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Keeping Kids Enrolled: Continuity of Coverage under SCHIP and Medicaid

by Dan Steinberg 

Table of Contents:

Introduction

Continuous Eligibility

Cost Sharing

Redetermination

Kids Who Leave the Programs

Conclusion

Notes

Introduction

States that are conducting outreach and enrollment for children who are eligible for Medicaid and SCHIP are confronted by a host of challenges. Families seeking coverage must overcome complicated application processes and language and literacy barriers; deal with the stigma of getting public assistance; and navigate the eligibility process for different programs.

Because of these barriers, states may find it advantageous to design their programs to keep children enrolled for longer periods once they are covered, rather than have them lose coverage and reapply. States that succeed in keeping kids enrolled are said to be providing good continuity of coverage.

Outreach and enrollment also have been issues critical to providing health care to low-income children through state-sponsored coverage programs. These issues are discussed in another NCSL document.(1) This paper provides information about how states can keep kids enrolled once outreach and enrollment have succeeded, and examins some early data on the effectiveness of retention mechanisms.

Keeping children enrolled for longer periods:

• Supports the policy goal of insuring low-income children;
• Saves states the administrative costs of repeating outreach and eligibility determination efforts if kids become disenrolled, then re-enroll;
• Saves states the administrative costs of processing applications;
• Helps to keep kids healthier and may improve school performance;
• Makes it easier and more cost effective for managed care organizations to serve kids;
• Allows managed care plans to maintain capitation rates for longer periods;
• Allows health care providers to spend more time with kids and parents so that they can educate them and prevent some health problems, rather than provide only sick care; and
• May reduce the number of emergency room visits by low-income families.

Three important concerns in promoting continuity of coverage are:

• Continuous eligibility. Under the federal regulations, states have the option to keep kids enrolled in Medicaid and/or SCHIP for up to one full year, even if their families experience a change in income or status. This policy can help retain kids for longer periods.
• Cost sharing requirements. States may require families to share some of the expenses of receiving health care coverage and/or treatment. Under SCHIP, these costs may not amount to more than 5 percent of a family's yearly gross income. Under both SCHIP and Medicaid, states may charge only premiums and enrollment fees for children with family income above 150 percent of the federal poverty level (FPL). States are using different forms of cost sharing, but are primarily relying on copayments and premiums. Although some states report that cost sharing has discouraged only a few families from participating in SCHIP, more information about the deterrent effects of cost sharing is needed.
• Redetermination. Most states have addressed the problems presented by complicated initial application processes by shortening application forms, allowing forms to be mailed in to processing offices, and using a single application form for both Medicaid and SCHIP. Some states, however, still have confusing or complicated redetermination requirements, which may cause families to let coverage lapse.

Continuous Eligibility

States have the option to allow children to remain eligible for SCHIP or Medicaid for up to 12 months, even when their family income increases. Because many medical assistance recipients have monthly or seasonal changes in income, many enrollees slip in and out of eligibility frequently. Continuous eligibility saves the state administrative costs, relieves enrollees of the responsibility of frequent reporting requirements, and addresses the difficulty in finding care in months when their coverage otherwise would lapse.

Continuous eligibility can, however, be expensive. In May 1999, the Medi-Cal Policy Institute of California estimated the expenses of extending continuous eligibility to children in Medicaid and the Medicaid expansion portion of California's SCHIP program. Estimates ran as high as $177 million if 12-month eligibility were extended to all children from birth to age 18. Their calculations did not, however, subtract potential savings realized in administrative costs or improved health services.(2)

Under continuous eligibility, enrollees are not required to report increases in income, nor are enrollees required to provide regular interim reports within the continuous eligibility period. Many states do, however, require both SCHIP and Medicaid enrollees to report if they move from the state or if their children have lost eligibility because the child has reached the upper age limit of the program so that coverage can be terminated.

Many states that use continuous eligibility also ask families to report a pregnancy or new birth in the family so that the program can offer coverage for the new child immediately after birth (and offer Medicaid coverage to the pregnant woman, if she is eligible). The federal poverty level is lower for families that have a greater number of children, so some families will shift from SCHIP to Medicaid eligibility with the addition of a new child. Some states also require SCHIP enrollees to report decreases in income, so that the state can shift them into the regular Medicaid program.

Twenty-six states currently are using 12-month continuous eligibility for SCHIP and children enrolled in Medicaid.(3)

• Continuous eligibility can promote continuity of coverage and promote children's health.
• Continuous eligibility relieves families of reporting burdens and eases the administrative burden on state agencies although it may increase overall program costs.
• States may still want families to report new children in the family, or report if children have permanently lost eligibility for the program because they have moved, reached the upper age limit of the program, or received private insurance.

Cost Sharing

Under Medicaid and SCHIP, states may require participants to contribute to the cost of providing coverage. For low-income families, however, cost sharing can be a barrier to enrollment and to seeking care. Many states use one of two different forms of cost sharing requirements, copayments and premiums. A few states, such as Nevada, are charging families a one-time enrollment fee that is due when their application is approved.

Under SCHIP, the Health Care Financing Administration requires each state using cost sharing to demonstrate that total payments amount to less than 5 percent of a family's income. States can comply by keeping track of family contributions administratively or by advising enrollees to keep track of their total cost sharing contributions themselves by saving receipts and informing the program when they reach the 5 percent limit. Such record keeping and calculations may be a burden for families that have extreme demands on their financial resources or time. Some states that charge premiums only are complying by setting premium payments low enough that they cannot mathematically amount to more than 5 percent of the lowest income a family could earn and still be eligible for the private program. This program design also eliminates the burden of record keeping for families.

Under Medicaid, states may charge premiums to families with income above 150 percent of the FPL premiums. States may not charge copayments or deductibles to families enrolled in Medicaid for children under age 18.

Federal law prevents state Medicaid programs from charging copayments for services delivered to children under age 18. Under SCHIP, however, states may charge copayments but, as with premiums, total cost sharing must not exceed 5 percent of family income. Nineteen states currently are charging copayments to SCHIP beneficiary families. The maximum amount of copayments are set by federal regulations, but most states' copayments range between $1 and $5, depending on the specific service.

States charge copayments for different kinds of services. Some states-such as Missouri and New Hampshire-charge copayments for all office visits. Some charge a copayment for prescription drugs, including Massachusetts (50 cents per prescription) and Pennsylvania ($5 for prescriptions, but no copayments for any other service). A few states require copayments for specialized services, such as visits to providers of outpatient mental health services (Florida), eyeglasses and hearing aids (Nevada), or surgery (Arizona and Rhode Island).

For several reasons, Medicaid recipients and people without insurance historically have used the emergency room for services that could be provided more cheaply at a scheduled primary care visit. With this in mind, 11 states' SCHIP programs are charging comparatively high copayments for visits to emergency rooms to reduce costs and to educate families about the importance of primary care. Many of these states waive copayment charges if emergency treatment was sought appropriately. Washington, for example, does not collect copayments from patients who enter the emergency room and are then admitted to the hospital. Copayments for emergency room visits often are much higher than copayments for other services in the same state. In New York, for example, copayments for office visits are only $2, whereas the emergency room copayment is $35. In Delaware, an emergency room visit is the only service for which a copayment is required.

States may not charge copayments or premiums for any preventive care (including immunizations) or for Early and Periodic Screening, Diagnosis and Treatment (EPSDT) visits. These services include general health, vision, dental, and hearing screening, and federal regulations mandate that states provide them under both Medicaid and SCHIP.

States have elected to use copayments for many reasons. A state might choose to implement copayments to defray the cost of the program, to give beneficiaries a stake in the program, to make a public program seem more like private insurance, or to promote personal responsibility among recipient families. If states impose cost sharing in order to augment the budget of their programs, however, any income realized will be offset by the administrative expense of collecting copayments, the mandatory low level of copayment rates, and uncollected payments.

Other policy goals motivating states to use copayments-such as the intent to instill a sense of ownership among enrollees or help remove the stigma of government-sponsored insurance-have yet to be empirically tested. These beliefs currently are supported only by anecdotal evidence.

Most states have been operating their SCHIP programs for less than one year, and few have even preliminary data on whether cost sharing requirements are proving burdensome to families. As states begin to evaluate retention and re-enrollment, they should remain conscious of this issue and determine if copayments are appropriate.

• Cost sharing may prove burdensome to families in SCHIP or Medicaid programs, and may cause some families to drop coverage.
• States that require families to do their own record keeping for the purposes of staying within maximums may be imposing a significant burden on families' time and resources.
• Some anecdotal evidence exists that families value government insurance more if they are allowed to participate financially in the program. This proposition has not been verified by research or evaluation studies.
• The revenue-generating benefits of cost sharing are lessened by administrative costs and federally mandated low cost sharing rates.

Under both SCHIP and Medicaid, states may charge premiums only if family income level is above 150 percent of federal poverty guidelines.

Under SCHIP, states may, at their option, choose not to reinstate, or "freeze out," families that have been dropped from coverage for nonpayment of premiums for a given number of months. Although freeze-out periods are a serious concern among managed care plans, they may help prevent adverse selection. "Adverse selection" in this case would be the practice of picking up coverage when children are sick, but allowing coverage to lapse when they are healthy.

Few states have reliable data on reasons for disenrollment, but the inability to afford premium payments has not been an overwhelming factor. New York, for example, has disenrolled only about 5 percent of its SCHIP participants because they fail to pay premiums. Some of these disenrollees may be withholding payment not because the expense is too great, but because they have found other insurance or have moved from the state. Ohio has had similarly promising results, and only two of 162 exit survey respondents said they left Ohio's SCHIP program because they were unable to pay the monthly premiums. Note that these results do not indicate numbers of families who are deterred from subscribing to these programs, and that the low number of respondents to these surveys may also reduce the accuracy of results.

As Table 1 shows, states differ greatly in the amount of time they will allow payments to be late before disenrolling children. The states with very long grace periods-such as Kansas (12 months) and Maine (six months)-do not pursue late payments unless the family is approaching its re-enrollment date.

NA = Information not available

Source: State SCHIP plans as submitted to Health Care Financing Administration, phone surveys conducted by the Health Services Division and the Forum for State Health Policy Leadership of the National Conference of State Legislatures, 1999.

1. Participants cannot re-enroll at the end of the continuous eligibility period unless all premiums are paid, but will not be dropped from coverage for nonpayment during that period.

2. Vermont is unusual in that it charges premiums for the previous three month's coverage. For example, a family would be billed in March for coverage received in January, February and March, and the payment would be due April 15. In this example, coverage would lapse April 30 if the premium payment were not made.

Table 1 also shows that freeze-out periods vary significantly. Again, SCHIP is too new to determine what effect freeze-out periods will have on enrollment numbers or health status, or whether it will be a deterrent to premium nonpayment. In evaluating the effectiveness of freeze-out periods, however, states may want to determine how freeze-outs affect continuity of coverage and how they affect the quality of children's health and well-being.

Under Medicaid, the total cost of premiums cannot exceed 10 percent of the amount that family income (less child care expenses) exceeds 150 percent of the FPL. For example, for a single parent with three children living in the 48 contiguous states, the 1999 FPL is $13,880; 150 percent of the FPL therefore would be $20,820 (1.5 x $13,880). Assume this parent earns $30,000 per year and has yearly child care expenses of $8,000. In order to determine the maximum premium this family can be charged, the state would need to deduct child care expenses from annual income ($30,000-$8,000 = $22,000). Then, the state would deduct 150 percent of the poverty level from this figure ($22,000-$20,820 = $1,180). The maximum premium the parent could be charged (for his or her entire family; that is, all three children) would be 10 percent of this figure, or $118 annually.

• Cost sharing may prove burdensome to families in SCHIP and Medicaid programs, and may disrupt continuity of coverage.
• Many states do not disenroll families for nonpayment until re-enrollment, which may help states retain families for longer periods.
• Freeze-out periods can adversely affect continuity of coverage. States may wish to determine the extent of adverse selection in their programs, and re-evaluate the usefulness of freeze-out periods.
• Although early studies suggest that few families drop SCHIP because they cannot afford the premiums, states should be aware that this possibility exists, and mat want to reconsider the value of charging premiums. Alternatively, states may consider allowing exemptions from premiums in cases of financial hardship.

Redetermination

Redetermination for both Medicaid and SCHIP is a process that may be identical to or different from the initial eligibility determination. For example, many states use a single application form for both Medicaid and SCHIP, but use different forms for redetermination. Some states require proof of income (such as a paycheck stub) or residence at redetermination, but others do not. Some state programs require enrollees to fill out a copy of the original application. Others-such as the SCHIP programs in Alabama and Michigan-send forms to enrollees that are preprinted with the information the enrollee originally supplied, and ask only for corrections or updated information.

A few states have redetermination processes that are significantly more time-consuming than the original application process. For Kentucky's SCHIP program, for example, families can mail in the initial application, but must apply in person for redetermination. States give several reasons for these policies, including the desire to use reapplication time as an opportunity to conduct outreach for other service programs. Such a requirement may prove prohibitive, however, for families that have difficulty in arranging for transportation, child care or time off from work.

States that have succeeded in simplifying their application process may want to make sure that the reapplication process also is as easy as possible for families. To simplify reapplication, states may choose to:

• Provide families adequate or multiple warnings and re-enrollment forms well before their coverage lapses;
• Preprint reapplication forms with all the information families originally supplied and require only updates;
• Eliminate proof of income or residence; and/or
• Allow mail-in reapplications.

Kids Who Leave the Programs

When evaluating how well their retention efforts are working, states may wish to find out how long kids stay on Medicaid and SCHIP programs. Two programs that have some information on client longevity are the Western Pennsylvania Caring Foundation and the Healthy Kids Program in Florida. These programs both preceded the passage of SCHIP, and Congress allowed them to continue serving as SCHIP providers. Although these programs are limited in geography and clientele, they still may give an idea of how long children stay in sponsored coverage programs.

The Caring Program for Children in Pennsylvania is a volunteer effort that provides health care to children sponsored by Blue Cross and Blue Shield. The average length of time that kids remain in the Caring Program is about a year and a half, a figure that has been consistent over the life of the program. Charles LaVallee, executive director of the Western Pennsylvania Caring Foundation for Children, notes that this relatively brief participation is a sign that " ... SCHIP is therefore a bridge, not a generational program. Forty percent of our kids leave within one year, and 15 percent go on to receive private insurance." LaVallee believes that these numbers show that SCHIP programs can be successful in serving as transitional coverage for children of families that are between jobs, or that are seasonally employed.

Rose Naff of the Healthy Kids Corporation in Florida reports that an even higher percentage of kids leaving that program move on to receive employer-sponsored dependent coverage. Nonpayment in her program, she reports, is frequently a method families use to inform the program that they have received private insurance. According to a random sample of families leaving Healthy Kids, as many as 50 percent leave for private coverage, and another 45 percent leave because they qualify for Medicaid. She does report however, that " ... our patient database is unique. Many of our people have high school or even some college education, and usually receive regular paychecks." Experiences in other states, particularly in programs that serve lower-income families, may vary.

Although information about those who leave SCHIP and Medicaid is sparse, it appears that people drop coverage for many reasons. Some states have attempted to survey families that have left the SCHIP program, but these families can be difficult to locate. One state received only a 25 percent response to such a survey; another received only about a 5 percent response. Reasons cited for leaving the program include difficulty completing the renewal forms or a misunderstanding about the need to re-apply. These difficulties can be overcome by state efforts to improve application and renewal processes. Other children no longer were eligible because they had reached the upper age limit for participation in the program or had permanently left the state. Income changes also affected eligibility for some. For some children on SCHIP, family income had increased so that they no longer were eligible or had decreased so they now were eligible for Medicaid.

Other states have reported that a significant number of children left regular SCHIP programs because they had received private insurance through a parent's employer. Colorado sent out 247 exit surveys in April 1999. Only 65 returned surveys, but of those 65, 21 had received private insurance. Although the group responding to the survey may not be typical, other states have reported that between 10 percent and 30 percent of those who drop SCHIP coverage do so because they have received other insurance. For these families, SCHIP has served as a transitional program, providing insurance during a period of unemployment or when insurance was not otherwise available.

• States that want to improve their retention of kids on programs could benefit from studying why families leave Medicaid and SCHIP.
• Children leave SCHIP and Medicaid for many reasons, including difficulty in completing reapplication procedures; loss of eligibility due to changes in residence, age or income; or receipt of private or employer-sponsored insurance.

Conclusion

States can facilitate attempts to make it easier for families to enroll their children in SCHIP and Medicaid, and to keep them enrolled as long as they continue to qualify for coverage.

State policies on continuous eligibility, cost sharing, disenrollment for nonpayment of premiums, and redetermination processes vary considerably from state to state. Data about these mechanisms are working and what causes children to drop coverage are still limited. One reason for this lack of information is that SCHIP is very new, and Medicaid is in a constant state of refinement. As state agencies and policymakers gain experience with these programs, they will want to continue to evaluate and update policies promoting continuity of coverage.

 Notes

1. Gretchen Flanders and Rhonda Gonzalez, CHIP: Outreach and Enrollment. Denver: National Conference of State Legislatures, August 1999.
2. Medi-Cal Policy Institute, Implementing Continuous Eligibility: Costs and Considerations (Oakland, Calif.: MPI, May 1999), 8.
3. Center on Budget and Policy Priorities, Table on Selected Simplified Criteria: Medicaid for Children and CHIP-funded Separate State Programs (July 1, 1999).