Comments on the State Plan for the Children's Health
Insurance Program
Submitted to the North Dakota Department of Human Services March 27, 1998

The North Dakota Catholic Conference provides these comments to the plan proposed by Governor Schafer and the Department of Human Services (Department) for a children's health insurance program (CHIP) pursuant to the State Children's Health Insurance Program in the Balanced Budget Act of 1997 (Title XXI).

The North Dakota Catholic Conference is the public policy arm of the Roman Catholic dioceses of North Dakota. The North Dakota Catholic Conference also represents the twenty-eight Catholic health care facilities in North Dakota. Our comments, therefore, stem from both principles of our faith and our practical experience with providing health care services to the population targeted by CHIP.

The North Dakota Catholic Conference supports North Dakota's participation in the Title XXI program. Health care, because it is essential to human life and dignity, is one of those services that society must ensure exists for all of its members. The children of the working poor are especially at risk of not receiving adequate health care coverage. While CHIP will not address all of our health care problems, it is an important step to ensure that the life and dignity of the most needy among us are protected and respected. For this reason, we commend the Governor and the Department for taking advantage of the CHIP program and provide these comments and questions regarding the state plan.

Process and Further Action
We urge the Department to establish a task force to further refine the CHIP plan. The conceptual plan leaves many important issues unresolved and, in some cases, does not reflect full collaboration with interested and knowledgeable parties. Such a task force should include relevant government agencies, legislators, health care providers, and children's health advocates. We understand the need to have a plan submitted soon to the Health Care Financing Administration (HCFA). Nevertheless, the approaching deadline does not preclude creating a task force of interested parties to further review and refine implementation of CHIP.

Consultation with Tribes
We are also concerned that the process has not involved sufficient participation by tribal representatives in the development of the plan. HCFA requires that states engage in meaningful consultation with tribes in the development of a CHIP plan. This consultation is in addition to any tribal response included in the general public involvement process. We have not seen any indication that such consultation with the tribes has occurred. If it has not yet occurred or is still on-going, there should exist an opportunity to respond to the proposed plan as changed to reflect that process.

Acceleration of Medicaid Coverage
The North Dakota Catholic Conference supports the proposal to use the Medicaid Program option to provide services for 18 year old children whose family income is below 100 percent of the federal poverty level. Since federal law requires that these children be covered in the near future, it makes sense to accelerate coverage at this time.

Use of Insurance Program for Remaining Children
The North Dakota Catholic Conference does not oppose using a private insurance program to cover the remaining children eligible for CHIP. However, use of a private insurance program raises several questions. A starting question concerns why the state is proposing a private insurance program. One reason given by the Department is that the state is uncomfortable with expanding Medicaid because it is an entitlement program. This reason, while it may make sense from a purely practical and budgetary standpoint, fails to reflect the very purpose for which the state is involved in the coverage of health care for low-income persons. The state responds to the essential needs of the poor because it is morally obligated to do so. When a program is opposed solely or primarily because it is an entitlement program, we run the risk of making policy decisions in a moral vacuum.

Poverty Level Limits
A more acceptable reason given is that a private insurance program allows the state to provide coverage for more children. This reason, however, raises another question. If one of the reasons for using a private insurance program is to provide coverage to more children, why does the proposed plan cover children only to 150% of the federal poverty level? Restricting access to CHIP to children in families at less than 150% of the poverty level results in a CHIP program that falls far short of its purpose to provide coverage for all or most uninsured children in North Dakota.

Accurate figures for the number of uninsured children are difficult to ascertain. Presumably, the numbers decrease at the higher income levels. However, data from the State Health Care Task Force study indicate that a significant number of children in North Dakota whose families are under 200% of the poverty level are uninsured. Moreover, the study showed that inability to afford health insurance was a primary reason families did not have coverage. There is no indication that market reforms passed by the state legislature or Congress have significantly reduced the number of uninsured children. Whatever the exact numbers, one thing is certain -- those children need health care coverage and are likely to remain uninsured without the availability to participate in CHIP.

A related concern is why North Dakota does not propose utilizing the full allotment of dollars allocated to it for CHIP under Title XXI. By accessing the full allotment available, North Dakota has a better chance of covering all the uninsured lower income children in the state. The state should take advantage of every opportunity it has to receive assistance from the federal government to provide health care services to its children. This makes even more sense when one considers that Title XXI money comes without all the "strings" and mandates present in Medicaid.

In short, the North Dakota Catholic Conference recommends that the North Dakota CHIP plan be made available to children whose family income is below 200% of the federal poverty level and that the state access all monies available to it under Title XXI.

Eligibility Issues
The North Dakota CHIP program should not have an asset test. Most states are not proposing an asset test for CHIP programs and most states have even eliminated asset tests for Medicaid. Using an asset test for North Dakota's CHIP program makes even less sense than in other states since more than one vehicle and farm implements are more of a necessity here than elsewhere. In addition, we should recognize that unlike those covered through Medicaid, the CHIP population is more likely to have assets such as farm implements that will work against eligibility while the family may nevertheless be unable to afford private insurance.

The proposed plan states that the Department is intending to use the same application for CHIP that is currently used to determine eligibility for Medicaid. Efforts should be made to ensure that applicants do not feel that they are applying for Medicaid. The target families for CHIP are more likely to see a stigma attached to receiving Medicaid and may not even attempt to apply for CHIP if the perception is that the family is applying for Medicaid. Not using an asset test will help alleviate this problem and provide a consumer-friendly outreach program.

Benchmark Coverage
The North Dakota Catholic Conference does not oppose using the Public Employees Retirement System as the benchmark coverage for CHIP, with the addition of basic dental, vision, well baby, well child, and well adolescent preventive services. However, our full support is reserved until we have an opportunity to review precisely what services are covered. During hearings before the interim Insurance and Health Care and Welfare Reform committees, representatives from the Department stated that the PERS plan is only a guideline and does not necessarily reflect what will be included in the CHIP plan. To adequately provide comments to the CHIP plan, it is necessary to know precisely what the plan will include.

For example, although the federal statute limits denial of eligibility or coverage because of preexisting conditions, CHIP plans can refuse to cover entire categories of services so long as those changes do not stray too much from the benchmark coverage. Only by examining precisely what is covered can the public have assurances that services considered too costly by the state or insurer or services of particular interest to under-represented groups are covered.

In addition, only with a full assessment of the covered services can interested persons recommend what services need not be offered because they are not appropriate for the CHIP population, possibly reducing the cost of coverage so more children can receive basic and essential services. An understanding of what is covered is also the first step for determining whether and how the state should create a separate benefits package for children with certain special care needs.

Since the success of CHIP depends a great deal on what services are covered, we urge that public announcements and an opportunity for hearings be made whenever any changes occur to the covered services. In addition, the creation of a task force to carefully review the covered services will help ensure that appropriate services are covered.

The conference supports not requiring monthly premiums, co-payments, or deductibles for those included in the proposed CHIP plan.

Abortion Coverage
The state plan is silent on whether abortion services will be covered. The federal law states that neither federal funds nor state matching funds for CHIP may pay for any abortion, or to assist in the purchase, in whole or in part, of health coverage that includes abortion, unless the abortion is necessary to save the life of the mother or if the pregnancy is the result of an act of rape or incest. (Sections 2105 (c)(1), (7). ) Coverage of abortions necessary to save the life of the mother or if the pregnancy is the result of an act of rape or incest is merely permitted, not mandated. (Id.; Section 2110 (a)(16).)

North Dakota law does not permit using CHIP funds to cover abortions unless the abortion is necessary to prevent the death of the mother. North Dakota Century Code section 14-02.3-01 states: "No funds of this state or any agency, county, municipality, or any other subdivision thereof and no federal funds passing through the state treasury or a state agency may be used to pay for the performance, or for promoting the performance, of an abortion unless the abortion is necessary to prevent the death of the woman." North Dakota's Medicaid program presently covers abortions where the pregnancy is the result of an act of rape or incest, but that is only the result of a court order based on language and judicial interpretation of Title XIX not applicable here. Since North Dakota law prohibits using state or federal funds to pay for abortions except where the abortion is necessary to prevent the death of the mother, the state's CHIP program cannot cover any other abortions.

The North Dakota Catholic Conference opposes any waiting period to address potential crowd- out. We recognize that Title XXI requires the state must do something to address potential crowd-out. Any approach dealing with the potential problem must, however, have the best interests of the children in mind. While crowd-out is theoretically a potential problem, there is little evidence that it is a significant problem. Officials in states that offered expanded coverage to children prior to the passage of Title XXI, report that crowd-out has not been a significant problem. Available evidence from large scale children's health insurance programs in Florida and Minnesota suggests crowd-out was not a significant problem in those states. For example, a study of study of MinnesotaCare, a program that subsidizes premiums for families under 275 percent of poverty, found no evidence that the program resulted in significant erosion of coverage in the private market. Further, only three percent of enrollees shifted from employer-based insurance to MinnesotaCare.

A main reason that crowd-out has not presented a problem is that lower income families often do not have employer-based coverage to lose. Thus, a recent study on Florida's Health Kids program found that only two percent of enrollees had employer coverage any time during the year before enrolling in the program. Also, the analysis of reasons for disenrollment from Healthy Kids showed that when parents had an opportunity to select employer-based coverage, they did so.

Since we have little reason to expect that crowd-out will be a problem in North Dakota, any waiting period is unnecessary and a six-month waiting period seems excessive. In fact, most states that have experience with expanded health insurance for children prior to the passage of Title XXI have no waiting period at all. Considering that the experience of these states does not show the need for a waiting period, North Dakota should consider having no waiting period, or at least a shorter period than the proposed six months. It is significant to note that three states with the most experience with expanded child health insurance programs, New York, Pennsylvania, and Florida, are not proposing any waiting period for their CHIP programs. Their experience has shown that crowd-out is not a problem that warrants waiting periods. In fact, of the seven states that had filed CHIP plans or passed legislation to implement CHIP as of January 15, 1998, only three had any waiting periods only one had a six-month waiting period.

If any waiting period exists, certain exemptions should exist. Testimony before the interim Insurance and Health Care and Welfare Reform Committees -- but not plan information provided to the public -- stated that the waiting period would not apply if the insurance was lost through no fault of the family. The state plan or rules should, relative to that policy, expressly exempt situations where the loss of insurance was caused by:
• Death of a parent
• Loss of employment for reasons other than voluntary termination
• Change of address such that coverage is unavailable
• Discontinuance of benefits to all employees
• Expiration of a coverage period under COBRA
• Self-employment
• Termination of health benefits due to long-term disability

In addition, to the restriction should not apply where:

• The previous insurance was non-group insurance
• The employer paid less than 50 percent of premium cost of the previous insurance
• Loss was caused by a change to a new employer such that coverage became unavailable
• Dependent coverage was terminated due to economic hardship
• Substantial reduction in either lifetime medical benefits or a category of benefits occurred
• The previous insurance was not comparable to that available under CHIP
• The child has special health care needs

Also, since the proposed waiting period is so long, if it is implemented, it must be combined with vigorous enforcement of the prohibition on denying benefits because of preexisting conditions.

In addition to our concern that a long waiting period is not needed, we also are concerned that the proposed North Dakota CHIP plan places the burden of dealing with the feared problem of crowd-out solely on the families. If crowd-out occurs in North Dakota, we must recognize that its cause does not rest solely with the behavior families eligible for CHIP. Some cause also may rest on the activities of employers who may change or drop insurance for their employees. North Dakota should consider ways to address the perceived problem by giving employers reasons to retain or expand insurance coverage.

Besides those policies designed to make employer-based coverage more affordable, states can regulate employer practices to address crowd-out. California's new law amends its existing unfair labor practices act to prohibit an employer from changing the employee-employer share-of-cost ratio based upon the employee's wage base or job classification in order that the employee enroll in a Title XXI program. It also prohibits employers from making any modification of coverage for employees and their dependents in order that they enroll in the Title XXI program. Further, the California law prohibits an employer from encouraging employees to drop group coverage in favor of the Title XXI program. Wisconsin passed legislation requiring employers who offer insurance to some of their employees to offer insurance to all. Rhode Island prohibits an employer from discriminating in benefits against employees eligible for public health insurance or offering an incentive to only such employees to drop employer-based coverage.

Finally, any consideration of potential crowd-out must put foremost the legitimate health care needs of the child. While there exist legitimate reasons to encourage retaining private health insurance and discourage unnecessary use of government programs, the health care needs of children takes moral precedence over those secondary concerns. In other words, providing health care to a child is always more important than preventing cancellation of private coverage.

Administration of Program by Insurer
In today's health care delivery environment, the method of providing coverage is as important as what is contained in the coverage policy. The state plan makes no statement about whether children enrolled in CHIP will be in a managed care plan. While we recognize that there exist varying degrees of managed care, we oppose requiring participation in a strict managed care plan by enrollees in CHIP. Although the conference does not necessarily oppose managed care, the benefits and appropriateness of managed care remain unknown. The North Dakota Catholic Conference believes that low income persons should never be forced into a managed care program as a condition of receiving health benefits. Like the Medicaid managed care pilot project, CHIP recipients should have a choice about whether to participate in a managed care program.

Since the proposed plan states that families will not have to pay any co-payment or deductible amounts to receive services under CHIP, we hope that any managed care contract that may exist will not permit cost-sharing on beneficiaries as a way to control the use of services. Indeed, any policy designed to control the use of services should be carefully scrutinized to ensure that the health care needs of the child and the rights of parents are never jeopardized.

Other Health Services Initiatives
Title XXI permits states to use up to 10% of their federal allotment for other forms of child health assistance including health services initiatives to improve children's health. The proposed plan does not contain any proposals for such initiatives. We should not assume that insurance coverage is always the best way to address children's health care needs, especially if the state intends to use only 50%-60% of its federal allotment for expanded health insurance and children above 150% of the poverty level will receive no assistance. A task force including representation from the Department of Health should examine using Title XXI to fund initiatives to improve children's health in North Dakota.

There exist many approaches to successful outreach for the CHIP program. Here are some suggestions:

• Do everything possible to eliminate the image that CHIP is "welfare."
• Do not use an asset test.
• Simplify the application process.
• Provide outreach to those families no longer eligible for Medicaid because of increased income. "Sell" CHIP to those families as a recognition of financial improvement
• Use Extension Services for outreach. This helps avoid the stigma that CHIP is a welfare program and will reach working populations that might be more likely to be eligible for CHIP than the traditional Medicaid population.
• Use schools and churches for outreach.
• Point of service application.

Special Needs Children
As discussed elsewhere in these comments, a task force should carefully review the benefits package to determine whether it is adequate for special needs children. If it is not, the state should consider creating a separate program. Also, the state should consider using Title XXI funds to expand existing special needs programs to include more children.

The North Dakota Catholic Conference supports participation by North Dakota in the Title XXI program. At this time, however, it appears that the state must make several changes to the plan before it is submitted to HCFA if the state is to have a plan that best achieves the purpose of Title XXI -- to improve children's health care and provide health insurance to as many uninsured children as possible. To further that effort, we recommend the creation of a task force to address finalizing a plan for submission to HCFA and implementation of the plan in North Dakota. These matters should be addressed now rather than later. Changes to the plan, though possible, will be more difficult as time passes. Moreover, the state should begin its effort by doing all that is possible to improve the health of North Dakota's children, not merely the minimum effort necessary to get the process started.

We look at these comments as the beginning of a process and look forward to working with the Department and the Governor to create the best plan for North Dakota's children.