CSHB 2962 has passed to third reading, which must occur before midnight on Friday, May 15.

CPPP's analysis and more information:

Parents will contribute more than the State to the CHIP Buy-In from 200-300% FPL and the federal match is even more.

The latest LBB fiscal note for CSHB 2962 estimates that the state’s GR cost for 2010-2011 will be $43.2 million, while:

· Parents will contribute $49.2 million, and

· Federal CHIP match will contribute another $105.5 million.

More Important Numbers:

· Twenty-six (26) other states make affordable coverage available to children at or above 250 percent of FPL, and 18 of these cover children above 300 percent FPL.

· LBB estimates this new CHIP program will cover 31,500 more children in 2010, reaching 82,900 in 2011.

Comparing CSHB 2962 and SB 841

CSHB 2962 is very similar to SB 841 by Averitt, which passed the full Senate 28-2.

Both bills create a virtually identical 200-300% FPL CHIP program with monthly premiums and stricter standards to discourage dropping private coverage and adverse selection. Additional provisions in CSHB 2962 are:

· SB 841 moves the CHIP asset test to 250% FPL; CSHB 2962 does the same and also specifies changes in the asset limits to make them appropriate for this higher-income group of families (sections 2, 14).

· SB 841 moves the current 6-month review of income for CHIP children from 185-200% FPL (created in 2007 by HB 109) up to 285% FPL; CSHB 2962 eliminates that check instead for 2 reasons:

1. Keeping the check would disqualify Texas from receiving bonus payments under federal CHIP Reauthorization (CHIPRA) for enrolling more uninsured children; and

2. The current check has been a failure; HHSC is only able to find adequate income data in 3^rd-party databases for fewer than 2% of the children 185-200% FPL who are reviewed.  The rest of the families actually have to provide new paperwork, even though the check was intended to be 100% electronic.

· House bill says premiums will be “approximately” 2.5% of family income, SB 841 says “not more than 2.5%”;  House language is simply to clarify that the intent is to be as close as possible to 2.5% (i.e., not less than).

· House includes a Full-Cost Buy-In option for kids 300-400% FPL who would otherwise lose eligibility, to be structured to have no cost to state.  SB 841 originally included this provision but there were HHSC technical issues with the program, which the CSHB 2962 version fixes.  Technical Floor Amendment to CSHB 2962 s expected to clarify that ONLY children exiting CHIP or Medicaid can participate, which will limit enrollment while HHSC works out the implementation challenges.

· House restores ability to deduct Child Support payments made to another household from income when qualifying for CHIP (eliminated in 2003).  A small but significant number of children cannot access CHIP because their family income is calculated as including funds that are actually NOT available to that household, but instead have been paid to another household in the form of child support.  As a result, two different families must report that same payment as income.

· House ensures that college savings plans can be excluded from counting as an asset for CHIP, Medicaid, TANF and SNAP.  This encourages saving for college, and simplifies processes for HHSC by making policy consistent across programs (Sections 7, 11,12).

· House strengthens HHSC outreach and application assistance activities for CHIP and other benefits HHSC administers.  Community-based organizations’ responsibilities and workload have nearly tripled since 2006, but we are spending less than in 2002 when they only served CHIP applicants.

· House Section 9 directs HHSC to ensure that all needed actions are taken to draw federal Stimulus Medicaid funding ; it is assumed that this would already be done and has no cost to the bill.

· House Section 10 directs HHSC to implement prospective payment systems for federally qualified health centers and rural health clinics as required by new federal law; it is assumed that this would already be done and has no cost to the bill.

· House Section 13 directs HHSC to develop a plan to improve eligibility outreach and streamline eligibility paperwork and systems.

Texas’ original CHIP statute ALREADY includes anti-crowd-out provisions, and these will apply to the new coverage:

Children below 200% FPL who are insured cannot enroll in Texas CHIP now, and they must have been uninsured for at least 3 months to qualify.

Sec. 62.154.  WAITING PERIOD; CROWD OUT

(a) “…the child health plan must include a waiting period and may include copayments and other provisions intended to discourage:

(1)  employers and other persons from electing to discontinue offering coverage for children under employee or other group health benefit plans; and

(2)individuals with access to adequate health benefit plan coverage, other than coverage under the child health plan, from electing not to obtain or to discontinue that coverage for a child.

(d) The waiting period (FOR CHILDREN BELOW 200% FPL) required by Subsection (a) must:

(1)  extend for a period of 90 days after the last date on which the applicant was covered under a health benefits plan; and

(2)  apply to a child who was covered by a health benefits plan at any time during the 90 days before the date of application for coverage under the child health plan.

CSHB 2962 Adds These New, Stricter Anti-Crowd-Out Provisions:

Under CSHB 2962, children from 200-300% FPL will have to be uninsured for 6 months to qualify, and research suggests that this waiting period can virtually eliminate crowd-out.

• Section 4:  Waiting period of 6 months – twice as long as for original Texas CHIP (<200% FPL).
• Section 3:  Monthly Premiums equal to 2.5% of family income, plus co-payments which can add up to 5% of family income.  Premiums increase along with family income and size.
• Sec. 5 and CSHB 2962 Floor Amendment:  Lock-Out for non-payment: To discourage dropping coverage when kids are healthy and re-enrolling when care is needed, children whose parents stop paying will have to wait an additional period before they can re-enroll.  This applies to both the 200-300% FPL group and the smaller Full-Cost Buy in group.

Texas CHIP Evaluation Research Finds Very Little Crowd-Out

Federal CHIP law requires states to limit crowd-out and requires an independent program evaluation.  The University of Florida’s Institute for Child Health Policy (ICHP) is the evaluator for Texas CHIP.  ICHP has reported that:

· Just 3% of children enrolled in Texas CHIP below 200% FPL did so after waiting out the 90-day waiting period.

· Only 24% of CHIP children had employer coverage “offered”, and

o 81% of these said they could not afford their share of the “offered” coverage

o The cost of the employer coverage (declined) averaged 11% of family income.

o See: http://www.hhsc.state.tx.us/news/presentations/032404_HSCSHCE.pdf

Dropping employer coverage is not an issue at all for half of Texans. Texas has one of the lowest rates of access to employer-sponsored insurance:  49.6% of Texans do NOT get coverage through their job, or spouse or parent’s job (compared to 40.7% nationwide).

National Crowd-Out Research

Jonathan Gruber of M.I.T. is a leading health economist often cited by conservative groups and legislators, whose research on CHIP crowd-out has been reported by the Congressional Budget Office.  Gruber’s analysis found:

• Using tax deductions and credits to buy insurance in the individual health insurance market would result in no net gain in health coverage, and would cause employer-based coverage to decline by fully as much as coverage in the individual market would rise.^[i]
• Gruber says, “no public policy can perfectly target the uninsured, and public insurance expansions like SCHIP remain the most cost-effective means of expanding health insurance coverage.  I have undertaken a number of analyses to compare the public sector costs of public sector expansions such as SCHIP to alternatives such as tax credits.  I find that the public sector provides much more insurance coverage at a much lower cost under SCHIP than these alternatives.  Tax subsidies mostly operate to “buy out the base” of insured without providing much new coverage.”^[ii]
• Gruber has also reported on a study that found adequate waiting periods are very effective at reducing crowd out.  Specifically, the study estimated 50% crowd-out with no waiting period, and no substitution with a six-month waiting period. ^[iii]

Over a Third of Texas’ 1.5 Million Uninsured Children are over CHIP Income Cap

· Over 2/3 of new uninsured U.S. children in 2006 were in families above 200% FPL, above the current limit for Texas CHIP.  Census 2007 numbers indicate that the number of uninsured Texas children from 200-300% of poverty is growing. (U.S. Census)

· Very few uninsured children from 200-300% FPL have access to insurance through their parents’ jobs:

· about 80% of uninsured children between 200-300% FPL live in a family where their parent does not have access to an employer-based plan that covers children; [iv]

· fewer than 8% of U.S. families between 200-400% of poverty turn down employer-sponsored health care.[v]

· Half the private companies in Texas do not offer any health benefits at all.  (TDI, Medical Expenditure Panel Survey 2006)

· Less than 8% of Texas private sector have employer-paid full family coverage for their workers.

· From 1996-2006, the average cost of family coverage in Texas increased 85.7%, but our incomes increased just 8.6%.  With premiums growing 10 times faster than incomes, coverage becomes less affordable for more and more Texans every year.

Today’s Individual Insurance Market is not a Solution for Many Texas Kids

Families without employer-sponsored insurance for their children can turn to the individual health insurance market for care, which research shows is often unaffordable and limited in scope—or denied altogether to children with medical conditions. 

• One study found that families with incomes between 200-299% FPL who purchased insurance in the individual market spent 21% of their income on medical costs, including premiums and cost-sharing, even though only relatively healthy people were able to buy the individual-market coverage at all.^[vi] TDI does not regulate individual insurance rates at all.
• A 2004 study found people with individual private insurance paid much higher share of their total health care bill out-of-pocket (55.3%) than did those with employer-sponsored group coverage (31.9%).^[vii].
• In 2008, an estimated 50.7 million insured Americans under 65 with health insurance spent more than 10 percent of their family pre-tax income on health care, and 13.5 million of these insured Americans spent more than a quarter of their family income on health care.^[viii]
• Another study:  One-third of persons in poor health who sought coverage in the individual market were either denied coverage or charged a higher premium for their pre-existing conditions.^[ix]

Research compiled by Center for Public Policy Priorities; for more information contact Anne Dunkelberg, Associate Director, (512) 320-0222, X102.

Anne Dunkelberg
Center for Public Policy Priorities
900 Lydia Street
Austin, TX 78702
512 320-0222 X102

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