insights (2006-22)

A State Boost for Health Care

With a big spur from the state Legislature, the Bredesen administration is taking major strides toward addressing health care needs that were precipitated by last year’s cuts in TennCare.

Gov. Phil Bredesen himself has championed a Cover Tennessee proposal with these major components.

• Bare-bones health insurance coverage for lower income workers of small employers that don’t presently offer any health benefits. Companies with 50 or fewer workers, at least half of whom make less than $24,000 a year, could enroll and get a $50 per month state subsidy toward an envisioned $150 average monthly premium of a new state-sponsored health plan—with employers and employees sharing the balance. Benefits remain to be determined, but they promise to be far more limited than comprehensive employer health insurance plans whose monthly premiums average about $350. The Bredesen administration projects covering 28,000 in the program’s first year at a cost of $16 million, with enrollment rising to 100,000 of the state’s 600,000 uninsured adults in year three at a cost of $57 million. However, if experience in other states with similar programs is any guide, participation will be far lower.

• Creation of a “high risk pool” for individuals with conditions that render them otherwise uninsurable. As originally proposed, the pool would provide them coverage at 150 percent to 200 percent of commercial rates—well beyond the reach of the vast majority of the 61,000 uninsurables who were dumped from TennCare’s rolls last year. Indeed, at those premium levels, the state projected that only 3,500 individuals would enroll. Yet even so a $7 million annual subsidy (to  be borne equally by the state and assessments on health insurers) would be required to make the program actuarially sound. Legislative intervention, spearheaded by Sen. Doug Jackson and Rep. Gary Odom, has begotten a transformation in that program, whose provisions will be described shortly, to make coverage more affordable to lower income uninsurables.

•Extension of health benefits to all uninsured children (on the order of 100,000) beyond the 636,000 who are enrolled in TennCare. That would be accomplished through participation in a federal program known as S-CHIP that matches state contributions more generously and less restrictively than Medicaid. The projected state cost of the extension is $7 million in the fiscal year ahead.

At the same time, the Bredesen administration is committed to continuation of what are known as Safety Net programs put in place a year ago to cushion the impact of TennCare disenrollment for the 171,00 who got cut off. Those include provisions for making a limited list of prescription drugs available at low cost and special provisions for the mentally ill, hemophiliacs and persons on dialysis or with organ transplants.

Moreover, TennCare savings beyond those projected when enrollment was cut from 1.37 million to 1.2 million have permitted waiving or easing benefit limits that were due to accompany the enrollment cuts. Those savings have resulted primarily from tighter controls over drug utilization both through requiring prior authorization of prescriptions not on the state’s preferred drug list and what’s known as retrospective drug utilization review to deal with doctors who are deemed to be overprescribing. Overall, the state’s once burgeoning TennCare costs are expected to remain flat at $2.6 billion.

The clamp-down on expenses, along with robust state revenue growth, contributed to Bredesen’s acceptance of the legislative initiative to provide $38 million to make participation in the high risk pool more affordable to low income uninsurables.

In addition to spearheading the state funding increase, Jackson and Odom also won approval of a bill that directs the administration to see federal matching funds that could triple the total amount available for premium assistance.

Bredesen had made regulatory and court-ordered restrictions accompanying federal matches under Medicaid a scapegoat for TennCare enrollment cuts. But his Finance Commissioner Dave Goetz now professes optimism that a match for premium assistance may be obtained with fewer strings attached under a relatively new federal program known as HIFA (for Health Insurance Flexibility Act).

No one is prepared to say at this point how much the premiums might be or how many of the 61,000 uninsurables removed from TennCare’s rolls might regain coverage. All that may take months for a newly appointed board that will oversee the program to figure out. But it seems clear that out-of-pocket costs to individuals with incomes below 200 percent of poverty (about $19,000) should be on a sliding scale based on their incomes. If a federal match is obtained, a resultant $100 million in premium assistance funding would appear sufficient to make coverage affordable to a large percentage of those who lost it.

Bredesen’s willingness to seek a federal match for premium assistance begs the question of why he isn’t doing so for his program to insure lower income workers of small employers. Several other states have obtained federal matches under HIFA for very similar programs, and the federal funds have enabled them to offer benefits far more ample than Bredesen is proposing, at no more cost to the state. While the details of Cover Tennessee also remain to be worked out, Goetz has suggested that benefits might be limited to $2,000 a year for doctor visits and three days of hospitalization, along with out-of-pocket co-pays. That is a far cry from commercial health insurance benefits and might even prove to be a trap for the unwary.