PREMIUM ASSISTANCE HAS MIXED RESULTS IN RURAL AREAS

Volume 27, Issue 478 October 30, 2006

Matthew Gever

Do premium assistance programs work in rural areas? The answer is yes and no, according to a new report from the Cecil G. Sheps Center for Health Services Research at the University of North Carolina at Chapel Hill.

Premium assistance programs are public/private partnerships that use Medicaid and/or SCHIP funds to help low-income individuals pay the cost of private coverage. The programs may work less well in rural areas than in urban ones because rural residents are more likely to work for small employers, who are less likely than large ones to offer coverage. “A lot of low-income Medicaid recipients are more likely to work for a small employer,” said Pam Silberman, a report author and president of the North Carolina Institute of Medicine. The volatility of the small group market, the lack of HMO availability and the higher premiums in rural areas also may serve as barriers to success.

However, some of the 16 states that Sheps surveyed—including Illinois, Utah and Massachusetts—reported that enrollment in premium subsidy programs was higher in rural areas than in urban/suburban sites. The underlying reason for this is not known, but it may be due to the underlying geographic differences in insurance status, source of coverage for children and/or family income.

Funds for premium assistance programs can be distributed using one of three methods: the Health Insurance Premium Payment (HIPP) program; SCHIP authorizing legislation; or through an 1115 waiver.

To date, enrollment in premium assistance programs has been small in most states because of the programs’ “inherent limitations,” the report says. Under HIPP, for example, a state can enroll a Medicaid beneficiary into an employer-sponsored plan only if it cost-effective for the state, and the private plan benefits must be similar to Medicaid’s. Providing “wrap-around” coverage to low-income workers may prove as costly as just enrolling them in Medicaid. SCHIP has similar requirements for costs and benefits, and requires that a child be uninsured for six months to ensure eligibility.

A more promising route may be 1115 Health Insurance Flexibility and Accountability Act (HIFA) waivers, which (like HIPP and SCHIP) require that federal spending not rise, but also provide states with more flexibility. Under a HIFA waiver, states can maximize private insurance options without the cost protections or benefit guarantees of HIPP or SCHIP.

Oregon was one the more successful states in increasing coverage in rural areas, according to Silberman. The state subsidized premium assistance for a higher income group—up to 185 percent of the federal poverty level (FPL). Oregonians between 100 and 185 percent of the FPL account for 62 percent of enrollees in the premium assistance program.

Oregon staff also focused their outreach in rural regions, as well as in sites with high concentrations of minorities. This was to ensure that rural workers had a chance to enroll in the program before urbanites filled up the open slots. The state also allowed qualifying individuals to purchase non-group coverage when employers did not offer insurance. This was especially helpful for rural residents, said Silberman.

Another state of interest to Silberman was Massachusetts, which she said “has a lot of potential to be modeled.” As part of an 1115 waiver, the Bay State uses Medicaid funds to pay employers for subsidizing premiums for qualifying low-wage employees.

“[T]o date, premium assistance programs have not lived up to their potential,” the report finds. However, it adds, “With some creativity in program design, premium assistance programs could be a useful tool in the state’s arsenal of efforts to expand health insurance coverage to the rural uninsured.”