How Medicaid Buy-In Programs Can Fill the Insurance Gaps
left by Unavailable or Unaffordable Child-only Plans
Among the first of the provisions under the Affordable Care Act (ACA) to go into effect, the ban on insurance companies denying coverage or benefits to children under age 19 with pre-existing conditions (Section 2704) applies to group plans or individual policies beginning on or after September 23, 2010. This represents a significant victory for children with special health care needs (CSHCN) and their families. Prior to ACA, outright denials of coverage or limits on benefits made it difficult for thousands of families of privately insured CSHCN to access adequate and affordable coverage for their children and put them at risk for financial hardship and medical debt.
While families of CSHCN and advocates were cheering, there was a disappointing response from the insurance industry. Recently, many of the nation's largest insurance firms declared they would stop selling child-only policies out of fear that as a result of Section 2704, they would have to accept high-cost children with pre-existing conditions into these plans. Insurers argued that this provision would enable parents to misuse the insurance system, by getting coverage only when their child needed care and subsequently dropping it when their child's medical expenses were paid for. In a letter dated September 24th to America's Health Insurance Plans (AHIP), the industry trade group, US Department of Health and Human Services (HHS) Secretary Kathleen Sebelius protested the insurance companies' decision, stating that insurers were not living up to their original commitment to ensure access to coverage for children with pre-existing conditions.
Since then, HHS and the National Association of Insurance Commissioners (NAIC) have been working together to address the concerns of insurers and encourage them to continue selling child-only policies, while concurrently making sure families can access the coverage options they need. Some of the proposed compromises (which must be consistent with current state law) include permitting insurers to charge different rates for child-only policies and dependent children, to determine the number and length of open-enrollment periods for children under 19, and to impose a surcharge on parents who drop coverage and then reapply when their child needs additional care. Another proposed compromise is allowing insurers to charge premiums based on a child's health status until 2014, when different ACA provisions (Sections 2702 and 2703) guaranteeing policy issuance and renewal go into effect. Advocates remain concerned that even if private insurers decide to resume selling child-only policies on the basis of these agreements, premiums are likely to increase for the plans - making child-only coverage far less accessible to the majority of families who need it (Haberkorn, September 25, 2010).
Child-only policies are mostly utilized by low- to middle-income families who do not qualify for Medicaid or CHIP but who cannot afford to insure everyone in their household. Families raising children with special health care needs find child-only policies especially helpful, because by definition their children use more health care services than typically healthy children do.
What options will families of CSHCN have if they cannot access child-only policies in the private market, either because these plans are unavailable or because the premiums are prohibitively high? A Medicaid buy-in program based on the Family Opportunity Act (FOA) is one particularly effective option that could help fill in the gap left by the loss of access to child-only plans. An FOA Medicaid buy-in program allows families of children who meet specific disability and income criteria[1] to pay a modest premium and "buy-in" to Medicaid benefits, either as their child's only source of coverage or as a supplement to existing private insurance. Medicaid can serve as a lifeline to financially struggling families and their children with special health care needs, as it limits the out-of-pocket costs families must pay for their child's care and also offers more robust benefits than typical private insurance (exemplified by Medicaid's comprehensive child health component known as Early Periodic Screening, Diagnosis, and Treatment (EPSDT).
With many states facing budget deficits, what are the public policy advantages in choosing to offer an FOA Medicaid buy-in program? In addition to expanding comprehensive and affordable coverage to children currently at risk for un- or underinsurance, the current federal matching rate applies for children in families who make less than 300% of the Federal Poverty Level, meaning the entire cost for covering new enrollees in an FOA buy-in program is not shouldered by the state alone. The state share will be further reduced because the majority of buy-in program enrollees will have existing private insurance, which will continue to cover expensive services like hospitalizations and prescription drugs.
As the provisions of the ACA roll out over the next three years, responses that work against the law's intent to make comprehensive and affordable coverage more available and protect consumers will likely continue. Some of these as-yet unknown challenges and the compromises that follow could result in gaps or inadequacies in insurance coverage within specific populations, with CSHCN being a particularly vulnerable group. The dropping of child-only plans was the first of these. Medicaid buy-in programs are a proven innovative strategy to fill the coverage gap created by unavailable or unaffordable child-only plans, and states should consider this option as a potential mechanism to continue to ensure CSHCN receive the best coverage available to meet their needs.
For additional information on FOA buy-in programs, refer to our publication, "Frequently Asked Questions about the Family Opportunity Act's Medicaid Buy-In Option". In addition, the Catalyst Center has estimated the number of children who would be eligible for an FOA buy-in program in each state. Contact us for your state's estimate. We also welcome any questions you may have regarding the content of this article - click here to email us.
References
Haberkorn, J. (September 25, 2010). HHS hits insurers on kids' coverage. Politico. Retrieved October 17, 2010, from http://www.politico.com/news/stories/0910/42707.html
[1] Children under age 19 who meet the Supplemental Security Income (SSI) functional disability criteria and whose adjusted gross family income is less than 300% of the Federal Poverty Level are eligible under an FOA Medicaid buy-in program. There are other kinds of buy-in programs that have different disability and/or income criteria. See the Catalyst Center web page on Medicaid Buy-in Programs or contact us for more information.
