MARCH 2013
Consequences of Proposed Eligibility Reduction of HUSKY A Parents
FINDINGS • Under a new budget proposal, 37,500 low-income working parents currently insured under Medicaid will lose eligibility in 2014; many of these current enrollees will be eligible for transitional Medicaid assistance for up to one year. • Tighter HUSKY eligibility requirements effective in 2014 will immediately restrict eligibility for lowincome parents who are not currently enrolled. • While current HUSKY parents will be eligible to purchase commercial insurance through the Connecticut Health Insurance Exchange in 2014, their out-of-pocket health care costs will increase by an average of $1,800 per year.
• Of the 37,500 parents affected, an estimated 7,500 to 11,000 may not purchase health insurance offered through the exchange – even with federal subsidies – because of increased out-of-pocket costs. • Parents who purchase insurance through the exchange may limit use of needed health care due to higher cost sharing obligations. • Low-income children are less likely to have health insurance coverage if their parent or parents are uninsured.
OVERVIEW Connecticut Gov. Dannel Malloy’s 2014-2015 biennial budget proposal to reduce HUSKY A parent eligibility may adversely affect an estimated 37,500 low-income working adults with children and could lead to thousands of newly uninsured residents. Currently, parents who are enrolled in HUSKY A, the state’s Medicaid program, are individuals with: 1) an annual family income between 133 percent and 185 percent of the Federal Poverty Level (FPL) [$25,975 - $36,131 annually for a family of three in 2013]; and 2) have children under age 19 who are enrolled in the HUSKY A program. Under this proposal, a reduction in HUSKY A eligibility will take effect in 2014 for low-income parents who are not currently enrolled. Some current HUSKY A parent
enrollees will receive up to one year of Medicaid transitional assistance, and lose Medicaid coverage in 2015. However, low-income parents will qualify to purchase subsidized private health insurance through the Connecticut Health Insurance Exchange (also known as Access Health CT) beginning in 2014. While the federal government, under provisions of the Affordable Care Act, will provide premium assistance and cost sharing (copayment and deductible) subsidies, individuals’ annual out-of-pocket health insurance costs will increase from $0 to an average of $1,800 per year. An estimated 7,500 to 11,000 HUSKY parents may forgo health insurance – even with federal subsidies – because of increased out-of-pocket costs. Others may curtail use of needed health care services. Research indicates that parents’ lack of insurance also may negatively affect their children’s coverage. CONSEQUENCES OF PROPOSED ELIGIBILITY REDUCTION OF HUSKY A PARENTS
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POTENTIAL EFFECTS ON FAMILIES
Under the budget proposal, parents no longer eligible for HUSKY A in 2014 will have the option to purchase subsidized commercial insurance through Access Health CT. The following intended and unintended consequences may occur:
The average total cost of coverage for HUSKY parents will increase, and enrollees will pay the difference
ANNE
On average, the total cost of health coverage through Access Health CT will be approximately $1,600 more than coverage under HUSKY A (see Table 1 on page 3). Under current HUSKY A eligibility, the state of Connecticut and the federal government each pay $2,400 for parent health coverage for a total of $4,800. If parents purchase coverage for themselves (since their children will remain covered under HUSKY as
long as they are in school and expect to graduate by age 19) through Access Health CT, the total cost increases to $6,400 with the federal government paying $4,600 and individual parents paying $1,800. To illustrate the effect of these changes on families, the authors computed increased health insurance costs for several hypothetical families who could lose HUSKY A parent coverage under the budget proposal.
ANNE: Family of two with higher income and low medical expenses living in New Haven Anne is a working single mother who makes
(currently covered by HUSKY). While Anne’s
$29,646/year (180 percent of FPL) in 2014,
daughter would remain eligible for HUSKY
towards the upper income limit of HUSKY
in 2014, Anne would be eligible to purchase
eligibility. Both she and her daughter are
subsidized insurance through Access Health
currently enrolled in HUSKY. Anne incurs
CT for a total out-of-pocket cost of $1,634 or
low medical expenses, totaling $300 per year
5.6 percent of her annual income.
An estimated 7,500 to 11,000 HUSKY parents may not purchase subsidized health insurance through
Under the budget proposal, restricting HUSKY A parent eligibility will save the state approximately $2,400 per person by reducing the state’s share of Medicaid spending. If coverage is purchased through Access Health CT, the federal contribution will increase by approximately $2,200 per person through $4,600 in new premium and cost sharing subsidies less $2,400 in reduced federal Medicaid match to the state. Individuals’ out-of-pocket costs will increase from $0 to an average of approximately $1,800 per year (see Table 3 on page 7).
the exchange. CONSEQUENCES OF PROPOSED ELIGIBILITY REDUCTION OF HUSKY A PARENTS
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Table 1: Estimated Average Annual Cost and Revenue Sources for HUSKY Parents’ Health Coverage through HUSKY and Connecticut’s Health Insurance Exchange in 2014
Revenue Source
HUSKY
Exchange
Change
State Funds
$2,400
–
($2,400)
Federal Funds
$2,400
$4,600
$2,200
Parents’ Out-of-Pocket Cost
$0
$1,800
$1,800
Health Coverage Total Cost 1
$4,800
$6,400
$1,600
The higher estimated overall cost is a result of several factors. Access Health CT will offer commercial plans, which pay health care providers rates that are 65 percent higher than Medicaid rates, on average.2 In addition, commercial insurers’ administrative costs are generally higher than Medicaid’s – 12 percent versus 6 percent, respectively.3
The higher cost does not reflect richer benefits under commercial plans when compared to benefits under Medicaid. In fact, HUSKY A covers adult dental and vision services, and non-emergency transportation while most commercial health plans do not.
HUSKY parents will face higher out-of-pocket health care costs
and deductibles) will increase from zero to 6 - 13 percent of medical expenses (depending on income), up to the out-ofpocket limit of $4,500.4 On average, total out-of-pocket cost for HUSKY parents will average approximately $1,800 per year. HUSKY parents who have complex medical issues and use health care services at a high rate will incur the greatest increase in new out-of-pocket costs.
CHANDRA
HUSKY parents currently pay no premiums or cost-sharing under HUSKY A. Under the proposed eligibility reduction, parents’ individual premiums will rise from $0 to an average of $1,033-1,710 per year. Likewise, cost sharing (copayments
CHANDRA: Family of two with higher income and high medical expenses living in Hartford Chandra is a working single mother who
While her son would remain eligible for
makes $29,646/year (180 percent of FPL),
HUSKY in 2014, Chandra would not. Her
towards the upper income limit for eligibility
out-of-pocket costs would increase from
in HUSKY. Both she and her son are currently
$0 to $3,155 or 10.6 percent of her annual
enrolled in the HUSKY program. Chandra
income if she purchases subsidized
incurs high medical expenses, around
insurance through Access Health CT.
$12,000/year (currently covered by HUSKY).
CONSEQUENCES OF PROPOSED ELIGIBILITY REDUCTION OF HUSKY A PARENTS
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HUSKY parents with strained household budgets may forgo health insurance because of higher out-of-pocket costs Research in Connecticut indicates that HUSKY parents already earn less than the income required for an adequate standard of living.5 Increasing their health insurance costs will exacerbate already strained household budgets. If parents purchase health coverage for themselves through the exchange, there will be less money left to pay for other needs such as food, shelter or childcare.
KEITH AND BECKY
Many studies show that as health insurance premiums rise, fewer people buy insurance.6 Research on moderate
premium hikes for Medicaid and the federal Children’s Health Insurance Program (CHIP) for families with similar annual incomes to those of HUSKY parents found enrollment declines ranging from 20 percent to 30 percent in Maryland, Missouri, and Rhode Island.7 These declines are the basis for estimates that between 7,500 and 11,000 low-income Connecticut parents would not purchase insurance coverage through Access Health CT. Furthermore, in a 2012 state-commissioned analysis, Mercer predicted that only 50 percent of Connecticut adults with incomes between 138 percent and 200 percent FPL in 2014 would enroll in a plan through Access Health CT due to premiums and cost sharing.8
KEITH AND BECKY: Family of four with lower income and average medical expenses living in Bridgeport Keith and Becky are married, live with
$8,000/year combined (currently covered
their two children, and earn $34,513/year
under HUSKY). Their annual health
(138 percent of FPL). All four family
insurance costs would increase from
members are currently enrolled in the
$0 to $1,615 or 4.7 percent of their annual
HUSKY program. Keith and Becky incur
income if they purchase subsidized
average medical expenses, around
coverage through the exchange.
Children are less likely to have health insurance coverage if their parent or parents are uninsured Children eligible for public health insurance are less likely to be insured if their parent or parents are uninsured. • Researchers found that 81 percent of Medicaid-eligible children enrolled in a public health insurance program in states with HUSKY-like parent coverage expansions, compared with 57 percent in states that do not cover parents.9 In 2009, 91 percent of eligible children in Connecticut participated in HUSKY and 5.5 percent of eligible children were uninsured.10 The research on parental
coverage suggests that reducing HUSKY eligibility for parents could increase the uninsured rate among children. • A 2006 study found that parental (especially maternal) coverage in public health insurance programs like HUSKY strongly affected whether a child enrolled in Medicaid remained in the program. Based on findings, the author concluded that expanding health coverage to uninsured children would be more effective if both children and their parents were covered under the same program.11 A study done in Oregon supports this finding: Medicaid-eligible children were significantly more likely to be uninsured if their parent or parents were privately insured rather than publicly insured.12
CONSEQUENCES OF PROPOSED ELIGIBILITY REDUCTION OF HUSKY A PARENTS
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HUSKY parents who purchase coverage may limit use of needed health care due to higher cost-sharing obligations Parents who purchase insurance coverage through Health Access CT will face increased cost sharing through deductibles and copayments. Equal to between 6 percent and 13 percent of medical expenses, individuals with a complex medical condition will incur the greatest cost burden. With other essential expenses competing for limited resources, this obligation might lead people to limit use of needed care, with potentially detrimental health effects.
MARIA
• The RAND Health Insurance Experiment (HIE) in the 1970s studied consumer responses to various health insurance designs. It concluded that low-income adults (with incomes at about 200 percent of FPL and below) with cost sharing were far less likely to receive appropriate care. Those with
cost sharing were 41 percent less likely as those with no cost sharing to obtain necessary care for acute conditions such as fractures and lacerations, pneumonia, acute bronchitis and strep throat.13 • Researchers infer that low-income people are more sensitive to the price of health care services than higher income people, though specific estimates of the difference in sensitivity are not available. A comprehensive review of the literature on the sensitivity of the demand for health care services to price and income found, however, that low-income health care program beneficiaries “... can be deterred by very small increases in premiums or cost sharing.”14 It is reasonable to think that cost sharing in a commercial insurance plan, even one in which the premium is heavily subsidized, would have a similar effect especially for those with complex medical issues that require frequent health care visits and multiple copayments.
MARIA: Family of two with lower income and moderately low medical expenses living in New London Maria is a working single mother who makes
by HUSKY) total about $1,000/year. While
$24,000/year (146 percent of FPL) in 2014.
her daughter will remain eligible for HUSKY
Both she and her daughter are currently
in 2014, Maria’s cost for subsidized health
enrolled in the HUSKY program. Maria’s
insurance coverage will total $963 dollars or
medical expenditures (currently covered
4 percent of her annual income.
Those with cost sharing were 41 percent less likely as those with no cost sharing to obtain necessary care for acute conditions... CONSEQUENCES OF PROPOSED ELIGIBILITY REDUCTION OF HUSKY A PARENTS
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CONCLUSION
A 2014-2015 biennial budget proposal to reduce eligibility of HUSKY A by disqualifying parents with annual incomes above 133 percent of FPL from Medicaid eligibility will have wide-ranging consequences: • About 37,500 of these working parents will lose public health insurance. • While eligible to purchase commercial insurance through Access Health CT, low-income parents’ out-of-pocket health care costs will increase from $0 to an average of $1,800 per year.
• Adding another financial burden to household budgets that are not self-sustaining will present low-income parents with very difficult decisions – paying for basic living necessities or purchasing health insurance for themselves. Faced with this choice, many parents who purchase coverage may limit use of needed health care services due to higher out-of-pocket costs.
• An estimated 7,500 to 11,000 of the affected parents may not purchase federally subsidized health insurance through the exchange because of increased out-of-pocket costs.
• Low-income children are less likely to have health insurance coverage if their parent or parents are uninsured or are insured in a different health coverage program.
• Changing current HUSKY eligibility requirements, which will increase the cost of health insurance coverage for parents, will likely result in a greater number of uninsured adults.
APPENDIX The Connecticut Health Foundation (CT Health) commissioned the University of Massachusetts Medical School, Center for Health Law and Economics, to conduct an analysis of a proposed restriction in HUSKY A parent income eligibility. To illustrate the effect of these changes on families, the authors calculated the increased costs for four hypothetical families with parents who would lose
HUSKY under the proposed budget (see vignettes on pages 2, 3, 4, and 5). Out-of-pocket cost calculations for each hypothetical family are available upon request at
[email protected]. Table 2 below summarize the financial effects of losing HUSKY coverage on these families:
Table 2: Each Family’s Annual Premium and Cost Sharing Obligations under Medicaid and Access Health CT, with Percentage of Family Income in Parentheses HUSKY (Medicaid)
Chandra
Anne
Maria
Keith and Becky
Family income
-
180% FPL ($29,646)
180% FPL ($29,646)
146% FPL ($24,000)
138% FPL ($34,513)
Medical expenses
-
High medical expenses
Low medical expenses
Moderately low medical expenses
Average medical expenses
Annual Premium
$0
$1,595 (5.4%)
$1,595 (5.4%)
$903 (3.8%)
$1,135 (3.3%)
Annual Cost Sharing
$0
$1,560 (5.3%)
$39 (0.1%)
$60 (0.3%)
$480 (1.4%)
Total Out-of-Pocket Cost
$0
$3,155 (10.6%)
$1,634 (5.6%)
$963 (4.0%)
$1,615 (4.7%)
CONSEQUENCES OF PROPOSED ELIGIBILITY REDUCTION OF HUSKY A PARENTS
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None of the families enrolled in HUSKY have a household income sufficient to cover the expenses required for economic security, including the cost of food, transportation, child care, personal and household items, taxes, emergency savings, and retirement savings.
Figure 1 shows the gap between these families’ current income and the income required to be self-sufficient, as well as the additional income required to be self-sufficient and cover the cost of purchasing subsidized insurance through Access Health CT.15
Figure 1: Each Family’s Income Relative to the Self-Sufficiency Level
Anne Chandra Keith and Becky Maria $0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Gap between current income and income required to be self-sufficient, with HUSKY Additional income required to be self-sufficient and purchase health insurance through Access Health CT
Table 3 outlines the methodology used to calculate the cost impact of reduced HUSKY A parent eligibility: Table 3: Calculation of Average Estimated Out-of-Pocket Costs for HUSKY Parents in Access Health CT FPL Range
133-150%
150-185%
Total
141.5%
167.5%
-
Premium Contribution 1
Mid-point
2
Average income per household (weighted average family size approx = 3.2)
$29,500
$35,582
-
3
Average premium contribution as a % of income (from ACA)
3.50%
4.81%
-
4
Average annual premium contribution per household (L2*L3)
$1,033
$1,710
-
5
Estimated # individuals
12,500
25,000
37,500
6
Estimated # households (assumes half of HUSKY parents are married couples)
9,375
18,750
28,125
7
Estimated total premium contribution in millions (L4*L6/1,000,000)
$9.7
$32.1
$41.7
Cost Sharing 8
Average Silver Plan Premium PMPM (from Milliman16)
$374
$374
-
9
Actuarial value of silver plan (ACA)
70%
70%
-
10
Average total medical cost PMPM (L8/L9)
$534
$534
-
11
Reduced cost sharing (ACA)
6.0%
13.0%
-
12
Average cost sharing PMPM (L10*L11)
$32
$69
-
13
Average annual cost sharing per member (L12*12)
$385
$833
-
14
Estimated # individuals
12,500
25,000
37,500
15
Total cost sharing in millions (L13*L14/1,000,000)
$4.8
$20.8
$25.6
16
Total premium contribution and cost sharing in millions (L7+L15)
$14.5
$52.9
$67.4
17
Total annual out-of-pocket cost, average per member (1,000,000*L16/L14)
$1,159
$2,116
$1,797
CONSEQUENCES OF PROPOSED ELIGIBILITY REDUCTION OF HUSKY A PARENTS
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REFERENCES 1 $4,800 total cost under HUSKY is based on the Connecticut Office of Policy and Management’s assumption of $400 PMPM (per member per month payment) [personal communication, March 5, 2013]. $6,400 total cost in Access Health CT is based on Milliman’s assumption of $374 monthly premium for the second lowest silver plan in the exchange, with a 70 percent actuarial value, in Milliman, State of Connecticut Basic Health Program Actuarial Analysis (Dec. 13, 2012). 2 Milliman, State of Connecticut Basic Health Program Actuarial Analysis (Dec. 13, 2012) assumes that commercial plans pay 129 percent of Medicare rates and Medicaid pays 78 percent of Medicare rates. 3 Collins,S.R., Nuzum, R., et al, How Health Care Reform Can Lower the Costs of Insurance Administration, Commonwealth Fund Issue Brief (July, 2009). 4 ACA §1402; Federal Register, Vol . 77, No. 236, p.73173 (Dec. 7, 2012). 5 Wider Opportunities for Women, The Self-Sufficiency Standard for Connecticut: How much income do families require in order to live without assistance? (Jan. 5, 2009). Values inflated to 2013 using Department of Labor Consumer Price Index (CPI). 6 Congressional Budget Office, The Price Sensitivity of Demand for Nongroup Health Insurance at 10 (August 2005). Elasticity may be less for individuals rather than for families; Leighton Ku and Teresa A. Coughlin. “Sliding-Scale Premium Health Insurance Programs: Four States’ Experiences.” 36 Inquiry 4 (Winter 1999/2000). Madden, C., Cheadle, A., Diehr, P., Martin, D., Patrick, D., & Skillman, S. (1995). “Voluntary Public Health Insurance for Low Income Families: The Decision to Enroll.” Journal of Health Politics, Policy and Law, 20, 4, 955-72. Guy, Gery and Adams, Kathleen. “Public and Private Health Insurance Premiums: How do they affect the Health Insurance Status of Low-Income Childless Adults?” Inquiry (Spring 2012). Northwest Health Law Advocates. Assessing the Federal Basic Health Option: Recent Lessons from Washington’s Basic Health Program (January 2012). Bill Wright et. al. “The Impact of Increased Cost Sharing on Medicaid Enrollees.” Health Affairs (2005). 7 Stephen Zuckerman, Dawn M. Miller, and Emily Shelton Pape, “Missouri’s 2005 Medicaid Cuts: How did they affect Enrollees and Providers?” Health Affairs 28 (2): w335-345, March/April 2009. Samantha Artiga and Molly O’Malley, Increasing Premiums and Cost Sharing in Medicaid and SCHIP: Recent State Experiences, Kaiser Commission Medicaid and the Uninsured, May 2005. 8 Mercer, Connecticut Health Insurance Exchange Planning Report p. 192 (January 2012). 9 Lisa Dubay and Genevieve Kenney, “Expanding Public Health Insurance to Parents: Effects on Children’s Coverage under Medicaid.” Health Services Research 38:5 (October 2003).
13 Reported in Julie Hudman and Molly O’Malley, Health Insurance Premiums and Cost-Sharing: Findings from the Research on Low-Income Populations. Kaiser Commission on Medicaid and the Uninsured, March 2003. 14 Reported in Su Liu and Deborah Chollet, Price and Income Elasticity of the Demand for Health Insurance and health Care Services; A Critical Review of the Literature. Mathematica Policy Research, Inc. March 2006. 15 Source for self-sufficiency standard in 2008 is Wider Opportunities for Women, The Self-Sufficiency Standard for Connecticut: How much income do families require in order to live without assistance? (Jan. 5, 2009). The authors adjusted these values to remove the health care component and inflated the remainder to 2013 using the CPI Inflation Calculator, U.S. Department of Labor, Bureau of Labor Statistics. The authors estimated the health care component by calculating weighted averages by family type of the health care component in the Basic Economic Security Tables (BEST), Table 8, A project of Wider Opportunities for Women’s Family Economic Security Program (2010), and inflating to 2013. 16 Estimate from Milliman. State of Connecticut Basic Health Program Actuarial Analysis (Dec. 13, 2012). http://www.healthreform.ct.gov/ohri/ lib/ohri/BasicHealthPlanWorkGroupMillimanActuarialAnalysisReport.pdf.
About the Authors Katharine London, MS, Principal Associate University of Massachusetts Medical School Center for Health Law and Economics Robert Seifert, MPA, Principal Associate University of Massachusetts Medical School Center for Health Law and Economics Rachel Gershon, JD, MPH, Senior Research Policy Analyst University of Massachusetts Medical School, Center for Health Law and Economics
Credits Editor-in-Chief: Editing Consultant: Design:
Elizabeth M. S. Krause Monette M. Goodrich E.K. Weymouth Design
10 Genevieve M. Kenney et al., Gains for Children: Increased Participation in Medicaid and CHIP in 2009. The Urban Institute, August 2011. 11 Benjamin D. Sommers, “Insuring children or insuring families: Do parental and sibling coverage lead to improved retention of children in Medicaid and CHIP?” Journal of Health Economics 25 (2006). 12 Jennifer E. DeVoe et al., “Uninsured but Eligible Children: Are Their Parents Insured? Recent Findings from Oregon.” Medical Care 46:1 (January 2008).
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