New York and California are forging new coalitions in fight to insure their states

At opposite ends of the country, two large and influential states are pushing toward lowering their rates of uninsured children and adults in ways that the rest of the country may end up following. New York and California each have been dubbed as among the most progressive in America when it comes to creating large programs to benefit the working poor.

New York State’s program, the Health Care Reform Act (HCRA) 2000, became law in December 1999 and only now is beginning to gain momentum. It was created to enlarge upon NY’s Health Care Reform Act of 1996 and bring coverage to as many as 1 million New Yorkers. The bill is a work in progress as state officials are still in negotiations with the Health Care Financing Administra-tion (HCFA) for waiver approvals.

In California, Gov. Gray Davis says he wants to expand the state’s Healthy Families program to cover all members of the working poor, both children and their parents. By putting Health Families into place, the governor may avoid losing California’s allotment of federal funding from the Children’s Health Insurance Program (CHIP). The target is 600,000 working adults, and it could cost the state an additional $128 million each year.

For both states, expanding their programs is seen by many of their administrators and policy-makers as the only way available to reach the people the programs were created for. Both state’s programs have plenty in common.

New York: Building a coalition

HCRA’s insurance proposals may be the largest expansion of state-based insurance in America. It took many components to complete the program.

A coalition of interest groups had to find common ground to create HCRA. Health care leaders, advocacy groups, and lobbyists had to come together to fuse the state’s tobacco settlement money, the state’s increase of 55 cents per pack of cigarettes, and matching federal funds into the new program.

Though December marks the end of the first year for HCRA, the program just now is gaining steam. By 2003, costs to fund the program are projected to be about $900 million per year.

"New York is not the first at all on building on this. California is doing something similar," Deborah Curtis, author of the policy brief "Access for the Uninsured: New York Health Care Reform Act 2000" and researcher for the National Academy for State Health Policy (NASHP) in Portland, ME, tells State Health Watch. "They are also using tobacco money for various types of coverage initiatives."

According to Ms. Curtis, HCRA was created to:

• continue deregulation of hospital payments;

• continue financing for hospital bad debt/charity care and graduate medical education;

• increase funding for Child Health Plus, which is New York’s subsidized health insurance program for low-income children with family incomes above the Medicaid eligibility level;

• create Family Health Plus, a free health insurance program for low-income, working adults;

• create Healthy New York, subsidized insurance for small businesses and working individuals;

• create Direct Pay Fund, a stop-loss fund to offset premium increases in the individual market.

California’s individual goals are similar. Using the pathway created by either state as a guide for other states to follow can be dangerous ground, according to Cynthia Pernice, CHIP project manager for NASHP.

"I’m cautious about saying what works in one state won’t necessarily work in another state. Some state legislatures have different rules," Ms. Pernice tells SHW. "It takes time for states to do their thing."

Time is something California is running short on this year. The Los Angeles Times urges Mr. Davis to pick up the slack left by the Congress’s failure to pass more of the health reforms it has promised in the past. Local solutions, the Times editorializes, are necessary now more than ever, "especially for the working poor."

The governor must let the federal government know of his intentions to spend allocations from Washington, DC, or else lose the money by year’s end. The state could lose up to $420 million this year if California doesn’t put its system in place. California is one of 40 states that have not spent their allocations; New York is one of only 10 that have spent the federal allocation.

The California contribution to the program would be an extra $128 million annually. Some legislators feel the amount is reasonable, but others say they fear for the coming years when such luxuries as the current budget surpluses may evaporate. Either way, the state is looking for ways to complement the federal money, which is sitting unspent.

"When stats show almost 90% of the money is unspent, it’s not the state’s problem," Ms. Pernice says. "It’s the way the money is allocated. All states jumped in wanting to cover as many kids as they could."

Healthy Family is a CHIP program, Pernice says, for those who are not eligible for Medicaid or Medi-Cal. The state is working under the assumption that Mr. Davis’s proposed rules will be the final rules the program will operate under, Ms. Pernice says, adding that she expects the Congress to extend the deadline to spend the federal allocations by the end of the year.

States must submit a waiver application to HCFA to be able to cover parents, Ms. Pernice says, but the California governor has yet to disclose how that waiver would work. Its effect on parents has yet to be gauged, she adds. Would they be covered through state funding? Through employers?

Either way, Ms. Pernice says, it’s a progressive way to fight the problem.

"Other states that are doing it include New York, Massachusetts, Wisconsin, Minnesota, Rhode Island, Tennessee. They are all trying to cover as many people as possible."

The California Medical Associa-tion, along with the California Small Business Association, The Children’s Partnership, Insure the Uninsured Project, Pacific Business Group on Health, and Wellpoint Health Networks, is urging the governor to create a provision for a credit option for employer coverage in his federal waiver application.

"In many cases, uninsured families with access to employment-based insurance could be covered at lower public cost by paying part of the family’s share of premium to enroll in their employer-provided plan," a letter written by the coalition to Mr. Davis reads. "Doing so would make use of the employer contribution available to them and thus stretch the available public dollars to cover more families.

"The purchasing credit approach can encourage the use of employment-based insurance. At Healthy Families income level, about one- third of uninsured California parents and children have access to employment-based coverage but are apparently unable to afford their required contributions."

No legislation is an island

HCRA in New York started off with a cost of $9 billion to implement, creating three new initiatives: Family Health Plus, Healthy New York, and Direct Pay Market Subsidies.

Family Health Plus provides comprehensive health insurance for lower income, uninsured working adults and is, technically, a Medicaid expansion. Healthy New York is subsidized health insurance for small businesses and individuals who pay for their own coverage. Funding is $219 million for the coming three years. Direct Pay is for HMOs covering individuals under standardized individual direct payment contracts. The HMOs can then receive reimbursement for 90% of high-cost claims between $20,000 and $100,000. The hope is that insurers will pass along the reimbursements to its members as lower premium increases.

As in California, where the governor is contemplating waivers from HCFA, New York’s Family Health Plus can get started on Jan. 1, 2001, if it receives all the necessary waivers from Washington, DC.

NASHP’s policy brief outlines the task succinctly: "The Department of Insurance in New York is charged with the development and implementation of HCRA’s two private insurance initiatives: Healthy New York and the Direct Pay Fund. It must set up procedures for administering the stop-loss funds and develop guidelines for plan qualification and premium review and approval. Once implemented, questions remain as to whether these insurance options will have the desired effect in the small group and individual insurance marketplace. Will the cost of the limited benefits product be affordable to uninsured workers and will the significant cost-sharing be acceptable? Will businesses be willing to subsidize 50% of their employees’ coverage in order to participate?"

The increasing number of employers that have shrugged off the burden of offering health care insurance spotlights a trend, Ms. Curtis says.

"It’s progressive in helping people who are historically out of the loop of Medicaid, like adults," she says. "Once you have established who is eligible, you need to figure out how to get them enrolled and keep them enrolled. If the state can do that, that’s a big job."

Ms. Pernice agrees that retention is the next hurdle the states need to get over. "CHIP has enabled the state [California] to get a higher federal match, and now states are publicizing Medicaid and CHIP for low-income families through TV ads, grocery stores, the laundromat. All you have to do is ride around town; it’s visible."

Timing and location were crucial to HCRA’s creation. Diverse groups worked toward its founding, and those combinations may not be part of the political makeup of other states.

"I’m cautious about what works in one state, that it doesn’t necessarily work in another state," Ms. Pernice adds. "Some state legislatures have different rules. It takes time for states to do their own thing."

California’s population makeup highlights the state’s personal features. It has the third-highest rate of uninsured among the nonelderly in the United Sates. Only Arizona and (with 27.2%) and Texas (with 27%) have higher uninsured rates than California, according to the Employee Benefit Research Institute. It is also the most populous state in the nation. Some of the challenges that lie ahead for the New York initiative, according to NASHP’s policy brief, include:

• Implementation of initiatives to expand access to the uninsured is a complex and difficult undertaking no matter how small or incremental the reform.

• Subsidized health insurance programs are costly. To achieve enrollment, subsidies must be deep (with premiums not to exceed 1% to 3% of income), the enrollment process must be simple, and marketing must be strong.

• Just because you build it does not mean they will come. New programs for the uninsured require a substantial investment in marketing and outreach.

• Enrolling all people who are eligible for a program has historically been a challenge in state-based programs. Varying, complex eligibility requirements among programs adversely affect enrollment rates.

In what could be a lightning rod for other states, New York may be a testing ground for what a state can do with tobacco tax money.

"The 55 cent increase, raising New York’s tax to $1.11 per pack, will be devoted solely to funding health care programs," NASHP’s policy brief reads. "Can this financing be sustained, or will the drastic increase result in a decrease in cigarette sales, thus limiting funding? Health policy leaders and lawmakers in New York acknowledge that the tax is not a broad-based revenue source and runs the risk of fluctuation. Again, many around the country will be watching New York’s experience solely to see if this type of funding source can provide continued support to HCRA 2000’s health care initiatives."