Premium Assistance Programs: What are they and could they help
Connecticut Families without Health Insurance?
Revised: January 2002
Last year Connecticut passed legislation directing the Department of
Social Services, the Office of Health Care Access and the Office of Policy
and Management to prepare a plan "for the purchase of
employer-sponsored health insurance for adults and children." The
plan is to include analyses of sliding scale fee schedules for coverage,
minimum benefit standards, the fiscal impact on the state, maximization of
federal funds, unemployment subsidies, assessment of impact on the current
HUSKY program, a timeline, infrastructure and resource requirements to
implement on January 1, 2003. The report is due no later than March 1,
What are premium assistance programs and how do they work?
Premium Assistance (PA) programs allow the state to subsidize health
coverage for low-income residents whose employers offer health insurance.
In other states with PA programs, applicants and enrollees are screened
for access to employer-sponsored health coverage. The state requests
detailed information from potentially participating employers regarding
costs, benefit package, employer share of costs and employee eligibility.
If the employer responds and the coverage meets state and federal
standards for both benefits and costs, consumers are enrolled in their
employer's plan. The state pays the consumer, insurer, and/or employer a
subsidy. Services missing from the employer package would be covered
through a state-sponsored "wrap around" program; consumer costs
above HUSKY levels are reimbursed by the state.
The goals of PA programs are
- to reduce the number of uninsured state residents,
- support existing employer coverage,
- leverage private health care spending to maximize the effectiveness
of public funds,
- keep families together in the same plan, and
- provide consumers the dignity of participating in the plan their
coworkers enjoy, while keeping costs reasonable.
Do any other states have premium assistance programs, how do they pay
for it and how do they work?
Premium assistance programs are very new. Only a handful of states have
implemented programs; all are very small and early results have not been
encouraging. Many more states are exploring the idea of premium subsidies;
several have approved federal waivers for PA programs. Unlike Connecticut,
states considering PA programs have a record of success in reaching
residents eligible for their traditional public programs. These states are
trying to further improve their enrollment numbers after successfully
exhausting more traditional, proven options. Colorado conducted an
extensive analysis of potential costs and risks vs. potential benefits,
and decided not to implement a PA program now, pursuing instead other
options to address the uninsured. PA programs are funded with Medicaid and
SCHIP funding in all states; Massachusetts also uses additional state
dollars for their program.
Massachusetts' PA program is the oldest, implemented in 1998.
Massachusetts includes both a subsidy of premiums for consumers and a
direct subsidy to employers in their program. Enrollment has been
disappointing, far below initial projections. What's more, over one third
of enrollees already had insurance. Administrative costs have been
Wisconsin's BadgerCare includes both the traditional Medicaid/SCHIP
program (similar to Connecticut's HUSKY) as well as a PA program. In
contrast to HUSKY, BadgerCare's traditional program has been extremely
successful, having reached 70% of Wisconsin's eligible uninsured children
as of June 2001. One year after implementation, however, the PA program
had enrolled only 5 families for a total of 20 people. Reasons given for
poor enrollment include low employer response rate to the questionnaire,
frequent job transitions common for low-wage workers, employer
contributions are too low (under 60%), employer packages that do not meet
minimal standards, and subsidies were not cost-effective to the state,
meaning that the state could purchase traditional BadgerCare for a family
What federal rules apply, if Connecticut wants to apply for a premium
In early August, the rules changed dramatically. CMS, formerly HCFA,
issued new guidance that "strongly encourages" states to
integrate or coordinate public programs with private health insurance.
States are given license under PA to reduce benefit packages below HUSKY
Part A or even Part B levels. Limits on costs for families were eliminated
- premiums and copayments are a significant barrier to accessing care for
even moderate income families in Connecticut. Minimal standards on the
share of costs that must be borne by employers were eliminated. Under the
new system, employers who pay a better share of costs would have an
incentive to reduce their contribution, secure in the knowledge that the
state will pick up the difference.
Most surprisingly, the new guidance significantly loosens the cost
effectiveness requirement. PA programs can operate as long as costs are
not "significantly higher." Connecticut could end up spending
more under a PA program than traditional HUSKY is already the most
expensive Medicaid managed care coverage in the US. Potentially, families
could find themselves enrolled in plans with fewer benefits and higher
costs than HUSKY, and the state could be spending more for this weaker
What barriers to implementation might a Connecticut premium assistance
- Administrative burden - The current HUSKY application process is far
from smooth. The addition of employer paperwork would unduly tax an
already overburdened system. The state would also have to create a
wrap around program to address costs to families and services not
covered by each employer's package. Administrative costs would be very
- Narrow eligible population - Nationally only 19% of the uninsured
have access to employer-sponsored health insurance. Of that number,
even fewer are eligible for HUSKY. Of that number, far fewer work for
employers who might agree to participate, and even fewer are offered
packages that meet even minimal standards. The total pool of
Connecticut families who could benefit from a PA program is very
- Could be a "bad buy" for both families and the state -
Employer contributions to health benefits are far lower and declining
far faster for low-wage workers. Some plans offered to employees are
just not a good value.
- Stigma - There is a very real danger that creation of an
employer-based option would strengthen the stigma against enrolling in
the traditional HUSKY program. Families without the option of
employer-sponsored coverage might be even less inclined to apply for a
program that is too often characterized as "welfare".
- Crowd out - Creating a PA program could lead a significant number of
employers to reduce their benefit levels and/or contributions toward
coverage. Without controls, the program could end up covering a large
number of currently insured people, as happened in MA. While crowd out
has not been a problem in Connecticut's HUSKY program, that is largely
due to very low enrollment.
- Adverse selection - As consumer costs increase, employees with
greater health needs would be more likely to participate and healthier
employees would have less incentive to pay the costs. As the health
care needs of the pool increase, costs for all employer-based coverage
could increase. As these costs rise, fewer consumers and employers
would be able to afford coverage, increasing the number of uninsured.
- Unfair eligibility - If the state increases eligibility for only the
PA portion of HUSKY, uninsured residents lucky enough to have an
employer offer of coverage that meets program standards would benefit
over those at lower incomes without an offer. Conversely, a worker
with a family would be able to afford coverage while a coworker at the
same job, same income (or even lower) without children, would be out
of luck. Large employers would be more likely to have personnel
departments to respond to the PA paperwork, so a child whose mom works
at McDonalds could fare better than another whose mom works at a
- Employer reluctance - Beyond the paperwork hassle, employers have
expressed concern about the stability of PA programs. Employers are
understandably wary of starting to offer benefits, becoming dependent
on state subsidies that are subject to the volatility of each year's
state budget process. If the program were cut, participating employers
would be placed in the difficult position of either cutting benefits,
raising costs to employees or shouldering the costs themselves.
- Fairness to employers - If Connecticut chooses to include an
employer subsidy, a choice between fairness and effectiveness of
funding will have to be made. If the state chooses only to offer the
subsidy to employers who begin to offer benefits, funding will be
effectively targeted to the uninsured. However, in fairness it will
difficult to exclude those employers currently doing the right thing
and offering their employees insurance. Under this broader offer, a
great deal of the new money will target workers who already have
insurance, as is the case in MA.
What should Connecticut consider if we decide to build a premium
- Public process - Initial and continuing public involvement is
critical to success.
- Good value - Be sure the state only buys decent coverage that is
worth its cost. Between employer plans and wrap around coverage,
ensure that families have access to a comprehensive benefit package
that covers all medically necessary services to protect both physical
and mental health.
- Reasonable costs to consumers - As a significant barrier to
accessing preventive care, keeping consumer costs reasonable is a good
investment of public funds. High costs to consumers could also trigger
- Cost effectiveness - Ensure that the state is not paying more for PA
coverage than for HUSKY. Determine if new funding from employer
contributions are mitigated by high administrative costs and crowd
out. One is reminded of the comment by an OPM staffer, "We can't
afford any more of your savings."
- Crowd out - While the state should maximize the effectiveness of
public funds, policies must be balanced with barriers to enrollment
for families. Requirements that employers not reduce current spending
- Capacity - Ensure all systems are in place and functional, before
implementation. Pilot the program first. Build consensus with
consumers, employers, insurers, and policymakers. Provide DSS with
sufficient resources to effectively administer the program.
- Significant consumer supports - Aggressive outreach and education to
empower consumers' good sense to do what works for their families.
Ensure that consumers fully understand the complex system and where to
go for help.
- Privacy - Protect sensitive employee personal information from
disclosure to employers.
- Smooth linkage with traditional HUSKY - Ensure that families who
apply for premium subsidy, but are eventually found to be ineligible,
are smoothly transitioned into HUSKY. Minimize application timelines.
- Minimize stigma - Ensure that all communications, policies and
processes are designed to reduce stigma for traditional HUSKY.
- Significant employer supports - Devote resources to encourage
employer participation. Aggressive outreach emphasizing benefits to
employers such as:
- Healthier, happier, more productive employees
- Improved employee retention
- Cover all family members in one plan
- Improve employee participation rates in company plan
- State assistance to business with benefit costs
- Financial commitment - Ensure a stable, long term source of funding
to inspire confidence among employers and consumers.
- Evaluate and modify the program in response - Monitor at least:
- Administrative costs
- Consumer and employer satisfaction
- Service utilization
- Employer contributions and costs
- Crowd out -- the number of previously insured enrollees
- Adverse selection - health status of enrollees
- Outreach effectiveness - to consumers and employers
- Fairness of application system
- Effectiveness in reducing the number of uninsured (relative to
other policy options)
What else can Connecticut do that would be likely to reduce the number
The problem of the uninsured is complex with many causes. No single
option alone will solve the problem. Several simpler options are available
to Connecticut that have proven to effectively reduce the number of
- Evaluate HUSKY outreach -- Thousands of uninsured Connecticut
residents are eligible but not enrolled in HUSKY as it exists now.
Connecticut is far behind other states in enrollment. Connecticut
spends a great deal of money on HUSKY outreach over a multitude of
programs and initiatives, but there is no evaluation of the
effectiveness of spending. In the absence of objective information,
funding decisions are motivated by intuition and politics. Efforts are
so fragmented that some community groups get numerous calls offering
HUSKY presentations, while others have never been contacted. Consumers
have great difficulty getting effective assistance throughout the
complex and lengthy application process. An evaluation could provide
guidance to improve the performance of all outreach activities. For
more on barriers to HUSKY enrollment, see the Connecticut Health
Policy Project's report: HUSKY
Focus Groups: What Parents Are Saying.
- HUSKY parents' expansion - Currently, Connecticut only provides
assistance to parents in families up to 150% of the Federal Poverty
Level ($21,945 for a family of three). However, the state has
determined that families up to twice that income level need assistance
in purchasing health care for their children. As it takes healthy
parents to raise healthy children, it makes sense to provide
assistance to HUSKY parents up to the same income levels as their
children. By accessing federal matching funds, the state would
shoulder less than half the cost of such an expansion. With better
outreach, this option offers the best hope of cost-effectively
reducing the number of uninsured.
- HUSKY endowment fund - Allow anyone, individuals and businesses, to
buy-into the HUSKY program at full cost. This would provide a source
of affordable coverage to every uninsured Connecticut resident.
Recognizing that many low-income uninsured would still need subsidies
to make a HUSKY buy-in option affordable, a separate HUSKY Endowment
Fund could be established. The Fund could accept both public and
private funds; companies, generous individuals, foundations, etc. that
wish to contribute to the problem of the uninsured would have a
mechanism. The application process for consumers would mirror college
applications. HUSKY applicants could fill out an application just for
coverage and pay the full freight (no stigma). However if they choose,
they could fill out a bit more information on income levels, etc. to
apply for assistance from the Fund. As it piggybacks on HUSKY, the
program could be implemented with a minimum of administration.
- Other options to help the uninsured include local programs building
on existing community resources with public and/or private funding,
programs utilizing volunteer and subsidized health care expertise,
expansion of the community health center system that currently serves
the uninsured, purchasing pools to provide affordable options to the
uninsured, making bulk-purchasing arrangements used by managed care
organizations available to the uninsured, market reforms to ensure
fair pricing in health insurance, care coordination for the uninsured,
and consumer and purchaser information campaigns to provide the tools
for effective purchasing. Variations on all these options have been
successful in other states.
Overall, a well-designed PA program has the potential to provide some
relief for Connecticut's uninsured. However, it will not solve the problem
alone. Connecticut should pursue many options, evaluate the progress of
each in reaching both fiscal goals and in reducing the number of
uninsured, and modify policies in response.
Comparison of Connecticut Options for the Uninsured
outreach for current programs
HUSKY to parents
|New bureaucracy created?
|Costs new money? (Assuming no cuts to
||No, makes better use of current spending
|Increase chances of crowd-out?
|Fair system for eligibility?
||Based on income and having children
||Based on income and having children
||Fairest system - open to everyone
regardless of income, employer or family circumstance
||Not fair - restrictions include employer
offer and participation, children and income
|Targets public funds to uninsured?
|Could it subsidize crummy insurance?
|Enhances stigma of current HUSKY program?
||No, reduces it
||No, reduces it
|Requires employer paperwork?
|Works in other states?
||Yes, very well
||Yes, very well
||Hasn't been tried
||No, works very poorly
|Has worked in Connecticut before?
||Hasn't been tried
||Hasn't been tried
||Hasn't been tried