Mississippi’s Children’s Health Insurance Program: A Policy Analysis
Executive Summary
Introduction
The federal Children’s Health Insurance Program (CHIP), a federal grant program, officially ended September 30, 2007, but has been extended several times through federal legislation. At present, CHIP is funded through March 2009 and Congress will either reauthorize the program or consider another funding extension. Also, Mississippi’s current contractual relationship with its CHIP insurer, Blue Cross Blue Shield of Mississippi, was scheduled to end December 31, 2008. (The State and School Employees’ Health Insurance Management Board [HIMB] has exercised an option to extend the agreement one year to December 31, 2009.)
In light of the above information, a legislator requested PEER to review the administrative structure of Mississippi’s CHIP, determine possible changes that could be implemented to the structure, identify the implications of any change, and attempt to assign a cost basis to the components of various CHIP models.
PEER sought to answer the following questions:
Conclusions
What are the legal authority and funding structure for Mississippi’s Children’s Health Insurance Program?
Title XXI of the Social Security Act created the Children’s Health Insurance Program and its funding mechanism. States have the authority to design their own CHIPs. MISS. CODE ANN. Section 41-86-1 et seq. (1972) set out minimum requirements for the state’s CHIP and authorized a CHIP Commission to structure a program consistent with minimum standards set forth in federal and state laws. Following the guidelines promulgated by state law, the CHIP Commission recommended that Mississippi’s Children’s Health Insurance Program operate as a separate, fully insured program under the direction of the State and School Employees’ Health Insurance Management Board.
CHIP is a joint federal/state program funded primarily through a block grant from the federal government that is based on the number of children in low-income families, the number of those children who are uninsured, and the state cost factor. The federal government provides the majority of the funding for the program. The federal match rate for Federal Fiscal Year (FFY) 2008 was 83.4%.
How does Mississippi operate its Children’s Health Insurance Program and how has program enrollment trended in recent years?
MISS. CODE ANN. § 41-86-9 (2) (a) (1972) gave the CHIP Commission the authority to designate either the Division of Medicaid (DOM) or the State and School Employees’ Health Insurance Management Board as the administering agency for the program. In its report, the CHIP Commission directed the State and School Employees’ Health Insurance Management Board (HIMB) to administer the program. The Division of Medicaid also has CHIP responsibilities and the division’s officials are ultimately held responsible by the federal Centers for Medicare and Medicaid Services for program administration and oversight.
Mississippi operates a separate CHIP that provides benchmark equivalent “plus” coverage, which means that Mississippi’s CHIP provides all of the benefits provided by the benchmark plan (i. e., the State and School Employees’ Life and Health Plan), as well as additional benefits (e. g., dental and vision coverage).
The current CHIP insurer, Blue Cross Blue Shield of Mississippi, was selected through a competitive bidding process. The term of the contractual agreement is for four years (January 1, 2005, through December 31, 2008; the HIMB has exercised an option to extend the agreement for one year.) The current CHIP agreement contains a one-time premium call that requires the state to reimburse the insurer for any claims costs that exceed the amount available to pay claims and the insurer to reimburse the state any excess amount when the premiums paid exceed claims incurred. This is typical of a participating insurance arrangement, which is the type of agreement that currently exists between the insurer and the state, and has the effect of removing substantial risk from the insurance product. Removing risk from the contract could remove the insurer’s incentive to implement vigorously certain required components of the contract such as utilization review. Strong utilization review could have a financial impact on providers in the network.
The overall enrollment for the program has remained consistent in recent years, with the majority of CHIP enrollment consisting of enrollees from families earning less than 150% of the federal poverty level and children age six to eighteen.
How do other states operate their Children’s Health Insurance Programs?
A survey by the National Academy for State Health Policy and PEER’s own survey of selected states show a range of administrative and service structures but yield no best practice model or most efficient organization. Each state’s program has its own strengths and weaknesses based on that state’s target population and service goals.
According to the National Academy for State Health Policy’s 2005 survey of states’ CHIPs:
PEER also conducted its own survey of six selected states and found a variety of administrative and service delivery structures, program costs, and benefits/services package. Among the states surveyed, Calendar Year 2007 program expenditures per member per month ranged from $100 in Arkansas to $210 in Tennessee, but PEER cautions that states’ program expenditures are not comparable for a variety of reasons. While the states surveyed are comparable with each other and Mississippi in basic benefits provided, states varied in requirements for cost sharing, level of maximum benefits, and percentages paid for covered services.
What are the total costs of Mississippi’s CHIP and the cost components of CHIP’s premium rate structure?
From January 2004 through June 2008, the total cost of Mississippi’s CHIP was approximately $605 million, with the federal government contributing $505 million and the state contributing approximately $100 million. The cost of CHIP varies yearly and depends largely on the premium rate structure charge by the insurer.
The premium rate for CHIP is based on the sum of six components. The six components that fluctuate and can cause premium rate changes (depending on program utilization) are trended claims, the recoupment component, administrative fees, risk pool assessments, premium taxes, and vision service premiums. Mississippi’s per member per month premium for calendar year 2008 is $231.13.
The current participating agreement with Blue Cross Blue Shield of Mississippi allows the insurer to operate similar to a third-party administrator. Currently, BCBSMS is allowed to set aside a portion of premiums paid by the state for administration and then pay claims out of the remaining amount. If the amount of claims paid out is more than the set-aside amount of the premium, BCBSMS is allowed to recover that amount. Conversely, if the portion of the premium amount that is set aside to pay claims is greater than the amount of claims incurred, then BCBSMS must refund the overage to the state. Department of Finance and Administration officials have stated that this agreement limits increases in the administrative component of the premium that the insurer charges the state.
PEER believes that Mississippi’s CHIP has opportunities for cost savings that the state has not yet achieved, including restructuring benefits, increasing cost sharing, implementing prescription drug cost containment measures, and implementing enrollment controls. (See pages 45 through 50 of the report for a full discussion of these cost savings opportunities.)
How does provider access compare between Mississippi’s CHIP and Medicaid?
Factors affecting the provider networks for CHIP and a Medicaid population resembling CHIP include access to the nearest provider, provider caseload, and allowable reimbursements for services rendered. All of these factors are important for adequate health care access. Data analysis shows that provider access (distance from beneficiary to nearest provider) is comparable between Mississippi’s CHIP and a similar Medicaid population. However, data analysis suggests differences in the provider caseloads between the two groups, with the Medicaid group having the greater demand for services. Also, an allowable charge comparison shows that on selected services, the Medicaid allowable amount is 48% of the current CHIP allowable amount.
What actions should Mississippi take regarding its CHIP?
Given that no clear best practice model for a state CHIP emerged from a national survey and PEER’s own survey of selected states and given that Mississippi’s contract with BCBSMS ends December 2009 (because HIMB exercised an option to extend the contract one year), PEER recommends that the state issue a request for proposals for a new service delivery structure to be effective for 2010. This structure should incorporate PEER’s recommended cost savings measures and changes in contract terms.
Policymakers should be aware of the impediments to change that could exist in implementing cost savings measures or changing to a different administrative structure. These impediments include the requirements of existing state law, review and approval of changes by the federal Centers for Medicare and Medicaid Services, whether the program will be reinstated at the federal level, and the effects of the CHIP funding formula.
Recommendations