CHIPRA: Chip Off the Old SCHIP Block

Fresh off the defeat of health care reform part umpteen, Bill Clinton joined with Ted Kennedy to attempt a sort of salvation, or redemption (call it what you will), with a bill to provide health care for America’s neediest children. Big problem: When Hillarycare crashed and burned, the Republicans rose from the ashes and took control of Congress. Therefore, the bill had to be bipartisan if it ever wanted to see the light of day.

Come 1997, the result was a piece of legislation that created the State Children’s Health Insurance Program (SCHIP). Then, as with health reform now, it was a health care experiment in Massachusetts that became the springboard for SCHIP, which is not surprising given that Senator Kennedy was both a staunch advocate for health care and a Massachusetts native. That first Massachusetts initiative was aimed at helping the children of the working poor, and the one being studied and copied now for nationwide health care reform is Commonwealth Care, an effort at insuring all Massachusetts residents that is nearing its three-year anniversary.

To get SCHIP through a Republican Congress, Clinton and Kennedy—with the aid of Kennedy chum Senator Orrin Hatch, Republican of Utah—fashioned a vehicle that was largely funded by the federal government (up to 70 percent of the states’ cost, with a cap) but pretty much designed and managed by the states. In a holy (say would say unholy) barter, Democrats got Republicans to agree to raise the qualifying income level far above the federal poverty rate—in some states now reaching 300 percent, or about $66,000 a year for a family of four—and Republicans got Democrats to agree not to crowd out private insurers, shades of the “public option” debate now consuming Congress. Funding was to be through a tax on cigarettes, though as with all things federal, budgeting is never really that transparent.

Things went along pretty swimmingly with a modest but functioning SCHIP program in place under a Republican Congress and then a Republican Congress and a Republican President. But 2006 shook up matters as Democrats regained control of Congress and sought to reauthorize and expand SCHIP. This time, Orrin Hatch backed out and sided with the Republicans while the Democrats sent bills to George Bush in 2007 and 2008 to reinvigorate and inflate SCHIP. He vetoed both of them.

More change came in 2008 as the Democrats strengthened their hold on Congress and also sent Barack Obama to the White House. One of President Obama’s first acts was to sign the bill that Bush had vetoed, and SCHIP morphed into CHIP through the Children’s Health Insurance Program Reauthorization Act (CHIPRA). Obama called it his “down payment” on universal health care, which leaves open the question whether the public option being proposed by the Democrats as part of health care reform is actually intended to become the “only option,” as critics have charged. CHIPs for all of us?

Since the original SCHIP was never designed to be a one-size-fits-all solution and states were left to implement health coverage for children on their own, there exists to this day a welter of different state programs, many relying on Medicaid and many setting up their own networks.
CHIPRA makes a few changes in CHIP. States are now given the option of providing premium assistance so that eligible children can be included in their parents’ employer-provided health insurance plans. The assistance would pay the difference in premiums between insurance solely for the parent and insurance for the parent and eligible child(ren).

Eligibility for CHIP, whether through premium assistance or Medicaid or a state CHIP network, is capped at 200 percent of the federal poverty income level, which is about $44,000 for a family of four, though states can exceed that level and still receive partial funding. An exception was granted to New York since that state had already obtained permission to use 300 percent as its top fully funded rate.

Along with the folding of workplace insurance into the program came new notification obligations for employers. Companies are now obliged to notify their employers of possible assistance available under Medicaid and CHIP. CHIPRA also forces companies to establish special enrollment periods—much like floating or year-round enrollment periods—for their company-provided health insurance. When an employee’s child or children suddenly become eligible for Medicaid or CHIP (presumably through the loss of income on the spouse’s side), the employer must both notify the parent-employee of CHIP-Medicaid-premium assistance availability and also open a 60-day enrollment window. Likewise, when an employee’s offspring lose their eligibility for CHIP or Medicaid, notification must also take place along with another 60-day enrollment window.

Though the special enrollment option kicked in on April 1, 2009, CHIPRA ordered the Department of Health and Human Services (HHS) to develop both state-specific and national notification notice models by Feb. 10, 2010. These notifications must be used beginning the first plan year after issuance, which for most purposes would be on Jan. 1, 2011. In the meantime, employers are left to wade through the CHIP notification maze by themselves. And, as always, there are fines involved. In this case, companies can be fined $100 per day for failure to comply with the employee notice requirements.

CHIPRA requires health plan administrators to disclose to states, upon request, information about their group health plans, including information that allows states to determine an employee’s eligibility, benefits offered under the plan, contact information for the plan administrator, and other relevant information, so that states can determine whether it is cost-effective for the state to provide premium assistance or simply cover children through CHIP. HHS and the Department of Labor (DOL) are tasked by CHIPRA with developing a model disclosure form “within one year of enactment,” or by February 2010.

All of these notification and disclosure requirements are fine and dandy if a company has just one location in one state, or even multiple locations in one state, but for companies with locations nationwide, navigating the muddy waters of differing states’ CHIP programs and requirements could be challenging and costly.

CHIPRA, like SCHIP, relies on increased tobacco taxes to foot the bill for its expanded outreach and operation, but as mentioned before, no one can ever be sure who or what pays for what in the federal budget. At least no one is (yet) talking of an unfunded multi-trillion-dollar liability for CHIP, but it is a much younger program than Medicare and Medicaid, which do indeed face a combined $37 trillion unfunded liability.

Financial shenanigans or not, CHIP (actually, SCHIP) seems to be having a positive impact. Georgetown University’s Health Policy Institute conducted a study showing that the number of uninsured children in the U.S. declined to 7.3 million in 2008, the lowest number since 1987, and this was before the more muscular CHIPRA kicked in. It seems that many states have taken to the program with a zeal, with 23 of them actually expanding their programs in the fiscally challenged environment of 2008. (One would be hard pressed, however, to find the likes of California and New York on the list, though New Jersey was indeed one of the 23.)

Overall, what is interesting here is that incremental, bipartisan reforms in the health care arena seem to work, whereas any effort to reform the whole system seems always to break down in Congress with both interparty conflict and intraparty in-fighting. What eventually transpires legislatively this time is still unclear, but if the nation simply follows the Massachusetts Plan called Commonwealth Care, the very things that the Obamacrats claim can’t happen will indeed happen in spades. Costs will rise, and care will be harder to get. The common pro-reform response is that reform can only work and save costs if it’s implemented on the national level; states can’t do it. The problem is—if the federal approach doesn’t work either, there’s nowhere else to turn except to rationing and denial of service to keep from bankrupting the country.

In short, we’d be right back to where we are now under private insurance. The French have a saying for this: “The more you change things, the more they stay the same.” And another French word sums it all up best, “Merde.” 

About the author:
Gary McCarty is a researcher and Web Content Manager for Personnel Concepts.

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