years in which the business makes the plan available. The credit is available as long as the employee's participation in the plan is voluntary and the employee's share of the premium is paid on a pre-tax basis. The bill has passed both houses and is waiting for the governor's signature.

- In Illinois , Gov. Rod Blagojevich (D) is proposing an innovative partnership between the state government and local chambers of commerce to help small businesses save money on health insurance. H.B. 905 allows small employers, self-employed individuals, and farmers to form health benefit purchasing cooperatives. The bill calls for the " health benefit purchasing cooperative to be designed so that all of the following are accomplished: (1) the members become better informed about health care trends and cost increases; (2) all members purchase their health care benefits and prescription drug coverage from the same insurer; (3) the members are actively engaged in designing health care benefit options that are offered by the insurer and that meet the needs of their community; (4) the health insurance risk of all of the members is pooled; and (5) the members actively participate in health improvement decisions for their community."

- A New Mexico bill, H.B. 523/S.B. 271, allows for-profit and non-profit small employers who employ an average of 50 or fewer employees over a 12-month period to voluntarily purchase health care coverage through the state employee health insurance plan. To be eligible, the small employer must not have offered health insurance during the previous 12-month period. Additionally, the bill allows the state to enter into agreements with an association, cooperative, or mutual alliance representing small employers to provide outreach and assistance to small employers to voluntarily purchase such health care coverage. This bill has been signed by the governor.

Health Savings Accounts

Building on the wave of interest in consumer-driven health care, many states are also looking to Health Savings Accounts (HSAs) to decrease rising health insurance premiums, which proponents hope will allow more people to buy health insurance. Because this issue has the backing of federal law and the encouragement of the Bush administration, it is expected to be a priority in many statehouses this session. At this point in the legislative season, 34 states have introduced measures related to HSAs and Medical Saving Accounts (MSAs). These measures range from states adjusting their state tax regulations to include HSAs for purposes of state income tax deductions to making minor technical changes to allowable deductible amounts. So far, six states have enacted HSA legislation.

- In Arkansas , H.B. 1064 adopts federal tax code to exempt HSAs from taxes under state law. It also establishes that contributions made by an employer to an employee's HSA will not be included in the employee's gross income.

- South Dakota S.B. 29 allows for the incorporation of HSA-compatible high-deductible health plans into the South Dakota high-risk pool. The hope is that HSA plans will be a less expensive coverage alternative for pool participants.

- Wyoming H.B. 111, which is very similar to the South Dakota legislation, amends the Wyoming Health Insurance Pool Act to allow the Commissioner of Insurance to offer at least two plans that include a higher deductible option or an HSA option in order to provide less expensive coverage alternatives for high-risk pool participants.

- Mississippi Governor Haley Barbour (R) recently signed a bill that will amend the state code to define the term Health Savings Account and to provide that the term Medical Savings Account be expanded to include HSAs for purposes of state income tax deductions.

- Similarly, Virginia H.B. 1492 creates the Health Savings Account Plan, which requires the Department of Taxation and the State Corporation Commission to propose amendments to the Medical Savings Account Plan to allow eligible individuals to establish HSAs. Recommendations are to be presented to the legislature by January 1, 2006. The bill also allows existing MSAs to be converted to HSAs and authorizes heath carriers to offer high-deductible health plans that can be offered in conjunction with HSAs. House Bill 1492 further requires the state employee health insurance plan to include a coverage option that could be offered with an HSA no later than July 1, 2006.

- N orth Dakota H.B. 1208 amends existing coverage requirements for mental health and substance abuse treatment to designate that deductible limitations for such treatments may not be applied to high-deductible health plans used to establish HSAs as specified by federal tax code.

Limited Benefit Plans

Another tactic states have explored to address the issue of rising health insurance premiums is allowing health insurance carriers to offer plans that do not include all state mandated health benefits. Typically, these types of plans have somewhat lower premiums because they do not provide coverage for many costly treatments. Traditionally take-up of these "bare-bones" or "mandate-light" policies has been low, however, states are still exploring this option. Below are a few examples of states that are currently considering legislation that would allow carriers to offer these limited benefit packages.

- Existing Montana law allows the Commissioner of Insurance to approve a 12-month demonstration project that allows a health insurance carrier to offer a limited coverage individual health benefit plan or managed care plan. A bill currently being considered (H.B. 318) extends eligibility criteria for the demonstration project to include those residents who either lost eligibility for a health plan because of age or lost coverage under a federally funded health insurance program because of age or failure to meet financial guidelines. The bill also adds coverage for diabetic education, treatment, services, and supplies and coverage for treatment of congenital metabolic disorders to the list of health services that the demonstration project may exclude from its health benefits plan or managed care plan.

- Illinois H.B. 500 creates the Illinois Consumer Choice of Benefits Health Insurance Plan Act, which allows health insurers to offer coverage options that do not include state-mandated health benefits to those in the individual market. The bill does require applications and policies to provide notice that the policy may not include some or all state-mandated benefits. The bill also stipulates that an insurer that offers one or more Consumer Choice of Benefits Health Insurance Plans must also offer at least one plan that includes coverage for all state-mandated health benefits.

- Indiana S.B. 269 allows health insurance carriers to offer a limited mandate policy to individuals and businesses with fewer than 50 employees who had not offered insurance during the previous calendar year. The insurer must provide a list of the benefits that the policy does not include. Policies for individuals must provide coverage for newborn testing, diabetes treatment, adopted children, and minimum maternity related benefits. Policies for small businesses must include screening for breast, prostate and colorectal cancer as well. There are differing House (H.B. 1487) and Senate versions, but they are similar. In his 2005 Agenda for an Indiana Comeback , Gov. Mitch Daniels (R) proposed a similar plan for those below 200 percent of the federal poverty level and for businesses with fewer than 75 employees.

- The legislation in Kentucky, H.B. 278, applies to even smaller businesses -- those with between two and 10 employees. Insurance companies still would be required to cover federally mandated benefits, as well as costs for diabetes treatments, hospice services, and chiropractic care. The bill also creates a high-risk insurance pool to help cover costs for the employees with the most expensive medical conditions. The high-risk pool would be funded by an assessment on premiums among participating businesses.

- Two bills on the table in Georgia have recently been reconciled into one bill, S.B. 174, called the "Small Business Employee Choice of Benefits Health Insurance Plan Act." Specifically, the bill allows insurers in the individual and small group markets to offer an alternative health benefit plan to both individuals and businesses with 15 or fewer employees that provides coverage for some, but not all, state-mandated benefits. Individuals purchasing such a limited benefit plan must acknowledge in writing that they understand that many services are not covered in the policy. The bill recently passed both the House and the Senate.

Further information on limited benefits can be found in the SCI brief, "Limited-Benefit Policies: Public and Private-Sector Experiences."

2. Federal Fiscal Year 2006 Budget Update

In March, the House of Representatives and Senate each passed their version of a Budget Resolution. The Budget Resolution establishes spending levels for discretionary programs and determines if changes are needed in tax levels or in entitlement programs. A conference committee, consisting of members of the House and Senate Budget Committees, is currently working to resolve the differences between two versions of the bill. The conferees are charged with creating a single budget resolution. If they cannot agree on a joint resolution, both chambers will set their fiscal year 2006 spending levels under different spending instructions, making it more difficult to reach an agreement at the end of the budget process.

Medicaid: The President's budget proposed cuts of $60 billion over 10 years to the Medicaid program. The House Budget Resolution instructs the committee with jurisdiction over Medicaid, the Energy and Commerce Committee, to reduce the program by $20 billion over five years. The initial Senate Resolution would have instructed its Finance Committee to cut $15 billion over five years. However, senators rejected the cuts by supporting an amendment calling for full funding for Medicaid. This represents the highest hurdle for the budget conferees to resolve.

Rather than supporting blanket cuts to the Medicaid program, Sen. Gordon Smith (R-Ore.) introduced S. 338, a bill to create a bi-partisan commission charged with studying current Medicaid services and delivery. If enacted, the commission would examine Medicaid's program components and recommend reforms to the President, the Congress, and the public. The bill was referred to the Finance Committee.

State Children's Health Insurance Program (SCHIP): As part of the Budget Resolution process, Sen. Orrin Hatch (R-Utah) introduced a SCHIP reserve fund amendment. The amendment requires that unspent SCHIP funds, which reverted back to the Treasury, be earmarked and spent only for the SCHIP program. The Senate passed the Hatch amendment by unanimous consent. This, too, needs to be resolved by the conference committee as the House made no explicit reference to unspent SCHIP funds.

Grant programs to support state coverage activities: As proposed, the President's budget eliminates all funding ($11 million in 2005) for the HRSA State Planning Grant program. Many states have used HRSA SPG funding to support their efforts to develop policy solutions on the uninsured. The President's budget eliminated other grant programs to support state and local coverage efforts such as the Healthy Communities Access Program (CAP) ($82 million in 2005) and supporting states in operating high-risk pools ($40 million in 2005). The President's budget does request $400 million in 2006 for grants to states to develop purchasing pools. Whether Congress will restore funding for the current grant programs or fund the new proposals that support states will become clear as House and Senate appropriators make progress on finalizing appropriations bills. However, given the pressure to reduce federal spending, restoring funding this fiscal year is even more challenging than prior years.

3. New SCI Brief: State and Community Collaboration

With little comprehensive action at the federal level in the past few years, the problem of the uninsured has been pushed to the front line, compelling states and local communities to work together to find and implement solutions. The Communities in Charge (CIC) program, a grant program funded by The Robert Wood Johnson Foundation, was created in 2000 to assist broad-based, community coalitions in designing and implementing sustainable, health care delivery systems to improve access for low-income, uninsured individuals. In 2004, the 12 participating communities "graduated" from the program with valuable experience and new knowledge of critical concepts that are fundamental to state-local collaboration. With a predominant focus on the recent experiences of communities in the CIC program and other local initiatives, this brief highlights the value of coalescing local and state resources. To read this  brief and other SCI written products, please visit the SCI Web site.

4. SCI Announces New Grant Funding for States

The State Coverage Initiatives (SCI) program has announced the availability of $300,000 in policy planning grants for states to support targeted activities that contribute to the planning process for expanding or maintaining coverage. These funds will support projects including: studies (e.g., modeling, actuarial, market analyses, etc.), funding state staff or consultants to work on specific coverage strategies, and other relevant projects. Projects will be funded up to $150,000.

We are particularly interested in providing grant funding for states to:

• identify, plan, and implement innovative approaches to extend coverage to families through public programs such as Medicaid and the State Children's Health Insurance Program, as well as other state-designed coverage programs;
• implement strategies to build upon and extend employer-based coverage;
• expand the availability and affordability of health insurance for individuals; and
• explore new coverage models and partnerships such as reinsurance or using the state public insurance pooling mechanism for small firms and individuals.

For more information on these new grants please visit http://statecoverage.net/grantfunding.htm. Specific questions about the application instructions should be directed to Isabel Friedenzohn at 202.292.6726 or isabel.friedenzohn@academyhealth.org.

5. 2005 AcademyHealth Annual Research Meeting, June 26-28 in Boston

It's not too early to make your plans to attend the 2005 Annual Research Meeting in Boston. Register by Monday, May 2, for the early registration discount. Friday, May 27 is the cut-off date for discounted hotel reservations in the AcademyHealth block. View the full conference agenda to see the many new sessions that have been added.

In conjunction with the Annual Meeting, the State Health Research and Policy Interest Group will meet on Saturday, June 25, from 10:00 a.m. to 4:00 p.m. This Interest Group provides a forum for health policy analysts, researchers, and policymakers to interact and discuss state-level research, research related to state health policy, and health services research from a state health policy perspective.

In addition, AcademyHealth is pleased to host a post-conference meeting of Health Services Research and Health Policy Center Directors on Tuesday, June 28, from 2:00 p.m. to 5:00 p.m. This session will focus on the shared concerns and interests of all centers.

6. Materials Now Available from ERISA Cyber Seminar

In March, The Robert Wood Johnson Foundation's State Coverage Initiatives (SCI) program and the National Academy for State Health Policy (NASHP) co-hosted an inter-active cyber seminar on ERISA and its implications for state health care access initiatives. The program featured noted national ERISA expert Patricia Butler, J.D., Dr.P.H., who covered a diverse range of issues including ERISA pre-emption, pay or play models and insurance regulation. She ended the seminar by making the point that, while ERISA clearly prohibits certain activities and clearly allows others, there are many grey areas within which states can maneuver. She encouraged states not to let the perceived threat of ERISA preemption block innovative ideas to expand health care access.

The complete archived seminar is available online.

7. Cover the Uninsured Week, May 1-8, 2005

The Robert Wood Johnson Foundation and its partners will hold the third Cover the Uninsured Week May 1 - 8. Although the Week 's official kickoff event takes place in Washington, D.C., on Wednesday, April 27, more than 1,000 events will take place throughout April and May, held by community groups from coast to coast.

Like last year's initiative, the 2005 campaign will promote awareness of the uninsured and enroll individuals in coverage programs. Cover the Uninsured Week 2005 will mobilize thousands of business leaders, union members, patients, hospital staff, physicians, nurses, and many others. Noah Wyle, star of NBC's "ER," will again serve as the national spokesperson for the 2005 campaign.

8.

Coming Soon from SCI

Check for updates on SCI's latest publications and meetings, including:

• A Profile in Coverage on the Maine Dirigo Program
• SCI's Summer Workshop for State Officials to be held in Chicago , July 28 - 29, 2005.

9. Reports of Interest

The following are the most recently released reports on coverage. State specific reports can be found in SCI's database of state reports.

Early Implementation of the Health Coverage Tax Credit in Maryland , Michigan , and North Carolina : A Case Study Summary
The Commonwealth Fund
April 2005

New Directions for Medicaid Section 1115 Waivers:Policy Implications of Recent Waiver Activity
The Henry J. Kaiser Family Foundation
March 2005

The Impact of the Erosion of Retiree Health Benefits on Workers and Retirees
Employee Benefit Research Institute
March 2005

2005 Hot Health Policy Issues for State Policymakers
The New Jersey Health Policy Forum
February 2005