Medicaid and CHIP: Enrollment, Benefits, Expenditures, and Other Characteristics of State Premium Assistance Programs

Fiscal pressures, rising health care costs, and increases in the number of uninsured may lead states to look toward public-private partnerships to help finance health insurance coverage. Through Medicaid and the State Children's Health Insurance Program (CHIP), states have had long-standing authority to operate premium assistance programs that subsidize the purchase of private health insurance. Enacted in February 2009, the Children's Health Insurance Program Reauthorization Act of 2009 (CHIPRA), which reauthorized CHIP and made changes to Medicaid, provided states with additional options for operating premium assistance programs. As of November 2009, states had not implemented premium assistance programs under the new authorities provided by CHIPRA, but, as allowed by CHIPRA, states were continuing to operate their programs under preexisting authorities. Through premium assistance programs, states use Medicaid funds, CHIP funds, or both to subsidize the cost of private health insurance--such as employer-sponsored insurance (ESI)--for eligible individuals. As such, premium assistance programs contrast with direct coverage, where states provide Medicaid or CHIP benefits to enrollees by paying doctors and other providers directly or contracting with managed care organizations. Previous reports on premium assistance programs have described the programs' potential benefits, as well as potential issues that have been raised about them. One potential benefit reported is that premium assistance programs could generate cost savings for Medicaid and CHIP by leveraging private financial resources for health insurance coverage--such as employer contributions--and decreasing enrollment in direct coverage. Additional potential benefits include helping families make the transition to private health insurance, expanding coverage to family members who are not themselves eligible for coverage under Medicaid or CHIP, and supporting the private insurance market. In contrast, a reported issue with premium assistance programs is that there may be disparities in the benefits and cost-sharing protections offered to enrollees in such programs compared with those in direct coverage. Reports also note that premium assistance programs may not be cost-effective--that is, premium assistance may be more expensive than providing direct coverage through states' Medicaid and CHIP programs. Finally, reports have raised the possibility that premium assistance programs may create incentives for families to reduce their contributions toward the cost of health insurance coverage, thus shifting the costs of coverage to public funds. CHIPRA required GAO to study cost and coverage issues related to state premium assistance programs receiving Medicaid and CHIP funds. In this report, GAO describes states' premium assistance programs, including the (1) funding source, operating authority, and type of private health insurance coverage subsidized; (2) policies regarding eligibility and enrollment; (3) benefits, premiums, and cost sharing; (4) expenditures and cost-effectiveness policies; and (5) challenges program officials reported in implementing and operating such programs, as well as the effect that CHIPRA may have on these challenges.