Issues

Comments on Implementing Regulations for the State CHIP Program

January 6, 2000

Health Care Financing Administration
Department of Health and Human Services
Attn: HCFA-2006-P
P.O. Box 8010
Baltimore, MD 21244-8010

Dear Administrator DeParle:

The National Association of Health Underwriters (NAHU) represents over 15,500 insurance professionals involved in the sale and service of individual, employer-based, and senior health insurance. Our members serve the insurance needs of over 100 million Americans. We are writing in response to your request for comments (64 Fed. Reg. 60881) on the Proposed Rule on Implementing Regulations for the State Children’s Health Insurance Program.

Many of NAHU’s members have served on state task forces and committees in their individual states that have been established to find the best way to implement the Children's Health Insurance Program. They have consistently reported several shortcomings of the federal CHIP legislation, which have impeded the ability of their states to fully reach the largest number of uninsured children.

Under the Balanced Budget Act, states have a number of options for implementing plans most appropriate to the needs of their uninsured children. One of those options is to expand Medicaid. The other available options are centered in the private sector. One of the reasons many of the people who are already eligible for Medicaid today do not enroll is that they do not want the negative stigma associated with public assistance. Private sector programs can represent a transition from this stigma by allowing and encouraging people to embrace the concept of "self help" as opposed to the expectation of government entitlement. As you know, this is a concept that has ramifications that extend far beyond the health insurance benefits provided by the plan. Congress wisely considered these private sector advantages and not only authorized states to develop private sector CHIP programs, but also allowed for children to be enrolled in the employer-based plans of their parents.

One problem with the CHIP program as it is currently interpreted relates to the cost-sharing requirements. Because each employer plan is different, and the family income of each eligible child is different, a separate mathematical calculation is required for EACH participant, to be sure the 5% cost-sharing limitation is met for that particular plan and participant. This may be the easiest and most cost-effective option available for children and their families, and will allow families the opportunity to all be enrolled together on the same employer-sponsored plan, but the separate calculation requirement makes plan administration unwieldy and expensive. For this reason it is unlikely that opportunities for participation in employer-sponsored plans will be aggressively pursued. This frustrating provision of the legislation is only worsened by HCFA’s letter stating that employer plans where employers are paying less than 60% of the family premium are not eligible for participation in the CHIP program. Not only does this interpretation by HCFA have no legislative basis, but surveys show that other than on the East coast, very few employers pay any part of the dependent premium, much less 60%. A recent NAHU survey indicated that, on average, large employers pay 85.51% of the employee premium and 17.62 % of the dependent premium, and that small employers contribute 78.06% of the employee premium and 5.14% of the dependent premium, a far cry from the arbitrary 60% requirement HCFA has imposed. This attempt to avoid crowd out and dumping from employer plans actually serves to prevent access to many children.

Regarding outreach, we have watched with interest the progress of different states in reaching their uninsured children and would only add that if the experience of Washington State’s Basic Health Plan and the California Health Insurance Purchasing Cooperative are any indication, many more people will be reached if licensed professional insurance agents and brokers are used to enroll children. Insurance agents and brokers meet with uninsured adults every day, and the employers of many of the parents of uninsured children. They have a perfect opportunity to reach those that need the coverage the most, and since private health insurance plans already include a marketing component in their administrative cost, this can be done with no extra cost to the program.

We appreciate this opportunity to comment. Should you have any questions, please contact Nancy Trenti, Asst. Director of Federal Regulatory Affairs at (703) 276-3807.

Sincerely,
Alan Katz
President