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Nine States Get Federal Funding To Improve Children's Coverage

MANAGED CARE May 1998. © MediMedia USA
State Initiatives

Nine States Get Federal Funding To Improve Children's Coverage

MANAGED CARE May 1998. ©1998 Stezzi Communications

The Department of Health and Human Services has given approval to nine states to participate in the Children's Health Insurance Program. The program, part of the Balanced Budget Act of 1997, sets aside $24 billion over five years for states to expand health coverage for kids.

CHIP grants coverage to uninsured children whose families earn too much for Medicaid but too little to afford private coverage. More than 10 million American children — one in seven — are uninsured.

The program allows states three options: designing a new children's health insurance program, expanding current Medicaid programs or a combination of both. States may create new programs through one of three benchmark plans: the Blue Cross/Blue Shield preferred-provider organization offered by the Federal Employees Health Benefit Program, a health plan offered by the state to its employees or the HMO with the largest commercial enrollment in the state. Allocation of matching funds is based on each state's number of uninsured low-income children and regional cost differences.

As of last month, the department had approved plans in Alabama, California, Colorado, Florida, Illinois, Michigan, New York, Ohio and South Carolina. States must use this new money to cover uninsured children, not to replace existing coverage.

Fifteen other states and Puerto Rico have submitted plans to HHS. Those approved by Sept. 30 are eligible to receive some of the $4.3 billion allotted for this fiscal year.

Regulators in three states have imposed hefty fines on HMOs in the last two months for a wide range of infractions. North Carolina's insurance department fined Durham-based Doctors Health Plan a record $500,000 for 51 violations. The HMO was cited for illegally requiring members to get prior authorization for out-of-network emergency services. The plan also failed to hold quality-review meetings, conduct annual reviews of its quality management program or develop a plan for out-of-area care.

The state is letting the company, which has lost nearly $10 million in two years, put off payment until the state decides it won't hurt the plan financially or its service to members.

North Carolina also imposed a $300,000 fine on the state's Blue Cross and Blue Shield plan and its HMO unit, Personal Care Plan of North Carolina, for record-keeping violations. The state said that during routine inspections last year, the plan delayed or failed to produce requested information. Blue Cross says new procedures have fixed the problem, but it still faces an on-site records survey by the National Committee for Quality Assurance, which has downgraded the HMO's accreditation status.

New Jersey's Department of Health and Senior Services has told First Option Health Plan that it will fine it between $100,000 and $500,000 for violating consumer protection laws. The state says the plan failed to provide adequate notice of reductions in its provider network to the department, patients and physicians. The amount will depend on the number of affected enrollees.

Washington State Insurance Commissioner Deborah Senn fined two Portland, Ore., plans owned by the Sisters of Providence $90,000 for using rates and contracts not filed with the state. Good Health Plan of Washington and Providence Health Care admitted the errors and agreed to the fines.

A bill that would have transferred regulatory oversight of Oklahoma HMOs from the state's health department to its insurance department is effectively dead for this year.

Sen. Brad Henry, a Democrat who is chairman of the Judiciary Committee, declined to hold hearings, saying the health department should have jurisdiction because decisions often are medically related.

Republican Sen. James Williamson filed his bill in response to concerns about the viability of Oklahoma HMOs, which lost $24 million last year.

Massachusetts Insurance Commissioner Linda Ruthhardt last month issued a report that criticized elements of a plan by Blue Cross and Blue Shield of Massachusetts to split itself into three companies. The report could spell trouble for Blue Cross, because Ruthhardt must rule on the breakup --which the company says is crucial to its future success.

Blue Cross wants to reorganize itself into three divisions: a tax-exempt managed care entity and tax-liable administrative services and indemnity insurance units.

But the state report, produced by the Boston-based consultancy Peterson Worldwide, challenged the accuracy of the proposal's underlying financial projections and its argument that accountability would increase because Blue Cross would retain its current management and overall governance structure. The report also questioned the wisdom of dividing assets in a way that could increase financial risk for the three new units.

Currently, the company can use consolidated assets to help units that run into trouble. The breakup plan doesn't allow for such sharing of assets. The administrative unit has lost $322 million since 1992, including $32 million last year.

Blue Cross said that dividing the company's finances would help the public see how each unit is doing. A hearing on the points made in the report was set for late last month.

A California Medical Association study suggests that not-for-profit health plans in the state generally spend more money on medical expenses than their for-profit counterparts do. Not-for-profits broke even, on average, during fiscal 1996–97, while for-profits pocketed small gains. Among California health insurers and managed care companies with 50,000 or more enrollees, Kaiser Foundation Health Plan spent the greatest portion of each premium dollar on medical care — for the fifth year in a row.

Medical loss ratios

Top and bottom four plans with 50,000 or more members, by percentage of revenue spent on medical care

SOURCE: KNOX-KEENE HEALTH PLAN EXPENDITURES SUMMARY, CALIFORNIA MEDICAL ASSOCIATION, SAN FRANCISCO, 1998