Topic:
HEALTH INSURANCE; MEDICAID; EMPLOYEE BENEFIT PLANS; HEALTH CARE REFORM; STATISTICAL INFORMATION;
Location:
INSURANCE - HEALTH - REFORM;

OLR Research Report


April 27, 2005

 

2005-R-0377

RHODE ISLAND'S PREMIUM ASSISTANCE PROGRAM

By: Robin K. Cohen, Principal Analyst

You asked for information on Rhode Island's RIte Share premium assistance program for low-income families eligible for the state's RIte Care Medicaid program. You specifically asked for (1) the number of employers and employees participating, (2) costs and savings to the state, and (3) pros and cons of such a program.

An earlier OLR report, 2001-R-0437, described the process Rhode Island went through to get federal approval for the program, including how the state was able to show cost-effectiveness, a critical component necessary for approval.

SUMMARY

Rhode Island began its RIte Share program in February 2001. Under the program, the state's Department of Human Services (DHS) pays all or a part of a family's monthly premium when the family has access to employer-sponsored health insurance (ESHI). The employers typically pay at least half of the premium cost. The state provides “wrap around” coverage for those services that Medicaid provides but the employer plan does not.

Initially, participation was voluntary for employees, but in January 2002, it became mandatory. As of December 31, 2003, 969 employers were approved for participation in the program and 5,006 individuals (out of a total 126,532 enrollees, or 4%) were enrolled, most of who transitioned from the full benefit RIte Care program to premium assistance. Program director Tricia Leddy reported recently that about 6,000 people are now enrolled, with about 1,000 participating employers.

States generally implement premium assistance programs to save money in their Medicaid programs by ensuring that employer coverage is used to the greatest extent possible. In Rhode Island, the state realized a net loss in the first year of operations but saved over $.5 million in the second year and double that amount in the third year. (Leddy roughly estimates that for every 1,000 enrollees, the state saves $1 million.) On a per member per month basis, the state went from a monthly loss of $29.50 to a savings of $23.06 per month between July 1, 2003 to December 31, 2003. The initial costs are administrative, which Leddy said were about $800,000 plus costs associated with making changes to the state's computer systems.

In a 2004 report on the program, DHS listed several challenges that limit RIte Share's ability to reach every potential enrollee. These include (1) the absence of a requirement on state employers to report to DHS on the health insurance they provide; (2) federal law that pre-empts any state law to require employers to enroll eligible families in ESHI outside an open enrollment period; (3) Medicaid rules that vary in terms of coverage requirements; and (4) increasing premium costs that employers pass on to employees, making it harder for the state to meet federal cost-effectiveness requirements. (Leddy also mentioned the “churning” phenomenon, whereby many factors (e.g., job change, loss of Medicaid eligibility) make the covered population a constantly moving number.)

Amy LaPierre, Project Director for Rhode Island's Covering Kids and Families, a group that advocates for health insurance for low-income families, believes the program has generally been successful in terms of getting more employer “dollars on the table.” But she echoed some of the same concerns expressed above, in particular the administrative burden the program creates. Her organization has done considerable outreach to get employers to participate, and many business groups have expressed interest in learning more about it.

RITE SHARE

Enrollment

Since 1994, RIte Care has been Rhode Island's managed health care program for families on Medicaid, uninsured families with incomes up to 185% of the federal poverty level, and pregnant women and children under age 19 from families with incomes up to 250% of the FPL. Eligible individuals enroll in state-licensed HMOs and health plans, which are paid monthly per person rates for providing or arranging for health services for enrollees.

RIte Share was added in February 2001 to make it easier for working, Medicaid-eligible individuals to access ESHI. Although it started out as voluntary for employees, the state realized early that to make the program cost effective, enrollment would have to be mandatory. Under the program, DHS pays all or part of the family's monthly premium, based on family income and size, and all co-payments and deductibles. And it provides wrap around coverage for Medicaid–covered services that the employer plan does not offer. The employer's coverage must be substantially similar in amount, scope, and duration to the benefits that RIte Care provides when evaluated in conjunction with the wrap around benefits.

In the first year, enrollment was just over 400 individuals. But the numbers have grown each year—currently about 6,000 people participate.

Cost Sharing

Although DHS pays enrollees' deductibles and co-payments, since January 2002, families with incomes above 150% of the FPL, whether in RIte Care or RIte Share, have been expected to pay premiums. (This was done in large part to prevent “crowd out, “ where families would opt for RIte Care instead of the employer coverage.) The state legislature raised the premiums (from a maximum of 3% of income to a maximum of 5%) on August 1, 2002, where they have remained. According to the 2004 report, only 10% of all RIte Care/RIte Share families are subject to cost sharing. Table 1 presents the premiums since the program's inception.

Table 1: RIte Care/RIte Share Premiums

Income Level

Monthly Family Premium (1/1/02 to 7/31/02)

Monthly Family Premium (8/1/02 to present-)

150%-185% of FPL

$43

$61

185%-200% of FPL

$53

$77

200%-250% of FPL

$58

$92

The state had considered having enrollees pay co-payments but found it would be difficult to do so and stay within the federal law's requirement that families pay no more than 5% of their income on cost sharing.

Savings

Costs Avoided. The idea behind premium assistance is it saves Medicaid funds by diverting potential full Medicaid enrollees into ESHI. DHS performed an analysis to determine the potential savings from RIte Share. Essentially, it computed gross savings by subtracting the RIte Care Expenditures Avoided from the RIte Share expenses.

There are four components of avoided expenditures: RIte Care capitation payments, risk sharing, stop-loss (where the state shares the risk with the health plans), and transition payments to community health centers. RIte Care capitation payments include the monthly payments to the health plans, as well as monthly fixed payments for each delivery (prenatal visits through delivery), and payments to the Women's and Infant Hospital for neonatal intensive care (state assumed risk for NICU services).

DHS entered into risk-share arrangements with all RIte Care-participating health plans to ensure that enrollees have a choice of plans. Under this methodology, risk is shared according to whether the actual medical loss ratio (medical expenses divided by premiums the state pays) in any one quarter are within agreed-upon ranges or “risk corridors.”

The stop-loss cost avoidance component represented those services that health plans had covered on a partial-risk basis from the beginning. For example, the plans cover all transplant costs up to the actual transplant of the organ with the state paying the rest. And they pay 30 days of inpatient mental health care and the first 30 outpatient days, with the state paying the rest.

Finally, under RIte Share the state avoided the costs associated with paying community health centers (CHC), which the state has done since 1994 to help the centers transition from being paid by the health plans on a cost basis to a fee-based reimbursement. The state pays a fixed fee per month for each RIte Care member who selects a CHC as its primary care provider.

The state subtracted from its RIte Care “costs” the RIte Share enrollee's portion of the monthly premium because these are also public expenditures the state avoided.

RIte Share Expenditures. The RIte Share expenditures consist of premium subsidies the state pays the employer, wrap around services, and any co-payments and deductibles. Administrative costs are considered separately.

Table 2 presents the methodology Rhode Island used to show how RIte Share saved the state money from its inception through the first half of FY 2004.

Table 2: RIte Share Gross and Net Savings

 

SFY 2002

SFY2003

SFY 2004*

RITE CARE EXPENDITURES AVOIDED

     

1. RIte Care Capitations

$814,569

$5,694,085

$4,474,486

2. Risk Share

40,275

307,883

364,475

3. Stop-Loss

5.643

22,501

17,495

4. CHC Transition Payments

20,113

150,004

116,632

5. Subtotal (1+2+3+4)

880,601

6,174,472

4,973,088

6. Cost-Shares Paid

-0-

200,091

149,333

Total RIte Care Expenditures Avoided (5-6)

$880,601

$5,974,381

$4,823,755

RITE SHARE EXPENDITURES

     

1. Premium Subsidies

$406,600

$2,367,055

$2,039,378

2. Supplementary Benefits

31,201

666,103

61,906

Total RIte Share Expenditures

$437,801

$3,033,158

$2,101,284

RITE SHARE SAVINGS

     

1. Gross Federal-Level Savings

$271,822

$1,861,337

$1,771.440

2. Gross State-Level Savings

170,979

1,079,885

951,031

3. Gross RIte Share Savings (1+2)

$442,881

$2,941,222

$2,722,471

4. State-Level Administrative Expenses

$332, 270

$507,796

$278,742

5. Net State-Level RIte Share Savings (2-4)

($161,291)

$572,089

$672,289

Source: Rhode Island Department of Human Services, 2004 report

Table 3 shows the calculations on a per-member per-month (PMPM) basis. Actual aggregate gross RIte Share Savings, through December 2003, were $84.66 PMPM. Through the same time period, aggregate net RIte Share Savings were $18.02 PMPM.

Table 3: Estimated RIte Share Savings on a PMPM Basis

 

SFY 2002

SFY 2003

SFY 2004* (estimate)

RIte Care Expenditures Avoided

$161.08

$159.31

$165.44

RIte Share Expenditures

$80.08

$80.88

$72.07

Gross RIte Share Savings

$81.00

$78.43

$93.37

Net RIte Share Savings

($29.50)

$15.26

$23.06

Source: Rhode Island Department of Human Services, 2004 report

*July 1, 2003 to December 31, 2003 only.

Program Challenges

Although RIte Share has helped the state realize significant savings in its RIte Care program and has likely encouraged greater use of ESHI by low-income families, the program has faced several challenges along the way.

Program director Leddy characterizes some of these as “churning,” that is a number of variables change over time and affect program administration. For example, Medicaid eligibility changes as a family's circumstances change. Also, enrollees' employment changes; they work different hours and change jobs. And there is the difficulty of reconciling the federal limitation on open enrollment periods with the need for enrollment flexibility for RIte Share families.

Other issues include (1) the lack of information about which employers offer health insurance, making it hard for DHS to transition RIte Care enrollees into RIte Share; (2) Medicaid rules that make providing wrap around coverage difficult since they vary depending on who is getting the coverage; (3) employers increasing their premiums and requiring the employees to pay more, making cost effectiveness a more elusive goal; (4) employers adopting health plans with increased member cost sharing (e.g., high deductibles and scaled down benefits) that also make cost effectiveness more difficult; and (5) health savings accounts and other flexible benefit programs making it more difficult for the state to mandate that employees take this coverage.

Covering Kids and Families' LaPierre adds that the process of moving families from RIte Care to RIte Share was a manual one which required a lot of staff time at a considerable cost to the state. She indicated that initially, there was no “infrastructure” between the eligibility offices and employers where information could be exchanged more readily. She acknowledged that the state has been working hard to automate to make this information easily available.

She also remarked that employers initially opposed the program, saying it created too great a burden on them. That sentiment has changed, and the state and LaPierre's organization have tried to sell the program as an employee retention program, rather than a mandate, with the result being more receptiveness by the employers.

Comments from RI About Connecticut's Proposal for Premium Assistance

Leddy also commented about Connecticut's proposal to try premium assistance. She expressed concern about the state's relatively low income eligibility limits (under 100% for caretaker adults). In Rhode Island, families with incomes up to 185% of the FPL get coverage, and the RIte Share group consists mostly of families with incomes between 100% and 185% of the FPL. Below these levels, Leddy said, employers typically do not offer coverage or the premium assistance was not cost effective for the state. Although Rhode Island covers children up to 250% of the FPL, very few of the higher income children are in RIte Share. In fact, Leddy stated that in families where the child only is getting RIte Care, the PMPM averages $300 per month.

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