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Connecticut Health Policy Project
  Improving Connecticut's Health Through Information

Premium Assistance Programs: What are they and could they help Connecticut Families without Health Insurance?

Revised: January 2002

Last year Connecticut passed legislation directing the Department of Social Services, the Office of Health Care Access and the Office of Policy and Management to prepare a plan "for the purchase of employer-sponsored health insurance for adults and children." The plan is to include analyses of sliding scale fee schedules for coverage, minimum benefit standards, the fiscal impact on the state, maximization of federal funds, unemployment subsidies, assessment of impact on the current HUSKY program, a timeline, infrastructure and resource requirements to implement on January 1, 2003. The report is due no later than March 1, 2002.

What are premium assistance programs and how do they work?

Premium Assistance (PA) programs allow the state to subsidize health coverage for low-income residents whose employers offer health insurance. In other states with PA programs, applicants and enrollees are screened for access to employer-sponsored health coverage. The state requests detailed information from potentially participating employers regarding costs, benefit package, employer share of costs and employee eligibility. If the employer responds and the coverage meets state and federal standards for both benefits and costs, consumers are enrolled in their employer's plan. The state pays the consumer, insurer, and/or employer a subsidy. Services missing from the employer package would be covered through a state-sponsored "wrap around" program; consumer costs above HUSKY levels are reimbursed by the state.

The goals of PA programs are

  1. to reduce the number of uninsured state residents,
  2. support existing employer coverage,
  3. leverage private health care spending to maximize the effectiveness of public funds,
  4. keep families together in the same plan, and
  5. provide consumers the dignity of participating in the plan their coworkers enjoy, while keeping costs reasonable.

Do any other states have premium assistance programs, how do they pay for it and how do they work?

Premium assistance programs are very new. Only a handful of states have implemented programs; all are very small and early results have not been encouraging. Many more states are exploring the idea of premium subsidies; several have approved federal waivers for PA programs. Unlike Connecticut, states considering PA programs have a record of success in reaching residents eligible for their traditional public programs. These states are trying to further improve their enrollment numbers after successfully exhausting more traditional, proven options. Colorado conducted an extensive analysis of potential costs and risks vs. potential benefits, and decided not to implement a PA program now, pursuing instead other options to address the uninsured. PA programs are funded with Medicaid and SCHIP funding in all states; Massachusetts also uses additional state dollars for their program.

Massachusetts' PA program is the oldest, implemented in 1998. Massachusetts includes both a subsidy of premiums for consumers and a direct subsidy to employers in their program. Enrollment has been disappointing, far below initial projections. What's more, over one third of enrollees already had insurance. Administrative costs have been extremely high.

Wisconsin's BadgerCare includes both the traditional Medicaid/SCHIP program (similar to Connecticut's HUSKY) as well as a PA program. In contrast to HUSKY, BadgerCare's traditional program has been extremely successful, having reached 70% of Wisconsin's eligible uninsured children as of June 2001. One year after implementation, however, the PA program had enrolled only 5 families for a total of 20 people. Reasons given for poor enrollment include low employer response rate to the questionnaire, frequent job transitions common for low-wage workers, employer contributions are too low (under 60%), employer packages that do not meet minimal standards, and subsidies were not cost-effective to the state, meaning that the state could purchase traditional BadgerCare for a family for less.

What federal rules apply, if Connecticut wants to apply for a premium subsidy waiver?

In early August, the rules changed dramatically. CMS, formerly HCFA, issued new guidance that "strongly encourages" states to integrate or coordinate public programs with private health insurance. States are given license under PA to reduce benefit packages below HUSKY Part A or even Part B levels. Limits on costs for families were eliminated - premiums and copayments are a significant barrier to accessing care for even moderate income families in Connecticut. Minimal standards on the share of costs that must be borne by employers were eliminated. Under the new system, employers who pay a better share of costs would have an incentive to reduce their contribution, secure in the knowledge that the state will pick up the difference.

Most surprisingly, the new guidance significantly loosens the cost effectiveness requirement. PA programs can operate as long as costs are not "significantly higher." Connecticut could end up spending more under a PA program than traditional HUSKY is already the most expensive Medicaid managed care coverage in the US. Potentially, families could find themselves enrolled in plans with fewer benefits and higher costs than HUSKY, and the state could be spending more for this weaker program.

What barriers to implementation might a Connecticut premium assistance program encounter?

What should Connecticut consider if we decide to build a premium assistance program?

What else can Connecticut do that would be likely to reduce the number of uninsured?

The problem of the uninsured is complex with many causes. No single option alone will solve the problem. Several simpler options are available to Connecticut that have proven to effectively reduce the number of uninsured.

Overall, a well-designed PA program has the potential to provide some relief for Connecticut's uninsured. However, it will not solve the problem alone. Connecticut should pursue many options, evaluate the progress of each in reaching both fiscal goals and in reducing the number of uninsured, and modify policies in response.

Comparison of Connecticut Options for the Uninsured

  Improve outreach for current programs Expand HUSKY to parents HUSKY endowment Premium Assistance Program
New bureaucracy created? No No Yes Yes
Costs new money? (Assuming no cuts to current services) No, makes better use of current spending Yes No/Maybe Yes
Increase chances of crowd-out? No No Maybe Maybe
Fair system for eligibility? Based on income and having children Based on income and having children Fairest system - open to everyone regardless of income, employer or family circumstance Not fair - restrictions include employer offer and participation, children and income
Targets public funds to uninsured? Yes Yes Yes Maybe
Could it subsidize crummy insurance? No No No Yes
Enhances stigma of current HUSKY program? No No, reduces it No, reduces it Yes
Requires employer paperwork? No No No Yes
Administratively complex? No No Moderate Very complex
Works in other states? Yes, very well Yes, very well Hasn't been tried No, works very poorly
Has worked in Connecticut before? Hasn't been tried Yes Hasn't been tried Hasn't been tried