More Health Care Plays

Low-income workers frequently have trouble getting health insurance coverage through the public programs technically available to them. The problem is that public health insurance programs for low-income workers and their families are separate from the system of job-based coverage used by most workers. In effect, this separation is a barrier because it means low-income workers must first hear about the opportunity to get coverage through a public program and then they must sign up, typically by going through a welfare agency. That requirement penalizes workers who cannot get time off from work to visit the welfare office and adds the stigma of welfare in the eyes of many workers. In contrast, workers who have job-based insurance conveniently sign up when they do their employment paperwork and then easily remain covered, since their employer pays their insurance premium.

The rates of insurance coverage among the working poor illustrate most clearly the problem with two separate systems. While very few workers with job-based coverage remain without insurance, more than one-half of children eligible for the federal SCHIP (State Child Health Insurance Program) or Medicaid coverage are not enrolled. That low participation rate leaves nearly five million kids uninsured.

"This in an important initiative, especially this budget year, as the increasing numbers of uninsured cause increased inefficiencies in funding their health care." -- Sandra Bruce, President & CEO, Saint Alphonsus Regional Medical Center, Idaho

In order to remove barriers to health insurance coverage, state policymakers should mainstream coverage for low-income workers by making it available through their jobs. One strategy is to use the worksite to enroll people in public programs when an employer does not offer coverage. Another solution is to use Medicaid and SCHIP funds to pay for job-based coverage when it is available. Several states offer policymakers examples of how this second strategy works in practice.

Under the leadership of State House Minority Leader Wendy Jacquet, Idaho created a "premium-assistance program," which is a subsidy program that promotes coverage by paying part of an employee's share of job-based health insurance premiums. In Idaho, the program expands coverage by giving low-income workers a Health Insurance Access Card to enroll in SCHIP, purchase individual coverage for children, or pay for employer-based family health plans. Workers in small businesses of less than 50 employees can also use the Access Card to help pay for insurance.

Currently, Massachusetts has a similar premium assistance program, with the subsidy going through the employer. Working with the MassHealth Family Assistance Program (MHFAP), the state's Insurance Partnership Program offers an incentive payment that encourages small businesses to offer health insurance to their low-income employees. With its 2006 health insurance reform, Massachusetts goes even further to mainstream low-income citizens into the insurance pool. The legislation encourages employers through subsidies and penalties to cover even more employees. The law also establishes the Connector, a marketplace designed to connect Massachusetts residents to affordable health plans, which they can join through their employer or independently if the employer will not cover them. Rather than isolating low-income citizens and placing them in a substandard public system, the Massachusetts plans promises to bring poorer citizens into the fold of high quality insurance that other residents enjoy. By redirecting federal and state health funding away from Band-Aid costs like subsidizing emergency rooms and toward the Connector and employer incentives, Massachusetts is leading the way in employer-based health insurance.

Some policymakers may worry that premium assistance will substitute public funds for private spending, thereby creating the problem sometimes called "crowding out," however, the potential problem is minor and can be prevented if the assistance is properly targeted. It is minor by definition, as small businesses often do not offer health insurance coverage to low-income workers (and even more rarely to their families), so there are not many employers whose private spending on health insurance coverage will be crowded out by public funding for covering low-income workers.

In fact, as long as premium assistance includes subsidies to workers or employers who already have job-based coverage, the subsidy gives employers more incentive to contribute to insurance for their employees. Moreover, it is only fair since an employer's contribution to job-based insurance is part of employee's overall compensation package of wages and other benefits. Providing premium assistance only to workers or employers without coverage is the same as cutting the pay of people who already have coverage. The premium assistance programs in Idaho and Massachusetts have tackled this problem, rewarding and encouraging job-based coverage by leveraging public funding for health insurance coverage.

Mainstreaming low-income insurance programs into job-based coverage is a win-win for state policymakers. The successful mainstreaming initiatives bring public insurance programs out of the welfare system and show how public programs can help expand private coverage.

Resources for Action

"Health Insurance Access Card," Idaho State Legislature, 2003
ssl.csg.org/dockets/25cycle/2005B/25Bbills/2125b04id.pdf

David B. Kendall, "Massachusetts Raises the Bar for Health Care Reform," Front and Center, Progressive Policy Institute, April 17, 2006,
www.ppionline.org/ppi_ci.cfm?knlgAreaID=111
&subsecid=137&contentid=253823

Jean Hearne and Linda Tollen, MassHealth Family Assistance Program: A Case Study of an Employer-Based Insurance Subsidy Program, Institute for Health Policy Solutions, April 1999,
www.ihps.org/pubs/1999%20May%20MAHlth.pdf

CHIP-B/Access Card Project, Idaho Department of Health & Welfare, Medicaid Division
http://www.healthandwelfare.idaho.gov/

"Access to Health Insurance," Idaho Department of Health & Welfare
www.healthandwelfare.idaho.gov/portal/alias_Rainbow/lang_en-US/tabID__3580/DesktopDefault.aspx

Additional Reading

Michelle Herman, Premium Assistance Programs: Potential Help for the Uninsured, National Conference of State Legislatures, 2004
www.ncsl.org/print/health/premiumassistancetechnicalassist.pdf

Ed Neuschler and Rick Curtis, "Use of Subsidies to Low-Income People for Coverage Through Small Employers," Health Affairs, May 21, 2003
content.healthaffairs.org/cgi/reprint/hlthaff.w3.227v1

Ed Neuschler and Rick Curtis, Premium Assistance: What Works? What Doesn't? Institute for Health Policy Solutions, April 2003
www.ihps.org/pubs/2003%20Apr%20Prem%20Asst-What%20Works%20IHPS.pdf

Joan Alker, Premium Assistant Programs: How They Are Financed and Do States Save Money?The Kaiser Family Foundation, October 2005
http://www.kff.org/medicaid/upload/
Premium-Assistance-Programs-How-are-they-Financed
-and-do-States-Save-Money-Issue-Brief.pdf

Contacts

Wendy Jacquet
House Minority Leader
Idaho Legislature
P.O. Box 783
Ketchum, Idaho 88340
(208) 726-3100
(208) 726-0674
wjaquet@sunvalley.net

David B. Kendall
Senior Fellow for Health Policy
Progressive Policy Institute
4021 Heritage Way
Missoula, MT 59802
(406) 543-2265
(772) 679-0652 (fax)
dkendall@ppionline.org