The effect of premium changes on SCHIP enrollment duration.

In recent years, states have increased beneficiary cost sharing in their public health insurance programs by increasing premiums or copayments. Historically, most cost sharing increases affecting children occurred in the State Children's Health Insurance Programs (SCHIP) because states could not require cost sharing for children in their Medicaid programs without federal waivers. However, the passage of the Deficit Reduction Act (DRA) of 2005 allows for greater cost sharing in Medicaid, and states are now permitted to charge premiums for nonexempt children who reside in families with income greater than 150 percent of the federal poverty level (FPL). SCHIP also is potentially facing major changes with reauthorization in 2007, which is under consideration at the time of this writing. Because it is a block grant, it has a fixed annual funding level and severe shortfalls are anticipated if the annual funding remains frozen with the reauthorization (Center on Budget and Policy Priorities 2006). States facing shortfalls in SCHIP funding typically have responded by reducing eligibility, eliminating benefits, or increasing family costsharing through copayments and premiums. Premiums can relieve some of the fiscal pressure that states face by reducing net program costs and discouraging crowd out of private insurance by public insurance. But premiums also may be a barrier to access if children do not obtain coverage because of the cost or if they experience intermittent coverage because of missed payments. SCHIP experiences with premium increases may yield important information for states to consider as they explore cost sharing options in SCHIP and Medicaid. This article examines the effect of premium changes in Florida's SCHIP—the Florida Healthy Kids Program (FHKP). Effective on July 1, 2003, the premium for families with household income between 101 and 200 percent of the FPL increased by $5 per family per month (PFPM) from $15 to $20 (Table 1). The Centers for Medicare and Medicaid Services determined that the $20 PFPM amount exceeded federal cost sharing limits for families with income at or below 150 percent FPL. Premiums were consequently reduced to $15 PFPM for families whose income was 101–150 percent FPL as of October 1, 2003 and remained at $20 PFPM for families whose income was 151–200 percent FPL. Table 1 Premium Changes in the Florida Healthy Kids Program, 2003 Families were given 60 days notice of the premium increase. Premium payments were due on the first of the month for the following month's coverage. Families had until the end of the month in which the premium was due to make a late payment and avoid cancellation. During that time, they received two notification letters and an automated call reminding them that their payment was overdue. Coverage was cancelled effective the first of the following month if the full premium was not paid. Children could be reinstated after a minimum 60-day waiting period if their families requested reinstatement and made a premium payment; however, payment of missed premiums was not required. When the premium changes occurred, the FHKP had a passive renewal process, and the average monthly disenrollment rate among families with 101 and 200 percent FPL was approximately 3 percent. The primary purpose of our study is to examine the relationship between the premium changes in Florida's SCHIP and the children's enrollment durations. Secondarily, we are interested in knowing whether the premium increase had a differential impact on subgroups of children because children's sociodemographic characteristics (family income, child age, and place of residence) and health status may influence their enrollment lengths (Shenkman et al. 2002). Our specific study objectives are to: (1) analyze the impact of the temporary premium increase of $5 PFPM on the enrollment duration of children in the 101–150 percent FPL group; (2) compare the impact of the $5 PFPM premium increase on the enrollment duration of children in the 101–150 percent FPL group to that of children in the 151–200 percent FPL group for the 3-month time period when families in both income groups faced the increased premium; (3) compare the shorter-term (first 3 months) versus longer-term (4–12 months) effects of the permanent $5 PFPM premium increase on the enrollment duration of children in the 151–200 percent FPL group; and (4) compare the differential effects of the premium changes on the enrollment duration of children with different sociodemographic and health status characteristics. Previous studies have found a positive relationship between premium amounts and the likelihood of disenrolling from SCHIP (Dick et al. 2002; Shenkman et al. 2002; Miller et al. 2004; Phillips et al. 2004). However, with the exception of Shenkman et al. (2002), the empirical methods employed in these studies made it difficult to tease out the premium effects from income effects because the different premium amounts corresponded to different income groups. More recent research uses duration analyses to examine disenrollment patterns before and after the introduction of new premiums (Kenney et al. 2007; Marton 2007). Less research has been conducted on the effect of changes in pre-existing premiums in SCHIP programs. Kenney et al. (2006/2007) recently examined the effect of increases in pre-existing premiums in New Hampshire for families between 185 and 300 percent FPL and in Kansas for families between 151 and 200 percent FPL. However, in Kansas, cancellations for premium nonpayment were postponed until recertification, which made it difficult to separate out the effect of the premium increases on disenrollment. Other developments in the recent literature include defining program exit more broadly to include transfers to other public health insurance programs (e.g., from SCHIP to Medicaid) and to analyze short-term versus long-term impacts of premiums on enrollment (Marton 2007). We adopt similar approaches in our analysis. This paper contributes to the literature in several ways. First, we extend the research on changes in pre-existing premiums to examine the effect of a relatively small nominal increase of $5 (from $15 to $20 PFPM) on the enrollment lengths of the lowest income families in SCHIP, those between 101 and 150 percent FPL, and compare that effect to the same increase for families between 151 and 200 percent FPL. The effect of this relatively small increase on enrollment length provides information about how sensitive families are to premium increases. Focusing on the lowest income families in SCHIP also provides insight into the potential impacts of the increased flexibility that states have to require cost sharing in their Medicaid programs as a result of the DRA. Second, we incorporate health status information from medical claims and encounter data to better understand the differential effects of the premium increases on children with different health status levels. Finally, unlike other studies, we include long-term program enrollees instead of focusing only on children who were newly enrolled during the observation period.