Health Insurance
States' Protections and Programs Benefit Some Unemployed Individuals Gao ID: GAO-03-191 October 25, 2002The six states reviewed had in place a variety of protections, established prior to the economic downturn, to assist unemployed individuals in maintaining health insurance coverage: State-mandated continuation coverage, which required small businesses to extend their group health coverage to former employees and their families who choose to pay for it. Guaranteed conversion, which required insurers to allow eligible individuals to convert their group coverage to individual health insurance policies. Guaranteed issue, which required insurers to offer coverage to those who did not have access to group coverage or public insurance. High-risk pools, state-created associations that offered comprehensive health insurance benefits to individuals with acute or chronic health conditions. However, individuals usually bore the full cost of the premiums, which was usually higher than their premium cost under employer-sponsored plans. For individuals who relied on unemployment benefits as their principal income, premiums absorbed a significant share of the benefit.
GAO-03-191, Health Insurance: States' Protections and Programs Benefit Some Unemployed Individuals
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
October 2002:
States‘ Protections and Programs Benefit Some Unemployed Individuals:
GAO Highlights:
Highlights of GAO-03-191, a report to the Ranking Minority Member,
Senate
Committee on Finance and Senator Gordon Smith:
HEALTH INSURANCE:
States‘ Protections and Programs Benefit Some Unemployed Individuals:
Why GAO did this Study:
In March 2001, the longest economic expansion in United States history
ended,
and the country entered a recession, signified in part by a significant
increase
in unemployment. Because rising unemployment can adversely affect
individuals‘
health insurance status, GAO was asked to review the policies of six
states with
significant recent increases in unemployment to (1) identify
protections
in place
that assist unemployed individuals in maintaining or obtaining health
insurance
coverage and (2) assess the extent to which unemployed individuals and
their families
can rely on Medicaid and the State Children‘s Health Insurance Program
(SCHIP) as a
source of health insurance.
The six states reviewed had in place a variety of protections,
established prior to the
economic downturn, to assist unemployed individuals in maintaining
health insurance coverage
State-mandated continuation coverage, which required small businesses
to extend their group
health coverage to former employees and their families who choose to
pay for it. Guaranteed
conversion, which required insurers to allow eligible individuals to
convert their group
coverage to individual health insurance policies.Guaranteed issue,
which
required insurers to
offer coverage to those who did not have access to group coverage or
public insurance.
High-risk pools, state-created associations that offered comprehensive
health insurance
benefits to individuals with acute or chronic health conditions.
However, individuals generally
bore the full cost of the premiums, which was usually higher than
their premium cost under
employer-sponsored plans. For individuals who relied on unemployment
benefits as their principal
income, premiums absorbed a significant share of the benefit.
Unemployed workers were less likely than their children to be eligible
for coverage under state
Medicaid or SCHIP programs because adult eligibility thresholds were
less generous than those for
children. Coverage of adults was limited in four of the six states,
as average unemployment
benefits were at least twice the amount of income allowed for Medicaid
eligibility. Colorado,
Oregon, and Utah have received recent federal approval to expand
Medicaid and SCHIP coverage for
certain low-income adults. While New Jersey had a similar expansion of
coverage in 2001, it
suspended new enrollment for adults in June 2002 due to budgetary
constraints.We incorporated
technical comments provided by representatives from states‘ insurance
departments, high-risk
pools, and Medicaid programs, as appropriate. We did not obtain
comments from the Department
of Health and Human Services because we did not assess its role
in these programs.
[See PDF for Image]
[End of Figure]
To view the full report, including the scope
and methodology, click on the link above.
For more information, contact
Kathryn G. Allen (202) 512-7114
Health Insurance for Unemployed:
GAO-03-191:
Contents:
Letter1:
Results in Brief:
Background:
Various State Protections Offer Assistance, but Unemployed Individuals
Generally Bear the Full Premium Cost:
Eligibility for Medicaid and SCHIP Programs Is Limited for Unemployed
Adults Despite Expansions in Some States:
Concluding Observations:
State Comments:
Appendix I: HIPAA Group-to-Individual Portability in Six
States:
Related GAO Products:
Tables:
Table 1: Insurance Status of Nonelderly Adults, by Employment Level,
Firm Size, and Industry, 2001:
Table 2: Changes in Unemployment by State, March 2001 to March 2002:
Table 3: Percentage Change in Employment for Selected Industries for
Six States, March 2001 to March 2002:
Table 4: Unemployment Benefits in Six States, First Quarter 2002:
Table 5: State Protections That Facilitate Access to Health Insurance
Coverage for the Unemployed in Six Selected States:
Table 6: State Continuation Coverage Requirements and Benefits:
Table 7: Selected Characteristics of the Standard Guaranteed Issue
Plans Covering Hospital and Medical Services in New Jersey, September
2002:
Table 8: Selected Characteristics of High-Risk Pools in Three States,
June 2002:
Table 9: Receipt of Unemployment Benefits Often Made Parents Ineligible
for Medicaid:
Table 10: Asset Exclusions for Parents under Medicaid in Six States:
Table 11: Medicaid and SCHIP Family Income Eligibility Limits and Asset
Tests for Children‘s Eligibility in Six States, 2002:
Table 12: Eligibility Levels for Childless Adults and Parents Applying
for Medicaid, 2002:
Table 13: Approaches to Group-to-Individual Portability in Six States:
Figures:
Figure 1: Source of Health Insurance Coverage of Nonelderly Adults and
Children, 2001:
Figure 2: States‘ Shares of Nonelderly Residents Who Are Uninsured
Compared to U.S. Average, March 2002:
Abbreviations:
COBRA Consolidated Omnibus Budget Reconciliation Act of 1985:
CPS Current Population Survey:
HHSDepartment of Health and Human Services:
HIPAA Health Insurance Portability and Accountability Act of 1996:
HMO health maintenance organization:
MEPS Medical Expenditures Panel Survey:
PPO preferred provider organization:
SCHIP State Children‘s Health Insurance Program:
United States General Accounting Office:
Washington, DC 20548:
October 25, 2002:
The Honorable Charles E. Grassley
Ranking Minority Member
Committee on Finance
United States Senate:
The Honorable Gordon Smith
United States Senate:
In March 2001, the longest economic expansion in United States history
ended, and the country entered a recession, as indicated by a
significant decline in overall business activity, including employment,
over several months.[Footnote 1] From March 2001 to March 2002, the
national unemployment rate increased from 4.3 percent to 5.7 percent--
or from 6.1 to 8.1 million unemployed individuals--the highest
unemployment rate in more than 6 years.[Footnote 2] Since about two-
thirds of nonelderly Americans obtain their health insurance coverage
through an employer, individuals who become unemployed face not only a
loss of income, but also potentially the loss of employer-subsidized
health insurance. Although the number of people without health
insurance increases as the unemployment rate increases, the rates of
increase are not the same because a sizable number of workers (25
percent) do not have health insurance through their employers. Workers
less likely to receive insurance include those who work in industries
where employment is cyclical in nature, such as agriculture or
construction; when they lose their jobs, their health insurance status
is unaffected.
Federal laws provide some protections to help newly unemployed
individuals maintain health insurance coverage by allowing them to
purchase coverage under their former employer‘s group health plan or to
obtain coverage through the individual insurance market. Because states
regulate many aspects of health insurance, they may also require
additional protections for unemployed workers. Two federal-state health
financing programs for certain low-income individuals--Medicaid and the
State Children‘s Health Insurance Program (SCHIP)--may also be a source
of health insurance coverage for unemployed individuals or their
families.
In light of the recent rise in unemployment and its relationship to
health insurance coverage, you asked us to review selected states with
significant recent increases in unemployment to (1) identify what
protections states have to assist unemployed individuals in maintaining
or obtaining health insurance coverage and (2) assess the extent to
which unemployed individuals and their families can rely on these
states‘ Medicaid and SCHIP programs as a source of health insurance
coverage.
To examine these issues, we analyzed national and state employment data
from the Bureau of Labor Statistics and data on the uninsured from the
2002 Current Population Survey (CPS) Annual Demographic
Supplement.[Footnote 3] Also, we reviewed six states (Colorado, New
Jersey, North Carolina, Ohio, Oregon and Utah) that had above-average
increases in unemployment from March 2001 to March 2002. We also
contacted representatives from states‘ insurance and labor departments
and Medicaid programs and obtained statutory, regulatory and other
information on state protections and programs that assist unemployed
individuals in maintaining or obtaining health insurance coverage. We
conducted our work from May 2002 through October 2002 in accordance
with generally accepted government auditing standards.
Results in Brief:
The six states we reviewed had established various protections prior to
the economic downturn to assist individuals in maintaining or obtaining
health insurance coverage. These protections benefit individuals who
have lost their jobs in maintaining coverage under their former
employer‘s group plan or in obtaining individual health insurance. They
included: requiring small businesses to extend their group health
coverage to former employees and their families if the former employees
pay for it; requiring insurers to allow individuals to convert group
coverage into individual coverage; and establishing high-risk pools
that offer comprehensive health insurance benefits to individuals with
acute or chronic health conditions. However, because states generally
did not provide subsidies and the individual thus bore the full cost of
the premium under the state protections, unemployed persons generally
had to pay more for coverage than they would as participants in an
employer-sponsored plan. For those relying on unemployment benefits as
their principal income, the premium costs under these various
protections would absorb a significant share. For example, the premiums
for the high-risk pool in one state nearly equaled the entire average
unemployment benefit. The six states we reviewed did not have data on
the number of individuals who lost their health insurance during the
current economic downturn and therefore could not quantify the number
who might benefit from these protections. A few states quantified the
number of persons who actually used certain protections. For example,
states tracked participation in high-risk pools and found increased
enrollment from March 2001 to March 2002. However, increased
participation could not be attributed solely to increases in the number
of unemployed because other conditions, such as insurers leaving the
market in the state, may have also had an effect.
Unemployed individuals who look to states‘ Medicaid and SCHIP programs
for health insurance coverage for themselves and their families may
find their eligibility limited. Unemployed workers were less likely
than their children to be eligible for coverage under Medicaid or SCHIP
because adult eligibility thresholds were less generous than those for
children. In four of the six states we reviewed, average unemployment
benefits were at least twice the amount of income allowed for Medicaid
eligibility. Two states with lower income eligibility for adults--Utah
and Colorado--have received federal approval to expand Medicaid and
SCHIP coverage for some adults who would otherwise be ineligible for
public coverage--a potential benefit for some unemployed individuals.
In addition, Oregon also recently received federal approval for program
expansions. In the wake of recent fiscal pressures resulting from the
economic downturn, however, New Jersey recently suspended new
enrollment for adults for its Medicaid and SCHIP programs due to
budgetary constraints. In addition, some states‘ efforts to expand
coverage for uninsured adults, in part by providing adult coverage with
funds intended for children, has raised significant federal fiscal and
legal issues.
Representatives from these states‘ insurance departments, high-risk
pools, and Medicaid programs provided technical comments on a draft of
this report, which we incorporated as appropriate. We did not obtain
comments from the Department of Health and Human Services (HHS) because
we did not assess HHS‘s role or performance with respect to protections
or programs that may benefit unemployed individuals.
Background:
Employer-sponsored coverage is the predominant source of health
insurance in the United States. In 2001, 67 percent of all nonelderly
adults (over 118 million) and 64 percent of all children (46 million)
obtained health insurance through an employer (see fig. 1). Nearly all
large firms and almost half of smaller firms offer health insurance
coverage for their employees.[Footnote 4] Federal tax laws provide
incentives for employers to pay some or all of the premiums because
their contributions are tax deductible as a business expense; the
employer-paid portion of the premiums is also not considered taxable
income for employees. Although the share of the premiums paid by
employers varies with the size of the firm and the type of health plan,
firms pay an average of more than 80 percent of the premiums for single
coverage and more than 75 percent for family coverage.[Footnote 5]
Also, for many individuals, the premiums for employment-based insurance
are lower than those in the private market for comparable individual
coverage.
Figure 1: Source of Health Insurance Coverage of Nonelderly Adults and
Children, 2001:
[See PDF for Image]
Note: Due to rounding, percentages may not add to 100 percent.
[A] Includes Medicare and military health insurance coverage.
Source: GAO Analysis of the 2002 Current Population Survey Annual
Demographic Supplement.
[End of Figure]
Medicaid and SCHIP:
Low-income individuals without access to employer-based insurance
coverage may qualify for Medicaid or SCHIP. These public insurance
financing programs covered over 40 million low-income people at a cost
of about $232 billion in federal and state expenditures in 2001.
Established in 1965, Medicaid is a joint federal-state entitlement
program that finances health care coverage for certain low-income
individuals. Medicaid eligibility is based in part on family income and
assets. States set their own eligibility criteria within broad federal
guidelines. For example, states vary in the kind and amount of income
they exclude from consideration when determining eligibility.
Similarly, while some states set a ceiling on the value of assets--such
as cars, savings accounts, or retirement income--that individuals may
have available to them in order to be deemed eligible for Medicaid,
other states have no asset test for eligibility. To the extent that
asset tests are present in a state‘s Medicaid program, individuals
would need to ’spend down“ or dispose of their assets to become
eligible for Medicaid.
More than half of the individuals enrolled in Medicaid are children.
Federal law requires states to provide Medicaid coverage to children
age 5 and under if their family income is at or below 133 percent of
the federal poverty level and to children age 6 to 19 in families with
incomes at or below the federal poverty.[Footnote 6] Most states have
received federal approval to set income eligibility thresholds that
expand their Medicaid programs beyond the minimum federal statutory
levels for children.
Medicaid eligibility for nondisabled adults is more limited. Federal
law requires states to provide Medicaid coverage to pregnant women up
to 133 percent of the federal poverty level, and mandatory eligibility
for parents is linked to the Medicaid family coverage category
established in the 1996 federal welfare reform law.[Footnote 7] At a
minimum, federal law requires states to offer Medicaid coverage to
parents in families that meet the income and other eligibility rules
that the state had in place on July 16, 1996, for determining
eligibility for welfare assistance. Nationwide, considerable variation
in Medicaid eligibility thresholds for parents exists. For example,
Alabama covers parents whose family income is up to 13 percent of the
federal poverty level. At the other end of the spectrum, Minnesota
covers parents with family incomes up to 275 percent of the federal
poverty level. The Medicaid statute does not generally provide for
mandatory or optional coverage of nondisabled childless adults.
However, some states have received federal approval to expand their
Medicaid programs to include coverage for some of them.[Footnote 8]
In 1997, the Congress created SCHIP to provide health coverage to
children living in families whose incomes exceed the eligibility limits
for Medicaid. While SCHIP is generally targeted to children in families
with incomes at or below 200 percent of the federal poverty level, each
state may set its own income eligibility limits, within certain
guidelines.[Footnote 9] As of January 2002, states‘ upper income
eligibility threshold for SCHIP ranged from 133 to 350 percent of the
federal poverty level. Unlike Medicaid, which entitles all those
eligible to coverage, SCHIP has a statutory funding limit of $40
billion over 10 years (fiscal years 1998 through 2007). Under SCHIP,
states can cover the entire family--including parents or custodians of
eligible children--if it is cost-effective to do so, meaning that the
expense of covering both adults and children in a family does not
exceed the cost of covering just the children. Similar to Medicaid,
states can obtain federal approval of SCHIP expansions through a
section 1115 waiver.
Characteristics of Uninsured Individuals:
While more than 85 percent of Americans obtain health insurance
coverage from the private insurance market or public programs, 40.9
million nonelderly Americans (16.5 percent) had no health insurance in
2001. Approximately 75 percent of the uninsured nonelderly adults had
jobs. Individuals working part time, for small firms, or in certain
industries, such as agriculture or construction, were more likely to be
uninsured (see table 1). Young adults, minorities, and low-income
persons were also more likely to be uninsured.[Footnote 10] The
percentage of uninsured is generally higher in the South and West and
lower in the Midwest and Northeast (see fig. 2). Texas had the highest
uninsured rate of nonelderly Americans (25.9 percent) of any state in
2001, while Iowa had the lowest (8.7 percent).
Table 1: Insurance Status of Nonelderly Adults, by Employment Level,
Firm Size, and Industry, 2001:
Employment characteristic: By employment level; Percentage uninsured:
[Empty].
Employment characteristic: By employment level; Part-time; Percentage
uninsured: 24.0.
Employment characteristic: By employment level; Full-time; Percentage
uninsured: 13.8.
Employment characteristic: By firm size; Percentage uninsured: [Empty].
Employment characteristic: By firm size; Fewer than 10 employees;
Percentage
uninsured: 30.3.
Employment characteristic: By firm size; 10 to 24 employees; Percentage
uninsured:
25.7.
Employment characteristic: By firm size; 25 to 99 employees; Percentage
uninsured:
18.9.
Employment characteristic: By firm size; 100 or more employees;
Percentage uninsured:
10.9.
Employment characteristic: By industry; Percentage uninsured: [Empty].
Employment characteristic: By industry; Agriculture, forestry and
fishing;
Percentage uninsured: 38.2.
Employment characteristic: By industry; Construction; Percentage
uninsured: 31.9.
Employment characteristic: By industry; Trade; Percentage uninsured:
23.9.
Employment characteristic: By industry; Services; Percentage
uninsured: 15.0.
Employment characteristic: By industry; Mining; Percentage uninsured:
12.9.
Employment characteristic: By industry; Transportation and public
utilities;
Percentage uninsured: 12.7.
Employment characteristic: By industry; Manufacturing; Percentage
uninsured: 11.8.
Employment characteristic: By industry; Finance, insurance and real
estate;
Percentage uninsured: 9.2.
Employment characteristic: By industry; Government; Percentage
uninsured: 4.3.
Source: GAO analysis of the 2002 Current Population Survey Annual
Demographic Supplement.
[End of table]
Figure 2: States‘ Shares of Nonelderly Residents Who Are Uninsured
Compared to U.S. Average, March 2002:
[See PDF for Image]
Source: GAO Analysis of the 2002 Current Population Survey Annual
Demographic Supplement.
[End of Figure]
Changes in Employment:
From March 2001 to March 2002, the national unemployment rate increased
1.4 percentage points, from 4.3 percent to 5.7 percent, with nine
states experiencing above-average increases. The largest percentage
point increases occurred in Colorado (2.6), Oregon (2.5), and Utah
(2.0) (see table 2).
Table 2: Changes in Unemployment by State, March 2001 to March 2002:
Change: 2.6; State: Colorado.
Change: 2.5; State: Oregon.
Change: 2.0; State: Utah.
Change: 1.9…; State: Ohio.
Change: 1.8; State: Arizona, New Jersey.
Change: 1.7; State: California, North Carolina.
Change: 1.6; State: New York.
Change: 1.5; State: Maryland, New Mexico, Tennessee, Texas.
Change: 1.4; State: United States, Virginia.
Change: 1.3; State: Florida, Mississippi, Wisconsin.
Change: 1.2; State: Massachusetts, Michigan.
Change: 1.1; State: Nevada, Pennsylvania.
Change: 1.0; State: Alabama, New Hampshire, Indiana.
Change: 0.9; State: Georgia, Illinois, South Carolina, Washington, West
Virginia.
Change: 0.8; State: Idaho, Minnesota.
Change: 0.7; State: Connecticut, Missouri.
Change: 0.6; State: Maine, Nebraska, Oklahoma, Vermont.
Change: 0.4; State: Hawaii, North Dakota.
Change: 0.3; State: Arkansas, District of Columbia, Iowa, Kentucky.
Change: 0.2; State: Kansas, South Dakota, Wyoming.
Change: 0.1; State: Delaware.
Change: 0.0; State: Alaska, Montana.
Change: -0.2; State: Louisiana.
Change: -0.5; State: Rhode Island.
Source: U.S. Bureau of Labor Statistics data.
[End of table]
Across the six states we reviewed--Colorado, New Jersey, North
Carolina, Ohio, Oregon and Utah--the greatest unemployment increases
were generally seen in manufacturing, construction, and transportation
and public utilities (see table 3).
Table 3: Percentage Change in Employment for Selected Industries for
Six States, March 2001 to March 2002:
Industry: Construction; Colorado: -5.2; New Jersey: 2.2; North
Carolina: -3.6; Ohio: -3.2; Oregon: -10.1; Utah: -8.2.
Industry: Finance, insurance and real estate; Colorado: -1.0; New
Jersey: 2.6; North Carolina: -0.8; Ohio: 0.0; Oregon: 1.0; Utah: 0.7.
Industry: Government; Colorado: 3.9; New Jersey: 2.0; North Carolina:
1.4; Ohio: 1.4; Oregon: 0.8; Utah: 1.4.
Industry: Manufacturing; Colorado: -8.8; New Jersey: -6.3; North
Carolina: -6.4; Ohio: -4.1; Oregon: -7.5; Utah: -6.8.
Industry: Mining; Colorado: 8.9; New Jersey: 0.0; North Carolina: 2.6;
Ohio: -3.1; Oregon: -11.1; Utah: -5.0.
Industry: Services; Colorado: -3.3; New Jersey: 0.3; North Carolina:
0.7; Ohio: 0.0; Oregon: -0.9; Utah: 1.4.
Industry: Trade; Colorado: -1.3; New Jersey: 0.0; North Carolina: -0.6;
Ohio: -1.1; Oregon: -1.3; Utah: -1.5.
Industry: Transportation and public utilities; Colorado: -7.0; New
Jersey: -3.7; North Carolina: -1.4; Ohio: -2.2; Oregon: -3.5; Utah: -
3.3.
Source: U. S. Bureau of Labor Statistics data.
[End of table]
Unemployed individuals may be eligible for financial assistance through
the Unemployment Insurance Program, a federal-state partnership
designed to partially replace the lost earnings of individuals who
become unemployed through no fault of their own.[Footnote 11] While
program requirements vary by state, individuals eligible for
unemployment insurance generally (1) have worked for a specified period
in a job covered by the program,
(2) left the job involuntarily, and (3) are available, able to work,
and actively seeking employment. Most states provide a maximum of 26
weeks of benefits, although benefits in some states have been extended
for an additional 13 weeks in times of high unemployment.[Footnote 12]
Benefits are generally based on a percentage of an individual‘s
earnings over the prior year, up to a maximum amount. The national
average weekly unemployment benefit was $254 in the first quarter of
2002, with benefits lasting an average of nearly 15 weeks. In the six
states we reviewed, the weekly unemployment benefit ranged from $253.80
in Ohio to $327.15 in New Jersey (see table 4).
Table 4: Unemployment Benefits in Six States, First Quarter 2002:
State: Colorado; Average weekly benefit amount (in dollars): 311.62;
Average duration
(in weeks): 13.0.
State: New Jersey; Average weekly benefit amount (in dollars): 327.15;
Average duration
(in weeks): 17.2.
State: North Carolina; Average weekly benefit amount (in dollars):
256.24; Average duration
(in weeks): 11.4.
State: Ohio; Average weekly benefit amount (in dollars): 253.80;
Average duration
(in weeks): 14.4.
State: Oregon; Average weekly benefit amount (in dollars): 261.99;
Average duration
(in weeks): 15.3.
State: Utah; Average weekly benefit amount (in dollars): 275.28;
Average duration
(in weeks): 12.7.
State: United States; Average weekly benefit amount (in dollars):
254.00; Average duration
(in weeks): 14.7.
Source: U.S. Department of Labor.
[End of table]
Federal Protections:
Although many aspects of health insurance, including premiums, are
regulated at the state level,[Footnote 13] two federal laws--the
Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)[Footnote
14] and the Health Insurance Portability and Accountability Act of 1996
(HIPAA)[Footnote 15]--established requirements designed to help
certain individuals maintain health coverage after loss of employment.
COBRA provided that firms with 20 or more employees offer former
employees and their dependents the opportunity to continue their group
coverage for at least 18 months.[Footnote 16] To qualify for COBRA
benefits, former employees must have been covered by the employer‘s
plan the day before they stopped working at the firm. Former employees
are eligible only for the health plan coverage that they received while
employed. COBRA coverage is not available if the former employer
discontinues health benefits to all employees, as in a company closure.
While employers must allow COBRA-eligible former employees to continue
receiving coverage under the employer‘s group health plan, the employer
does not have to pay for it. The former employee can be required to pay
the full cost of the group health premium plus 2 percent, which is
designed to cover the employer‘s administrative cost of keeping the
former employee in the plan.[Footnote 17] Based on data from a 2002
survey of employers, the average cost of COBRA coverage is
approximately $260 a month for an individual and $676 a month for a
family.[Footnote 18] Based on a survey of a national sample of 1,001
nonelderly adults, a recent study estimated that because of the cost of
COBRA continuation coverage, ’only 23 percent of employed, insured
adults would be very likely to participate in the COBRA program if they
lost their jobs.“[Footnote 19]
Unlike COBRA, which provided the opportunity for individuals losing
their jobs to continue their private group health insurance, HIPAA
provisions guarantee certain individuals losing group coverage the
right to purchase coverage in the individual market.[Footnote 20] HIPAA
provides guaranteed access to health coverage for individuals who,
among other criteria, had at least 18 months of coverage without a
break of more than 63 days and with the most recent coverage being
under a group health plan. HIPAA stipulates that states must either
require health insurers to make certain of their policies available to
qualifying individuals or use an ’alternative mechanism“ to offer them
coverage. An example of an alternative mechanism is a state-sponsored
high-risk pool, which offers comprehensive insurance coverage to
individuals with preexisting health conditions who are otherwise unable
to obtain coverage in the individual market or who may be able to
obtain coverage only at a prohibitive cost. (Appendix I describes how
the six states that we reviewed guarantee access to coverage under
HIPAA.) As with COBRA, individuals bear the full cost of individual
coverage received under HIPAA. Since HIPAA provides for coverage in the
individual insurance market, in which premiums are generally based on
the characteristics of the individual applicant, this coverage is
likely to be more costly for many applicants for a similar level of
coverage than premiums for groups, where risk is spread over all
members of the group. The differences will be smaller in some states
that have imposed restrictions on how much insurers can vary premiums
based on an individual‘s characteristics.
Various State Protections Offer Assistance, but Unemployed Individuals
Generally Bear the Full Premium Cost:
The six states we reviewed had instituted various protections that
might assist individuals who have lost their jobs in maintaining or
obtaining health insurance. Unemployed individuals, however, generally
bore the full cost of the premium. States did not have data on the
number of individuals who lost their health insurance during the
economic decline and thus, who could benefit from these protections,
but did have data on the number of individuals using some of the
protections.
States‘ Protections Generally Allow Unemployed Individuals to Purchase
Insurance at Full Cost:
The six states we reviewed had in place a variety of protections, which
were established prior to the economic downturn. Unemployed
individuals, however, were generally responsible for bearing the full
costs of purchasing health insurance. Key protections to assist
unemployed individuals in maintaining health insurance coverage
included:
* State-mandated continuation coverage, through which states require
small businesses to extend their group health coverage to former
employees and their families if the former employees pay for it;
* Guaranteed conversion, through which states require insurers to give
eligible individuals the ability to convert their group coverage to an
individual health insurance policy;
* Guaranteed issue, through which states require insurers to offer
coverage to individuals who do not have access to group coverage or
public insurance; and:
* High-risk pools, in which states create associations that offer
comprehensive health insurance benefits to individuals with acute or
chronic health conditions.
Table 5 indicates the extent to which the six states we reviewed had
adopted such protections.
Table 5: State Protections That Facilitate Access to Health Insurance
Coverage for the Unemployed in Six Selected States:
State: Colorado; State-mandated continuation coverage: ¸; State-
mandated guaranteed conversion: ¸; State-mandated guaranteed issue:
[Empty]; High-risk pool: ¸.
State: New Jersey; State-mandated continuation coverage: ¸; State-
mandated guaranteed conversion: [Empty]; State-mandated guaranteed
issue: ¸; High-risk pool: [Empty].
State: North Carolina; State-mandated continuation coverage: ¸; State-
mandated guaranteed conversion: ¸; State-mandated guaranteed issue:
[Empty]; High-risk pool: [Empty].
State: Ohio; State-mandated continuation coverage: ¸; State-mandated
guaranteed conversion: ¸; State-mandated guaranteed issue: ¸; High-risk
pool: [Empty].
State: Oregon; State-mandated continuation coverage: ¸; State-mandated
guaranteed conversion: [A]; State-mandated guaranteed issue: [Empty];
High-risk pool: ¸.
State: Utah; State-mandated continuation coverage: ¸; State-mandated
guaranteed conversion: ¸; State-mandated guaranteed issue: [B]; High-
risk pool: ¸.
State: Total; State-mandated continuation coverage: 6; State-mandated
guaranteed conversion: 4; State-mandated guaranteed issue: 2; High-risk
pool: 3.
[A] Oregon requires insurers to offer either a low-cost or prevailing
benefit plan to eligible individuals leaving that insurers‘ group
coverage. To be eligible, individuals must, among other criteria, be
state residents, have at least 6 months of prior group coverage, and
not be eligible for Medicare or Medicaid.
[B] Utah does not have a guaranteed issue law, but residents who do not
meet the medical criteria for the state‘s high-risk pool are guaranteed
access to a policy from the private insurance company that had declined
them coverage.
Source: State information, October 2002.
[End of table]
Of the six states we reviewed, only Oregon assisted lower income
unemployed individuals in paying for the cost of premium coverage.
Previously funded solely with state resources, the program was unable
to expand enrollment for nearly 3 years and had a significant waiting
list due to budget constraints. However, in October 2002, Oregon
received approval to expand this program using federal funds.[Footnote
21]
State-Mandated Continuation Coverage:
Each of the six states that we reviewed had a health care coverage
continuation law, which applied to employers with fewer than 20
employees and thus were not subject to COBRA requirements. While the
states required that employers make health insurance coverage available
to eligible individuals, the employers were not required to pay for
this coverage. In New Jersey, North Carolina and Utah, eligible
individuals can be required to pay up to 102 percent of the cost of the
premium charged under their former employer‘s plan (the full cost of
the group health premium plus a 2 percent fee to cover the employer‘s
administrative costs) (see table 6). In the other three states,
individuals may be required to pay up to the full cost of the premium,
but no administrative fee may be added. Like COBRA, the state health
care coverage continuation laws did not apply to companies that
terminate coverage, such as when going out of business. Nationally,
premiums for state continuation coverage averaged approximately $260 a
month for an individual and $676 a month for a family in 2001, which
equals 24 to 61 percent of the average unemployment benefit.[Footnote
22]
Table 6: State Continuation Coverage Requirements and Benefits:
State: Colorado; Maximum premium (expressed as a percentage of group
rate): 100; Prior continuous coverage requirement
(in months): 6; Maximum required length of coverage
(in months): 18.
State: New Jersey; Maximum premium (expressed as a percentage of group
rate): 102; Prior continuous coverage requirement
(in months): a; Maximum required length of coverage
(in months): 12.
State: North Carolina; Maximum premium (expressed as a percentage of
group rate): 102; Prior continuous coverage requirement
(in months): 3; Maximum required length of coverage
(in months): 18.
State: Ohio; Maximum premium (expressed as a percentage of group rate):
100; Prior continuous coverage requirement
(in months): 3; Maximum required length of coverage
(in months): 6.
State: Oregon; Maximum premium (expressed as a percentage of group
rate): 100; Prior continuous coverage requirement
(in months): 3; Maximum required length of coverage
(in months): 6.
State: Utah; Maximum premium (expressed as a percentage of group rate):
102; Prior continuous coverage requirement
(in months): 6; Maximum required length of coverage
(in months): 6.
[A] Individuals must have been covered by employer-sponsored insurance
on
their last day of employment.
Source: State continuation coverage laws, as of October 2002.
[End of table]
Eligibility for, and the length of required coverage under, states‘
continuation coverage laws were often more limited than under COBRA.
While under COBRA individuals must only be insured the day before they
stop working, five of the six states that we reviewed had more
stringent requirements. They required individuals to have been
continuously insured for the 3 to 6 months immediately prior to the
separation from their job. New Jersey, Ohio, Oregon, and Utah required
employers to offer a year or less of continuation coverage, compared to
18 months under COBRA and in Colorado and North Carolina.
State-Mandated Guaranteed Conversion:
Once individuals exhaust their COBRA or state health care continuation
coverage, they may become eligible to convert to an individual policy.
Although the HIPAA provisions require states to ensure that eligible
individuals can move from group to individual health insurance
coverage, state guaranteed conversion is specific to an insurer. Four
of the six states we reviewed (Colorado, North Carolina, Ohio, and
Utah) required insurers to provide individual policies to eligible
individuals previously covered under a group policy sold by their
company. To be eligible for guaranteed conversion, individuals had to
have been continuously insured by the group health plan, or its
predecessor, for 3 to 12 months (depending on the state) prior to their
application for conversion--requirements that are less stringent than
the 18 months of prior continuous coverage under HIPAA.[Footnote 23]
State laws on guaranteed conversion contained no maximum length of
required coverage; as with other individual health insurance policies,
beneficiaries could renew the policies as long as they agreed to
continue paying the premiums and did not commit fraud. Individuals were
responsible for the conversion plan premiums, which could generally be
based on the demographic and health characteristics of the individual.
Thus, individual coverage under conversion policies--for which
individuals pay the full premium--was generally more expensive than
group coverage especially for higher-risk individuals.
State-Mandated Guaranteed Issue:
Of the six states we reviewed, New Jersey and Ohio had ’guaranteed
issue,“ which required insurers to offer coverage to all individuals in
the state who were not eligible for group coverage or public insurance
programs, if they were willing to pay for it. According to Ohio
statute, insurers in that state could charge an individual up to 2.5
times the rate charged to another individual with a similar
policy.[Footnote 24] In New Jersey, insurers were required to charge
each applicant the same price for five standard plans, but monthly
premiums varied by insurer.[Footnote 25] For a policy issued by a
health maintenance organization (HMO) in New Jersey, with a $30
copayment per visit to the doctor, monthly premiums for single coverage
ranged from $324 to more than $394, depending on the insurer, while
premiums for the other standard health plans were more
expensive.[Footnote 26] (A comparison of the five standard plans is in
table 7.) In the four states we reviewed that did not have guaranteed
issue laws, insurance companies could choose not to offer coverage to
individual applicants and have few or no restrictions on what they
could charge individuals based on their health status, age, or other
factors.
Table 7: Selected Characteristics of the Standard Guaranteed Issue
Plans Covering Hospital and Medical Services in New Jersey, September
2002:
Indemnity/PPO: Plan A[B]: Individuals‘ share of provider covered
charges: 50%; Indemnity/PPO: Plan B: Individuals‘ share of provider
covered charges: 40%[C]; Indemnity/PPO: Plan C: Individuals‘ share of
provider covered charges: 30%; Indemnity/PPO: Plan D: Individuals‘
share of provider covered charges: 20%; HMO: Individuals‘ share of
provider covered charges: Copayment
per visit[D]; Individuals‘ share of provider covered charges: [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible);
Indemnity/PPO: Plan A[B]: $5,000[E]; Indemnity/PPO: Plan B: $3,000[E];
Indemnity/PPO: Plan C: $2,500[E]; Indemnity/PPO: Plan D: $2,000[E];
HMO: f; [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges: Range
in monthly premiums for single coverage across carrier[G]; Indemnity/
PPO: Plan A[B]: [Empty]; Indemnity/PPO: Plan B: [Empty]; Indemnity/PPO:
Plan C: [Empty]; Indemnity/PPO: Plan D: [Empty]; HMO: [Empty]; [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Deductible; Type of plan[A]: Individuals‘ share of provider covered
charges: Individuals‘ maximum out of pocket cost (above their
deductible): Range in monthly premiums for single coverage across
carrier[G]: [Empty]; Indemnity/PPO: Plan A[B]: [Empty]; Indemnity/PPO:
Plan B: [Empty]; Indemnity/PPO: Plan C: [Empty]; Indemnity/PPO: Plan D:
[Empty]; HMO: [Empty]; [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: : $500;
Indemnity/PPO: Plan A[B]: : Not offered; Indemnity/PPO: Plan B: : Not
offered; Indemnity/PPO: Plan C: : Not offered; Indemnity/PPO: Plan D: :
$1,200 - $8,127; HMO: : h; : [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: : $1,000;
Indemnity/PPO: Plan A[B]: : $434 - $2,150; Indemnity/PPO: Plan B: :
$480 - $2,457; Indemnity/PPO: Plan C: : $381 - $3,071; Indemnity/PPO:
Plan D: : $423 - $4,914; HMO: : h; : [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: : $2,500;
Indemnity/PPO: Plan A[B]: : $348 - $1,843; Indemnity/PPO: Plan B: :
$409 - $2,150; Indemnity/PPO: Plan C: : $309 - $2,457; Indemnity/PPO:
Plan D: : Not offered; HMO: : h; : [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: : $5,000;
Indemnity/PPO: Plan A[B]: : $237 - $416; Indemnity/PPO: Plan B: : Not
offered; Indemnity/PPO: Plan C: : Not offered; Indemnity/PPO: Plan D: :
Not offered; HMO: : h; : [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: : $10,000;
Indemnity/PPO: Plan A[B]: : $153 - $311; Indemnity/PPO: Plan B: : Not
offered; Indemnity/PPO: Plan C: : Not offered; Indemnity/PPO: Plan D: :
Not offered; HMO: : h; : [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Copayment; Type of plan[A]: Individuals‘ share of provider covered
charges: Individuals‘ maximum out of pocket cost (above their
deductible): Range in monthly premiums for single coverage across
carrier[G]: $500: $1,000: $2,500: $5,000: $10,000: [Empty]; Indemnity/
PPO: Plan A[B]: [Empty]; Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not
offered: $480 - $2,457: $409 - $2,150: Not offered: Not offered:
[Empty]; Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 -
$2,457: $409 - $2,150: Not offered: Not offered: [Empty]; Indemnity/
PPO: Plan C: 30%: $2,500[E]: Not offered: $381 - $3,071: $309 - $2,457:
Not offered: Not offered: [Empty]; HMO: [Empty].
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: $500:
$1,000: $2,500: $5,000: $10,000: : $10; Indemnity/PPO: Plan A[B]: : h;
Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457:
$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B:
40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not
offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not
offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h;
HMO: : $487 - $727.
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: $500:
$1,000: $2,500: $5,000: $10,000: : $15; Indemnity/PPO: Plan A[B]: : h;
Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457:
$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B:
40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not
offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not
offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h;
HMO: : $462 - $512.
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: $500:
$1,000: $2,500: $5,000: $10,000: : $20; Indemnity/PPO: Plan A[B]: : h;
Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457:
$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B:
40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not
offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not
offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h;
HMO: : $379 - $463.
Type of plan[A]: Individuals‘ share of provider covered charges:
Individuals‘ maximum out of pocket cost (above their deductible): Range
in monthly premiums for single coverage across carrier[G]: $500:
$1,000: $2,500: $5,000: $10,000: : $30; Indemnity/PPO: Plan A[B]: : h;
Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457:
$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B:
40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not
offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not
offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h;
HMO: : $324 - $394.
Note: Plans A through D, and the HMO plan, represent standard insurance
packages defined by the state, which were available from multiple
insurers.
[A] New Jersey‘s standard guaranteed issue included three different
types of health plans: (1) indemnity plans, which allowed individuals
to choose any physician or hospital for care, (2) PPOs, which paid for
a greater portion of care received from a selected panel of doctors and
hospitals typically reimbursed on a fee-for-service basis, and (3)
HMOs, which were prospectively paid a fixed monthly fee per patient to
provide or arrange for most health services and, in turn, pay providers
either retrospectively for each service delivered on a fee-for-service
basis or through prospective capitation payment arrangements.
[B] The state refers to this plan as Plan A/50.
[C] Beneficiaries must pay an additional $200 per day hospital charge
for each of the first 5 days of hospitalization, up to a maximum of
$2,000 per person each year.
[D] HMOs offered copayment options of $10, $15, $20 and $30 for
physician and outpatient services. Other copayments applied to
inpatient hospitalizations, emergency room visits, and maternity care.
Also, prescription drugs could be covered subject to either a 50
percent coinsurance or a $15 copayment, at the option of the carrier.
[E] Under the PPO options, insurers paid 100 percent of charges after
total covered charges, paid by either the individual or the insurer,
reaches $10,000.
[F] Plan did not have a maximum out-of-pocket cost.
[G] All individuals, regardless of age or health status, paid the same
premium.
[H] Plan did not have this type of deductible or copayment for
policyholders.
Source: State information.
[End of table]
High-Risk Pools:
Three of the states we reviewed (Colorado, Oregon, and Utah) have
established high-risk pools that served individuals with acute and
chronic conditions.[Footnote 27] The high-risk pools in these three
states began operation in the early 1990s and also served individuals
eligible for coverage under HIPAA (see table 8). High-risk pools are
subsidized. Because enrollees often have major health problems, medical
claims costs are high and would exceed unsubsidized premiums collected
from their enrollees. Oregon‘s risk pool was subsidized by a fee
assessed on insurers based on the number of people they cover. Utah
subsidized the operation of its high-risk pool with state funds.
Colorado used a combination of these approaches.
High-risk pool premiums are higher than standard premiums for
individual insurance paid by healthy applicants although not
necessarily higher than a high-risk individual would be charged in the
individual market if coverage were available. State high-risk pool laws
generally capped premiums at 125 to 200 percent of comparable standard
commercial coverage rates. Premiums varied based on factors such as
age, geographic location, type of health plan, and deductible. One
state, Colorado, provided a 20 percent premium discount to certain low-
income individuals. Across the three states we reviewed that had high-
risk pools, undiscounted premiums for nonelderly adults ranged from
less than 10 percent to close to 100 percent of the average
unemployment benefit in the state.
Table 8: Selected Characteristics of High-Risk Pools in Three States,
June 2002:
State: Colorado; (1991); Medical eligibility requirements: * State
residents for at least 6 months who; * were denied coverage because of
a medical condition;; * were accepted for coverage, but with a premium
higher than that under the high-risk pool;; * were accepted for
coverage, but with a pre-existing condition exclusion of greater than 6
months; OR; * have one of 30 acute or chronic medical conditions but
were not necessarily denied coverage.; Number enrolled[A]: 3,886;
[Empty]; Premium limits: 150 percent of the standard individual rate;
Factors used to determine premiums for an individual: * Age; * Gender;
* Smoking status; * County; * Deductible amount ($300 to $5,000); Range
of individual monthly premiums: $75 - $1,283[B].
State: Oregon; (1990); Medical eligibility requirements: * Individuals
who were denied individual health insurance coverage within the last 6
months because of their health condition.; Number enrolled[A]: 8,762;
[Empty]; Premium limits: 125 percent of the prevailing market rate for
an individual policy; Factors used to determine premiums for an
individual: * Age; * Geographic location; * Type of health plan[C];
Range of individual monthly premiums: $118 - $661.
State: Utah; (1991); Medical eligibility requirements: State residents
for at least 12 months or dependent children 25 years of age or younger
of such individuals, who; * meet the high-risk pool‘s health
underwriting criteria established under Utah statute,[D]; * apply for
coverage not more than 63 days after being denied coverage by a private
individual insurer, AND; * pay the established premium.
OR; * Individuals who terminated similar coverage from another state‘s
high-risk pool within the previous 63 days because they were no longer
a resident of that state and who pay premiums for the entire coverage
period in Utah.[E]; Number enrolled[A]: 2,061; [Empty]; Premium limits:
Generally set at 150 percent of the prevailing premium level for the
five largest small employer insurers in the state offering comparable
coverage; Factors used to determine premiums for an individual: * Age;
* Deductible amount ($500 to $2,500); Range of individual monthly
premiums: $152 - $471.
AEnrollment figures represent the total enrollment in the high-risk
pool and thus include individuals who qualify either because of medical
reasons or through HIPAA.
[B] Reflects the premiums for individuals between the ages of 20 and
64. Premiums are lower for children and higher for individuals over age
65. Individuals with household incomes of $32,500 or less, and with
liquid assets of $50,000 or less, can qualify for a 20 percent premium
discount.
[C] Premiums in Oregon vary by health plan. Enrollees have a choice of
four health plans: a traditional indemnity plan, a PPO, HMO, or low
cost/limited benefit plan.
[D] Under the state‘s criteria, points were assigned to various medical
conditions based on the expected medical claims or complications for
that condition. Individuals with conditions that have points totaling
above a specified level were eligible for the high-risk pool.
[E] Under certain circumstances, individuals would be ineligible for
the high-risk pool. For example, individuals eligible for other public
programs that provide medical care were not eligible for the high-risk
pool.
Source: GAO analysis of state information.
[End of table]
States Lack Data on Current Numbers of Uninsured; Knowledge of
Beneficiaries‘ Use of State Protections Varies:
Although Ohio, Oregon, and Utah collected data on the number of
uninsured residents, none of the states that we reviewed had data
sufficiently current to determine how many of their residents had lost
health insurance during the recent economic decline. States‘ knowledge
of any changes in the numbers of individuals benefiting from the
different states‘ protections varied by option and the state, with data
most often available for the three states‘ high-risk pools. None of the
states we reviewed tracked how many of its residents obtained health
coverage through state-mandated continuation coverage. Of the four
states that required insurers to offer conversion plans, only Utah
tracked the number of policies issued but it did not have data current
enough to determine whether usage increased during the current economic
decline. New Jersey tracked the number of individuals receiving
individual health coverage through its five standard plans. Enrollment
in these standard plans declined in the past year, which a state
representative attributed to the rising cost of coverage.[Footnote 28]
Each of the three states we reviewed that had high-risk pools tracked
enrollment in their pools. From March 2001 to March 2002, enrollment in
high-risk pools increased by 47 percent in Colorado, almost 23 percent
in Oregon, and 37 percent in Utah. But it is not clear how much of the
increased participation came from the ranks of the unemployed. For
example, a Colorado official said a large portion of the increased
enrollment in the state‘s high-risk pool was likely due to insurers
leaving the individual and small group health insurance market in the
state. Therefore, it is difficult to determine how much of the increase
included those dropped from individual or nonemployer-based group
coverage and how much included the newly unemployed.
Eligibility for Medicaid and SCHIP Programs Is Limited for Unemployed
Adults Despite Expansions in Some States:
Given the cost of maintaining coverage under their former employers‘
health insurance plan or obtaining alternative coverage, unemployed
individuals may look to states‘ Medicaid and SCHIP programs for
coverage for themselves and their families. Unemployed adults, however,
are less likely to qualify for these programs than their children due,
in part, to less generous eligibility levels set for adults than for
children. Colorado, Oregon, and Utah have recently received federal
approval for waivers to expand eligibility for adults in Medicaid and
SCHIP, which may increase coverage for unemployed individuals. In the
wake of recent fiscal pressures resulting from the economic downturn,
however, New Jersey has suspended its Medicaid and SCHIP coverage
expansion for new applicants. Efforts by some states to expand Medicaid
and SCHIP coverage for uninsured adults have raised significant federal
fiscal and legal issues, at times providing adult coverage with funds
intended for children.
Unemployed Adults Are Less Likely Than Children to Qualify for Medicaid
and SCHIP Coverage:
As unemployed adults seek health insurance, they will likely find it
more difficult to secure coverage under Medicaid or SCHIP for
themselves than for their children. Under Medicaid, the majority of
states had set eligibility levels for nondisabled adults that were less
generous than those for children.
In the six states we reviewed, Medicaid‘s maximum income eligibility
levels for non-disabled adults were lower than the levels for
children.[Footnote 29] In Colorado, New Jersey, North Carolina, and
Utah, the maximum income levels for coverage for these adults were
under 50 percent of the federal poverty level.[Footnote 30] In
contrast, Medicaid and SCHIP coverage for children ranged from those in
families with incomes up to 170 percent of the federal poverty level to
those in families with incomes up to 350 percent of the federal poverty
level (in Oregon and New Jersey, respectively).[Footnote 31]
In four of six states, adults eligible for unemployment benefits might
not have qualified for Medicaid because the average of their
unemployment benefits would have been at least twice as much income as
allowed for Medicaid eligibility. In the remaining two states--Ohio and
Oregon--adults that received the average unemployment benefit would
have met the income eligibility requirements for Medicaid in those
states (see
table 9).
Table 9: Receipt of Unemployment Benefits Often Made Parents Ineligible
for Medicaid:
State: Colorado; Average monthly unemployment benefit
(in dollars): 1,350; Monthly Medicaid income eligibility level for
parents[A[(IN DOLLARS)] rs): 421; Income within Medicaid eligibility
levels: No.
State: New Jersey; Average monthly unemployment benefit
(in dollars): 1,418; Monthly Medicaid income eligibility level for
parents[A[(IN DOLLARS)] rs): 443; Income within Medicaid eligibility
levels: No.
State: North Carolina; Average monthly unemployment benefit
(in dollars): 1,110; Monthly Medicaid income eligibility level for
parents[A[(IN DOLLARS)] rs): 544; Income within Medicaid eligibility
levels: No.
State: Ohio; Average monthly unemployment benefit
(in dollars): 1,100; Monthly Medicaid income eligibility level for
parents[A[(IN DOLLARS)] rs): 1,252; Income within Medicaid eligibility
levels: Yes[B].
State: Oregon; Average monthly unemployment benefit
(in dollars): 1,135; Monthly Medicaid income eligibility level for
parents[A[(IN DOLLARS)] rs): 1,252[C]; Income within Medicaid
eligibility levels: Yes[B].
State: Utah; Average monthly unemployment benefit
(in dollars): 1,193; Monthly Medicaid income eligibility level for
parents[A[(IN DOLLARS)] rs): 583[D]; Income within Medicaid eligibility
levels: No.
AMedicaid income eligibility levels for parents are based on a family
of three.
[B] To qualify for Medicaid, an individual would also need to meet
asset test and other eligibility requirements.
[C] On October 15, 2002, Oregon received federal approval to expand
Medicaid and SCHIP coverage for adults, including parents, up to 185
percent of the federal poverty level, or $2,316 per month for a family
of three. The state plans to implement this expansion in increments
beginning November 1, 2002.
[D] In Utah, some adults with incomes above this eligibility level may
qualify for Medicaid under another eligibility category that limits
benefits to primary and preventive care.
Sources: State and U.S. Bureau of Labor Statistics data, 2002.
[End of table]
In Colorado, North Carolina, Oregon, and Utah, Medicaid coverage for
unemployed adults was more restricted than it was for children because
adults‘ accumulated assets could have made them ineligible for coverage
even after their unemployment benefits run out. The amount of assets
allowed and the types of assets included for eligibility purposes
varied by state (see table 10). For purposes of determining whether
individuals reached or exceeded their asset limit, North Carolina
included the cash value of life insurance, checking and savings
accounts, and other investments, but excluded the value of an
applicant‘s primary residence and vehicle. Utah required that families
with children over age 6 have assets below $3,000 (with allowances for
an additional $25 in assets for each additional family member) but
excluded the value of one home and of one vehicle, up to $15,200.
Table 10: Asset Exclusions for Parents under Medicaid in Six States:
State: Colorado; Asset limit: $2,000; [Empty]; Treatment of home:
Excluded; Treatment of vehicle: Value of one vehicle excluded.
State: New Jersey; Asset limit: None; [Empty]; Treatment of home: N/A;
Treatment of vehicle: N/A.
State: North Carolina; Asset limit: $3,000; [Empty]; Treatment of home:
Excluded; Treatment of vehicle: Value of one vehicle excluded per adult
age 18 or older.
State: Ohio; Asset limit: None; [Empty]; Treatment of home: N/A;
Treatment of vehicle: N/A.
State: Oregon; Asset limit: $2,000; [Empty]; Treatment of home:
Excluded; Treatment of vehicle: Value of vehicles excluded.
State: Utah; Asset limit: $2,000 -$3,000; [Empty]; Treatment of home:
Home occupied or being purchased by the applicant is excluded;
Treatment of vehicle: Value of one vehicle excluded (up to $15,200); OR
$1,500 of the value of any vehicle.
Source: State information, October 2002.
[End of table]
In contrast, most states nationwide have eliminated family asset tests
in determining Medicaid and SCHIP eligibility for children. As of
January 2002, 44 states had eliminated family asset tests for all
children in families with incomes at or below the poverty level and two
other states dropped it for certain categories of children. Among the
six states we reviewed, four states did not have asset tests for
children in Medicaid, while five states did not have asset tests for
children in SCHIP (see table 11).
Table 11: Medicaid and SCHIP Family Income Eligibility Limits and Asset
Tests for Children‘s Eligibility in Six States, 2002:
State: Colorado; Upper income eligibility
(as percentage of federal poverty level)[A]: 185; Family asset test
applies to
children‘s eligibility for:: Medicaid: Yes; Family asset test applies
to
children‘s eligibility for:: SCHIP: No.
State: New Jersey; Upper income eligibility
(as percentage of federal poverty level)[A]: 350; Family asset test
applies to
children‘s eligibility for:: Medicaid: No; Family asset test applies to
children‘s eligibility for:: SCHIP: No.
State: North Carolina; Upper income eligibility
(as percentage of federal poverty level)[A]: 200; Family asset test
applies to
children‘s eligibility for:: Medicaid: No; Family asset test applies to
children‘s eligibility for:: SCHIP: No.
State: Ohio; Upper income eligibility
(as percentage of federal poverty level)[A]: 200; Family asset test
applies to
children‘s eligibility for:: Medicaid: No; Family asset test applies to
children‘s eligibility for:: SCHIP: No.
State: Oregon; Upper income eligibility
(as percentage of federal poverty level)[A]: 170[B]; Family asset test
applies to
children‘s eligibility for:: Medicaid: No; Family asset test applies to
children‘s eligibility for:: SCHIP: Yes.
State: Utah; Upper income eligibility
(as percentage of federal poverty level)[A]: 200; Family asset test
applies to
children‘s eligibility for:: Medicaid: Yes[C]; Family asset test
applies to
children‘s eligibility for:: SCHIP: No.
AMedicaid eligibility can vary by the child‘s age. For example,
Colorado covers infants and children up to age 5 in families with
incomes up to 133 percent of the federal poverty level and children age
6 to 19 in families with incomes up to 100 percent of the federal
poverty level. SCHIP eligibility would begin above these levels and end
for children in families earning up to 185 percent of the federal
poverty level.
[B] Oregon received federal approval to expand Medicaid and SCHIP
coverage for children up to 185 percent of the federal poverty level,
which it plans to implement on February 1, 2003.
[C] State counts family assets for eligible children age 6 and older.
Source: State information.
[End of table]
Among unemployed adults, childless adults often had more difficulty
qualifying for Medicaid than parents. The Medicaid programs in
Colorado, North Carolina, and Ohio did not cover any nondisabled
childless adults. In New Jersey, childless adults faced a lower
Medicaid income eligibility level than parents did. Oregon and Utah
covered a small number of childless adults, all of whom earned less
than 150 percent of the federal poverty level (see table 12).
Table 12: Eligibility Levels for Childless Adults and Parents Applying
for Medicaid, 2002:
State: Colorado; Income level below which coverage is granted
(expressed as percentage of federal poverty level)[A]: Childless
adults: No coverage; Income level below which coverage is granted
(expressed as percentage of federal poverty level)[A]: Parents: 34.
State: New Jersey; Income level below which coverage is granted
(expressed as percentage of federal poverty level)[A]: Childless
adults: 19; Income level below which coverage is granted (expressed as
percentage of federal poverty level)[A]: Parents: 35[B].
State: North Carolina; Income level below which coverage is granted
(expressed as percentage of federal poverty level)[A]: Childless
adults: No coverage; Income level below which coverage is granted
(expressed as percentage of federal poverty level)[A]: Parents: 43.
State: Ohio; Income level below which coverage is granted (expressed as
percentage of federal poverty level)[A]: Childless adults: No coverage;
Income level below which coverage is granted (expressed as percentage
of federal poverty level)[A]: Parents: 100.
State: Oregon; Income level below which coverage is granted (expressed
as percentage of federal poverty level)[A]: Childless adults: 100[C];
Income level below which coverage is granted (expressed as percentage
of federal poverty level)[A]: Parents: 100[C].
State: Utah; Income level below which coverage is granted (expressed as
percentage of federal poverty level)[A]: Childless adults: [B]; Income
level below which coverage is granted (expressed as percentage of
federal poverty level)[A]: Parents: 47[B].
[A] Income eligibility levels for childless adults are based on the
individual, while the levels for parents are based on a family of
three.
[B] Income eligibility does not reflect state‘s coverage expansions
under federally-approved waivers because eligibility was either no
longer available to new applicants (New Jersey) or provided a more
limited benefit with additional cost sharing (Utah).
[C] Oregon received federal approval to expand Medicaid and SCHIP
coverage for adults up to 185 percent of the federal poverty level. The
state plans to implement this expansion in increments beginning
November 1, 2002.
Source: State information.
[End of table]
States‘ Expansions Can Offer Coverage for Unemployed Individuals, but
Some Raise Fiscal and Legal Issues:
Some states have received approval from the federal government to
expand Medicaid and SCHIP coverage for parents and childless adults,
including recently unemployed individuals. Of the states we reviewed,
Utah recently received a section 1115 waiver to expand Medicaid
coverage to certain parents and childless adults for a benefit package
limited to primary care and preventive services. Utah‘s waiver is
estimated to cover an additional 16,000 parents with family incomes
under 150 percent of the federal poverty level and 9,000 childless
adults with incomes under 150 percent of the federal poverty level. The
expansion, implemented on July 1, 2002, is funded by enrollment fees
and cost sharing by participants and savings from increased cost
sharing and new limits on some optional services, such as mental health
services, vision screening and physical therapy, for certain groups of
currently eligible adults. On September 27, 2002, Colorado received
approval to cover pregnant women with family income between 134 and 185
percent of the federal poverty level using SCHIP funds. Oregon also
received approval on October 15, 2002, for a section 1115 waiver to
expand insurance coverage for adults and children up to 185 percent of
the federal poverty level using Medicaid and SCHIP funds. Oregon
expects to cover an additional 60,000 individuals, but plans to phase
in implementation of this expansion. On November 1, 2002, the state
plans to expand its premium assistance program by paying between 50 and
95 percent of premiums for eligible individuals with incomes up to 185
percent of the federal poverty level, using both Medicaid and SCHIP
funds.[Footnote 32] On February 1, 2003, Oregon plans to expand
Medicaid and SCHIP eligibility to pregnant women and children with
incomes up to 185 percent of the federal poverty level, and to other
eligible individuals, including parents and childless adults, with
incomes up to 110 percent of the federal poverty level. Further
eligibility expansions may occur each quarter depending upon the
availability of state funding.
A state that has used a waiver to expand Medicaid and SCHIP coverage
may be prompted by shortfalls in its budget to limit these expansions.
Of the states we reviewed, in January 2001, New Jersey expanded
Medicaid and SCHIP coverage for parents earning up to 200 percent of
the federal poverty level. In June 2002, however, New Jersey suspended
new enrollment of adults in this program, increased the premiums and
reduced the benefits for those already covered under the
expansion.[Footnote 33] New Jersey‘s program had exceeded the state‘s
3-year enrollment projection in 9 months.
Section 1115 waivers to expand insurance coverage under Medicaid and
SCHIP can extend coverage to adults who would not otherwise qualify and
who would have difficulty obtaining coverage elsewhere. However, we
reported earlier that some waivers are inconsistent with the goals of
the Medicaid and SCHIP programs and may compromise their fiscal
integrity.[Footnote 34] For example, in approving Utah‘s expansion, we
concluded that HHS did not adequately ensure that the waiver would be
budget neutral as required for approval. We estimated that Utah‘s
waiver, if fully implemented, could cost the state and federal
governments $59 million more than without the waiver. We found that the
state‘s projection of what it would have spent without the waiver
inappropriately included the estimated cost of services for a new group
of people who were not being covered under the state‘s existing
Medicaid program. Although we did not review Colorado and Oregon‘s
waiver applications in our earlier report, we raised a broader legal
issue about states‘ use of SCHIP funds to cover adults without
children, which Oregon‘s recently approved expansion will do. In our
earlier report, we found that HHS had approved an Arizona waiver
proposal that would, among other things, use unspent SCHIP funding to
cover adults without children, despite SCHIP‘s statutory objective to
expand health care coverage to low-income children. In our view, HHS‘s
approval of the waiver to cover childless adults is not consistent with
this objective, and is not authorized. Consequently, we recommended
that the Secretary of Health and Human Services not approve any more
waivers that would use SCHIP funds for childless adults.[Footnote 35]
In addition, we suggested that the Congress amend the Social Security
Act to specify that SCHIP funds are not available to provide health
insurance for childless adults.
Concluding Observations:
Health insurance for the majority of Americans who rely on employer-
based coverage could be threatened upon job loss. Federal and state
laws provide some protections that are aimed at helping individuals
maintain or obtain health insurance coverage in such circumstances. The
protections offered, however, are not without limitations as
individuals may find that bearing the full cost of the premiums--with
no employer or state subsidies--may be beyond their financial means.
While those who cannot afford health insurance may look to Medicaid or
SCHIP for assistance, coverage for adults is hampered by limited income
eligibility and other requirements, such as asset tests, that are
likely to reduce the number of adults that can qualify for coverage.
Some states have made recent efforts to use the flexibility available
to them under Medicaid and SCHIP to expand their programs to help cover
increased numbers of uninsured adults. Tighter budgets, however, are
beginning to constrain some states‘ ability to sustain insurance
coverage expansions initiated during stronger economic times. Thus,
despite program expansions, coverage under Medicaid and SCHIP may not
be available to unemployed adults, while other state coverage options
may be too costly for these individuals.
State Comments:
We provided a draft of this report for technical review to
representatives of insurance departments, high-risk pools, and Medicaid
programs in the six states we reviewed. Each of the states provided
technical comments, which we incorporated as appropriate.
In addition, in its comments, Utah disagreed with our statement--based
on findings in an earlier report--that HHS did not adequately ensure
that the state‘s section 1115 waiver met the budget neutrality test.
The state contends that its waiver is budget neutral and is consistent
with long-standing HHS budget neutrality practices. Since 1995, we have
expressed concern that HHS‘s methods for assessing budget neutrality
allow the inclusion of certain costs that inappropriately inflate cost
estimates and result in the federal government being at risk to spend
more than it would have had the waivers not been approved.[Footnote 36]
We believe that continued use of these methods is inconsistent with the
long-standing requirement for section 1115 waivers to be budget neutral
and inappropriately places the federal government at risk of increased
cost for the Medicaid and SCHIP programs.
We did not obtain comments from HHS on this report because we did not
evaluate HHS‘ role or performance with respect to protections or
programs that may benefit unemployed individuals.
As agreed with your offices, unless you publicly announce its contents
earlier, we will plan no further distribution of this report until 30
days after its date. At that time we will send copies to other
interested congressional committees and other parties. We also will
make copies available to others upon request. In addition, the report
will be available at no charge on the GAO Web site at http://
www.gao.gov.
If you or members of your staff have any questions regarding this
report, please contact me on (202) 512-7114 or Carolyn Yocom on (202)
512-4931. Other major contributors to this report include JoAnn
Martinez-Shriver, Michael Rose, and Michelle Rosenberg.
Kathryn G. Allen
Director, Health Care--Medicaid
and Private Health Insurance Issues:
Signed by Kathryn G. Allen:
[End of section]
Appendix I: HIPAA Group-to-Individual Portability in Six States:
HIPAA provides guaranteed access to coverage--“portability“ from group
to individual coverage--to eligible individuals who, among other
criteria, had at least 18 months of coverage without a break of more
than 63 days. Recognizing that many states had already passed reforms
that could be modified to meet or exceed these requirements, HIPAA gave
states the flexibility to implement this provision by using either the
federal fallback or an alternative mechanism.
Under the federal fallback approach, insurers must offer eligible
individuals guaranteed access to coverage in one of three ways. HIPAA
specified that a carrier must offer eligible individuals (1) all of its
individual market plans, (2) only its two most popular plans, or (3)
two representative plans--a lower-level and a higher-level coverage
option--that are subject to a risk spreading or financial subsidization
mechanism.[Footnote 37] According to a 2002 report, 11 states opted for
the federal fallback approach.[Footnote 38]
Under an alternative mechanism, states may design their own approach to
guarantee coverage to eligible individuals as long as certain minimum
requirements are met. Essentially, the approach chosen must ensure that
eligible individuals have guaranteed access to coverage with a choice
of at least two different coverage options. For example, one possible
alternative mechanism is a state high-risk pool.
As shown in table 13 only one of the six states we reviewed relied on
the federal fallback approach to ensure group-to-individual
portability. The remaining states either relied on their high-risk
pool, another alternative mechanism, or both.
Table 13: Approaches to Group-to-Individual Portability in Six States:
State: Colorado; Federal fallback approach: [Empty]; State alternative
mechanism approach: High-risk pool: X; State alternative mechanism
approach: Other: [Empty].
State: New Jersey; Federal fallback approach: [Empty]; State
alternative mechanism approach: High-risk pool: [Empty]; State
alternative mechanism approach: Other: X[A].
State: North Carolina; Federal fallback approach: X; State alternative
mechanism approach: High-risk pool: [Empty]; State alternative
mechanism approach: Other: [Empty].
State: Ohio; Federal fallback approach: [Empty]; State alternative
mechanism approach: High-risk pool: [Empty]; State alternative
mechanism approach: Other: X[B].
State: Oregon; Federal fallback approach: [Empty]; State alternative
mechanism approach: High-risk pool: X; State alternative mechanism
approach: Other: X[C].
State: Utah; Federal fallback approach: [Empty]; State alternative
mechanism approach: High-risk pool: X; State alternative mechanism
approach: Other: X[D].
ANew Jersey provided group-to-individual portability through its
individual market guaranteed issue law.
[B] Ohio used a combination of its guaranteed issue law and guaranteed
conversion to provide group-to-individual portability.
[C] Oregon provided group-to-individual portability by requiring
insurers to offer eligible individuals, who were previously covered by
their group health plan, a choice between a low-cost and a prevailing
benefit plan. Although similar to the federal fallback approach, the
state characterized this as an alternative mechanism.
[D] Utah used its high-risk pool to provide group-to-individual
portability for individuals eligible for HIPAA who were deemed
uninsurable. HIPAA-eligible individuals who did not meet the high-risk
pool‘s health underwriting criteria were guaranteed coverage in the
private individual market.
Source: State information, October 2002.
[End of table]
[End of section]
Related GAO Products:
Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver
Projects Raise Concerns, GAO-02-817. Washington, D.C.: July 12, 2002.
Health Insurance: Characteristics and Trends in the Uninsured
Population, GAO-01-507T. Washington, D.C.: March 13, 2001.
Health Insurance Standards: New Federal Law Creates Challenges for
Consumers, Insurers, Regulators, GAO/HEHS-98-67. Washington, D.C.:
February 25, 1998.
Medicaid Section 1115 Waivers: Flexible Approach to Approving
Demonstrations Could Increase Federal Costs, GAO/HEHS-96-44.
Washington, D.C.: November 8, 1995.
GAO‘s Mission:
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FOOTNOTES
[1] See The Business-Cycle Peak of March 2001, National Bureau of
Economic Research (Nov. 26, 2001). The National Bureau of Economic
Research identifies recessions on the basis of several indicators,
including employment, sales in the manufacturing and trade sectors, and
industrial production.
[2] The U.S. Bureau of Labor Statistics characterizes individuals as
unemployed if they are at least 16 years of age, do not have a job,
have actively looked for work in the prior 4 weeks, and are currently
available for work. Persons who were waiting to be recalled to a job
from which they had been laid off need not have been looking for work
to be classified as unemployed. Persons who have lost a job and are not
looking for work are not counted as unemployed.
[3] Our national review included the District of Columbia, which we
referred to as a state for purposes of this report.
[4] According to the 2000 Medical Expenditures Panel Survey (MEPS), 59
percent of all firms offer health insurance coverage, with 97 percent
of firms with more than 50 employees and 47 percent of firms with fewer
than 50 employees offering coverage.
[5] According to the 2000 MEPS data, firms with fewer than 50 employees
paid an average of 85 percent of the premiums for single coverage and
72 percent for family coverage. Larger firms (with 50 or more
employees), paid an average of 82 percent of the premiums for single
coverage and 77 percent for family coverage.
[6] For 2002, the federal poverty level is $8,860 a year for a single
individual and $15,020 for a family of three. Medicaid eligibility is
mandatory for all children born after September 30, 1983, whose family
incomes are less than or equal to the federal poverty level. See 42
U.S.C. § 1396a(a)(10)(A)(i)(VII), (l)(1)(D) and (l)(2)(C) (2000).
[7] The Personal Responsibility and Work Opportunity Reconciliation Act
of 1996, Pub. L. No. 104-193, 110 Stat. 2105.
[8] Under section 1115 of the Social Security Act, the Secretary of
Health and Human Services can waive many of the statutory requirements
in the case of experimental, pilot, or demonstration projects that are
likely to promote Medicaid‘s objectives. See 42 U.S.C. § 1315 (2000).
Use of this authority allows states to provide services or cover
individuals not normally eligible for Medicaid and SCHIP and to receive
federal funds under these programs for services and populations not
otherwise eligible. To receive approval for waivers, states must show
that expansions of coverage should not result in the federal government
spending more money in the state than would have been spent in the
absence of the waiver. We have reported that section 1115 waivers
approved for several states were not budget neutral. See Medicaid
Section 1115 Waivers: Flexible Approach to Approving Demonstrations
Could Increase Federal Costs, GAO/HEHS-96-44 (Washington, D.C.: Nov. 8,
1995) and Medicaid and SCHIP: Recent HHS Approvals of Demonstration
Waiver Projects Raise Concerns, GAO-02-817 (Washington, D.C.: July 12,
2002).
[9] SCHIP allows a state to expand eligibility up to 50 percentage
points above its Medicaid income eligibility standard in 1997. As with
the Medicaid program, SCHIP allows states to set their own income and
asset eligibility criteria. 42 U.S.C. § 1397jj(b)(1)(B)(ii) (2000).
[10] See U.S. General Accounting Office, Health Insurance:
Characteristics and Trends in the Uninsured Population, GAO-01-507T
(Washington, D.C.: Mar. 13, 2001).
[11] Established in 1935 by the Social Security Act, the Unemployment
Insurance Program is funded through federal and state taxes levied on
employers.
[12] On March 9, 2002, the President signed the Temporary Extended
Unemployment Compensation Act of 2002, which provides eligible
individuals with up to 13 weeks of federally financed extended
unemployment benefits. Pub. L. No. 107-147, Tit. II. 116 Stat. 21, 26.
[13] While all states have enacted laws that require insurers to
provide certain health care benefits, certain types of health insurance
plans are exempt from these requirements. The Employee Retirement
Income Security Act of 1974 generally preempts states from regulating
employers that assume the risk for, or ’self-fund,“ their employees‘
health benefits.
[14] Pub. L. No. 99-272, 100 Stat. 83, 222 (1986).
[15] Pub. L. No. 104-191, 110 Stat. 1937, 1939.
[16] Under certain circumstances unrelated to job loss, such as the
case of a covered employee‘s death, spouses and dependent children are
able to continue group coverage under COBRA for up to 36 months.
[17] The Trade Act of 2002, Pub. L. No. 107-210, enacted on August 6,
2002, gives eligible individuals an immediate 65 percent refundable tax
credit for certain health insurance coverage, including COBRA coverage.
The credit, which takes effect in November 2002, is for workers who
lose their job as a result of trade agreements and for retirees age 55
to 64 who lack health care benefits and whose former employer‘s pension
plan was taken over by the Pension Benefit Guaranty Corporation. The
Congressional Budget Office estimated that this legislation would
increase the number of workers eligible for coverage by about 50
percent, to nearly 200,000 annually; the refundable portion of this
credit is estimated to cost the federal government $1.6 billion over
fiscal years 2003 through 2012.
[18] Costs were calculated based on 102 percent of average monthly
premiums for employer-sponsored health plans. See The Kaiser Family
Foundation and Health Research and Educational Trust, Employer Health
Benefits: 2002 Annual Survey (Menlo Park, Calif.: 2002).
[19] Jennifer N. Edwards, Michelle M. Doty and Cathy Shoen, The Erosion
of Employer-Based Health Coverage and the Threat to Workers‘ Health
Care: Findings from The Commonwealth Fund 2002 Workplace Health
Insurance Survey (New York, N.Y.:
August 2002).
[20] HIPAA also provides protections for individuals changing jobs and
obtaining other coverage by setting group market limitations on
preexisting conditions, exclusion periods, previous coverage credit
requirements, and prohibitions on exclusions based on health status.
[21] Begun in 1998 as a state-funded program, Oregon‘s premium
assistance program paid from 70 to 95 percent of the health insurance
premiums for individuals with incomes below 170 percent of the federal
poverty level. The program had over 3,300 enrollees and a waiting list
of more than 29,000 as of June 2002. With the newly approved federal
waiver, the program will pay from 50 to 95 percent of health insurance
premiums for individuals with incomes up to 185 percent of the federal
poverty level. Expanded eligibility for premium assistance is scheduled
to begin on November 1, 2002. The state expects enrollment in the
program to increase by approximately 25,000 people, with enrollment to
be limited based on the availability of state funding.
[22] Costs were calculated based on 102 percent of average monthly
premiums for employer-sponsored health plans. Actual costs of state
continuation coverage may be higher or lower depending on the
characteristics of the firm or health insurance policy. See The Kaiser
Family Foundation and Health Research and Educational Trust, Employers
Health Benefits: 2002 Annual Survey (Menlo Park, Calif.: 2002).
[23] HIPAA does allow individuals to have a break in coverage of 63
days or less and still remain eligible.
[24] For individuals eligible for HIPAA, Ohio statute limits the rate
to twice the midpoint rate charged any other individual with a policy
with similar copayments and deductibles. For individuals not eligible
for HIPAA, Ohio statute limits the rate to 2.5 times the highest rate
charged to any other individual with a policy with similar copayments
and deductibles.
[25] Although New Jersey did not regulate premium rates, insurers were
required to pay at least 75 cents in benefits for every dollar received
in premiums or refund a portion of the premiums.
[26] The four remaining standard plans can either be indemnity plans or
preferred provider organizations (PPO). The indemnity plans allow
individuals to choose any physician or hospital for care, while the
PPOs pay for a greater portion of care received from a selected panel
of doctors and hospitals typically reimbursed on a fee-for-service
basis.
[27] Nationally, 30 states have high-risk pools. See Communicating for
Agriculture & the Self-Employed, Comprehensive Health Insurance for
High-Risk Individuals: A State-by-State Analysis. (Fergus Falls, Minn.:
2002).
[28] The number of individuals covered by standard plans in New Jersey
declined by almost 14,000, from 97,790 individuals in the first quarter
of 2001 to 83,896 people in the first quarter of 2002.
[29] However, on October 15, 2002, Oregon received federal approval to
expand Medicaid and SCHIP eligibility for children and adults in
families with incomes up to 185 percent of the federal poverty level.
Increased eligibility levels for most adults will be phased in over
time while eligibility for children and pregnant women is scheduled to
be increased to 185 percent of the federal poverty level on February 1,
2003.
[30] While income eligibility levels for adults in New Jersey is
currently under 50 percent of the federal poverty level, adults already
enrolled in Medicaid may have higher incomes due to increased
eligibility levels established by the state in the past.
[31] Upon implementation of Oregon‘s expansion, which is expected to
begin on February 1, 2003, Medicaid and SCHIP coverage for children
will increase from 170 percent of the federal poverty level to 185
percent of the federal poverty level.
[32] Prior to the approved waiver, the Oregon premium assistance
program used state-only funding that paid from 70 to 95 percent of the
health insurance premiums for approximately 3,700 individuals with
incomes below 170 percent of the federal poverty level. Due to budget
constraints, however, new enrollment in the state-only premium
assistance program was limited for 3 years, and had a waiting list of
more than 29,000 people. Under the waiver, the state is limiting
enrollment due to the availability of state funding and estimates that
an additional 25,000 people will be covered.
[33] A recent study indicates that many states plan to decrease
Medicaid spending in various ways, including limits on enrollment and
retrenchment from program expansions. See Victoria Wachino, Kaiser
Commission on Medicaid and the Uninsured, State Budgets Under Stress:
How are States Planning to Reduce The Growth in Medicaid Costs?
Preliminary Results based on the Kaiser Commission on Medicaid and the
Uninsured 50-State Survey (Washington, D.C.: July 30, 2002).
[34] See U.S. General Accounting Office, Medicaid and SCHIP: Recent HHS
Approvals of Demonstration Waiver Projects Raise Concerns, GAO-02-817
(Washington, D.C.: July 12, 2002).
[35] HHS does not concur with our position that the spending of SCHIP
funds is not authorized for childless adults. Subsequent to our
recommendation, the Secretary approved New Mexico‘s and Oregon‘s waiver
requests, on August 23, 2002, and October 15, 2002, respectively. Both
states intend to use SCHIP funds to cover childless adults.
[36] For a more detailed discussion of this issue, see GAO-02-817,
pages 19-20, 34-35.
[37] See U.S. General Accounting Office, Health Insurance Standards:
New Federal Law Creates Challenges for Consumers, Insurers, Regulators,
GAO/HEHS-98-67 (Washington, D.C.: Feb. 25, 1998).
[38] See Communicating for Agriculture & the Self-Employed,
Comprehensive Health Insurance for High-Risk Individuals: A State-by-
State Analysis. (Fergus Falls, Minn.: 2002).
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of the federal government for the American people. GAO examines the use
of public funds; evaluates federal programs and policies; and provides
analyses, recommendations, and other assistance to help Congress make
informed oversight, policy, and funding decisions. GAO‘s commitment to
good government is reflected in its core values of accountability,
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Contact:
Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov
Automated answering system: (800) 424-5454 or (202) 512-7470:
Public Affairs:
Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.
General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.
20548:
