Don't Chip Away CHIP

Leaders, from Illinois and across the country, are calling on Congress to continue funding the Children’s Health Insurance Program by highlighting its success in reducing the number of uninsured children and warning that these children may lose coverage or receive less age-appropriate care.  The Children’s Health Insurance Program, or CHIP for short, offers developmentally appropriate healthcare for low-and-moderate-income children from families earning wages above the Medicaid threshold.  In Illinois, the program covers 219,000 children and pregnant women as of June 30, 2014.

The healthcare reform law funded CHIP until October 2015, but states need quick federal action as they plan their budgets for the coming year. Unfortunately, Congress may forgo CHIP funding, because children could potentially obtain health insurance through the health insurance marketplace. However, the health benefits in a marketplace plan may not equal those offered through CHIP, and families may not be able to afford the premiums and co-payments.

CHIP’s Benefits are Better

The essential health benefits in the marketplace’s qualified health plans can differ from CHIP’s; marketplace plans can either enact more stringent benefit limits or not cover important pediatric services. For example, a Government Accountability Office study of CHIP programs in five states including Illinois found that marketplace plans were more likely to limit pediatric services and that CHIP offered more generous ceilings for certain services.

Of special significance for children, marketplace plans are not required to cover pediatric dental services if a stand-alone dental plan is available. This means families might be forced to purchase a dental plan in addition to a general health plan for their children—increasing monthly premiums. Since the individual mandate would not apply to dental coverage, families may forgo pediatric dental coverage altogether.

Children in the Illinois CHIP program, All Kids, benefit from Early and Periodic Screening, Diagnosis, and Treatment services. EPSDT can identify medical conditions at an earlier and more treatable point in time and link children with necessary care. The benchmark plan for the state does not offer a comparable set of services. 

Higher Costs and Family Glitches

CHIP health plans, including Illinois’ All Kids, have better cost sharing arrangements than marketplace plans. Monthly premiums in All Kids range from $0-40, while the marketplace’s lowest cost bronze plan in Chicago had a heftier premium of $76 per month.

A report by the nonpartisan Medicaid and CHIP Access Payment Commission found similar patterns across the nation. According to the report, the actuarial value, or the costs covered by a health insurance plan, is generally lower in marketplace plans.

Parents and children forced out of CHIP plans would also encounter higher healthcare prices due to the ACA’s family glitch. The healthcare law bases affordable workplace insurance—and a family’s eligibility for marketplace financial assistance—on the cost of insuring individuals, not families. Parents are placed in the bind of being unable to afford their employer’s family plan, because that option involves much higher costs, but cannot qualify for tax credits or subsidies.

Stick with CHIP

Advocacy groups and leaders from both political parties have called CHIP a success. Since its creation in 1997, the program has increased the number of children with health insurance: 8 million children were enrolled in 2012 alone. The program has contributed to the marked decrease in the percentage of uninsured children, which has fallen from 13.9% to 7.1% over the past 17 years. Because of CHIP’s proven track record and uncertainty surrounding healthcare options in a post-CHIP era, Congress needs to continue funding this important program.

Bryce Marable, MSW
Policy Analyst
Health & Disability Advocates

Employers: Dropping Group Health Insurance Could Cost You

Looking ahead to 2015, many employers are deciding how to respond to the rising cost of employee group health insurance premiums. A study of employers by the large consulting group Mercer suggests that “the per-employee health benefit cost will rise by an average of 3.9% in 2015.” Although this is moderate compared to past premium-increase trends, “two-thirds of respondents say they will make changes to their health plans next year to rein in cost growth.”

Using Cash Pay-Outs Instead

To control costs, some small employers are considering dropping group coverage altogether. In a recent article by the Wall Street Journal, WellPoint, Inc. reported that “its small-business-plan membership is shrinking faster than expected and it has lost about 300,000 people.”

Many small employers are instead planning to offer a cash payout – a lump-sum of cash – for employees to purchase coverage on their own or through the new ACA marketplaces. While this may appear an attractive way to rein in health insurance costs, employers must consider the tax implications for employees and their organization. Taken together, cash pay-outs will actually increase costs overall for both employers and employees.

Employees Will Pay More...

Group insurance is a better deal for employees. With group health insurance, the amount that an employer pays towards an employee’s health insurance is not counted as taxable income. In addition, employee premium contributions can be withdrawn pre-tax directly from their paycheck. This substantially reduces the employee’s overall taxable income and the income tax they will pay. The example below shows the monthly take-home pay for a person making $6,250 per month who participates in an employer-sponsored group health plan.

As the example indicates, the employee’s net pay is $3,955. In comparison, if the same employee instead received a cash pay-out to purchase health insurance individually, they would make $3,595 per month. Example 2 shows how employees will end up paying more in taxes and more for their insurance when a cash pay-out is used.

As you can see, cash pay-outs will reduce overall employee compensation. When employees give workers cash to pay for their own health insurance, the money increases their gross income and in effect the monthly taxes they must pay. Additionally, the money directed toward employee premiums cannot be withdrawn pre-tax from their paycheck.

The real numbers will change depending on premium costs, tax brackets, and income level, but the message is consistent: employees will lose money. Employee Benefits Corporation has a great calculator tool that helps individuals understand the personal impact of pre-tax benefits.

... And So Will Employers

Because cash pay-outs increase employee gross income, the amount that the employer must pay in state and federal taxes will also increase. In our example above, when the employer offered group health insurance, the employee earned a base monthly salary of $5,650. In the second scenario, the employee’s monthly salary increased to $6,850. Employers pay on average 7.65% of their monthly payroll for Social Security and Medicare. For the employer providing group health insurance, the cost for Social Security and Medicare is $432; the employer offering cash instead of benefits would pay $524. This results in a difference to the employer of $92 per month – just for this one employee.

Higher salaries created by cash pay-outs also mean higher workers compensation costs, and short-term and long-term disability insurance. Since workers’ compensation replaces a portion of the employee’s salary, the higher the salary, the higher the costs. The same is true for short- and long-term disability insurance, which replaces all or part of employee salaries.

Stick With Group Health Insurance

Before quickly migrating to cash payouts employers should quantify cost implications for themselves and their employees. This calculation can complicate and lengthen the decision making process – but it is time well spent in the long run. If the goal is to reduce financial burden, using cash pay-outs ultimately creates the opposite effect and the promised reduction in costs is an illusion.



Michele Thornton, MBA
Insurance and Benefits Consultant

Why Narrow Networks are a Big Deal: A Discussion of Network Adequacy

A network is defined as the healthcare facilities, professionals, and suppliers that an insurance carrier has contracted with to include in a given health plan. Network adequacy is the extent to which a health plan has a satisfactory number of primary and specialty healthcare professionals that consumers can access in a timely manner.

The terms network and network adequacy are pretty technical words, so the average consumer may not know their definition, but a percentage of the population is even unaware of how to apply these terms to the process of purchasing a health insurance plan. According to a Commonwealth Fund survey of marketplace shoppers, 25% said they did not know the quality of the network for their health insurance plan. The survey results indicate that consumers may lack an awareness of how network adequacy impacts them on a personal level.

Consumer Problems with Network Adequacy

Consumer awareness is important, because network adequacy can have a tremendous influence on a patient's quality of care. For example, plans can include a hospital in their network, yet exclude doctors or specialists working at that hospital. As a result, patients may unknowingly receive care from an out-of-network doctor and be left with an exorbitant bill. This practice, in which consumers must pay the costs beyond the allowable amount determined by the health insurance company, is called balance billing. Sometimes the lists of healthcare professionals in a network are not even accurate, which may lead consumers to enroll in a plan that does not have their desired provider. Also, hospitals serving special populations, such as children, have reported difficulty being included in networks – preventing families from getting needed care at a reasonable cost.

Network Reforms Proposed

These issues may soon change. The National Association of Insurance Commissioners (NAIC) recently released a new draft model law for states, which has proposed some significant reforms. To begin with, hospitals would need to develop a process for alerting patients in cases where they may be seeking treatment from an out-of-network provider who happened to be working at an in-network hospital. In addition, insurance carriers would be required to update changes to their provider networks on a monthly basis and must make this information available online and in print form.

NAIC's draft model law also created the general recommendation for states to create sufficiency standards accounting for elements such as the amount of specialty services available, geographic accessibility, the number of providers, the wait time for receiving care, and the hours of operation for participating providers. NAIC gives states latitude in how they apply their sufficiency standards. However, NAIC does note that some states have chosen to adopt quantitative standards that set minimum numbers for providers for maximum travel times and maximum waiting times, among other metrics.

Changing Consumer Experiences for the Better

The reforms requiring insurance companies and healthcare providers to communicate accurate and timely information on healthcare networks are a much needed help for consumers who lack basic knowledge of their options (which may be due to the fact that they hate shopping for health insurance). Mandating more open lines of communication would simplify the process of finding and using health insurance. With readily available information, consumers would know what providers and hospitals are a part of their plan. Importantly, state actors are recognizing the significance of empowering consumers with knowledge, as the Illinois Department of Insurance recently released fact sheets on networks and out-of-network benefits.

Beyond improving communication with consumers, NAIC’s draft language on sufficiency standards would support consumers who have purchased a plan in having the ability to access the healthcare providers they need to stay healthy – without traveling great distances or waiting long periods of time. Advocacy needs to be done at the state level to guarantee that the sufficiency standards in place are in line with the intentions of NAIC’s draft model law and create quantitative metrics to determine a network’s strength.


Bryce Marable, MSW
Policy Analyst
Health & Disability Advocates

People with Disabilities and the ACA

The Affordable Care Act (ACA) is making health insurance coverage more affordable and accessible for millions of Americans. With the passage of this law, individuals and families have more control over their care – especially individuals with disabilities. The ACA provides people with disabilities a basic protection – they can no longer be denied access to health insurance simply because of their health history.

Under the ACA, individuals like myself can no longer be denied health care because of a pre-existing condition. This is significant for the up to 129 million non-elderly Americans living with some type of pre-existing health condition such as asthma or diabetes, including 17.6 million children.

We have come a long way over the past year. All combined, in just one year, we’ve reduced the number of uninsured adults by 26%. Additionally, 76 million Americans with private health insurance are getting preventive services such as vaccines, cancer screenings, and yearly wellness visits for free. Finally, more than 7 million Americans are enrolled in the Marketplace and more than 8 million additional individuals are enrolled in Medicaid and CHIP, compared to last fall.

We have much to celebrate but there is work to be done. November 15 marks the beginning of the second enrollment period, which will run until February 15. The Administration is committed to ensuring that all Americans have access to coverage. The open enrollment period is a time for Americans already enrolled to re-enroll. It is also a chance for those without coverage to enroll for the first time.

Take a few minutes to watch Joey talk about what the ACA has meant for him and millions of others:

To learn more about getting covered, please visit HealthCare.gov.

By Taryn Williams
Associate Director of the White House Office of Public Engagement.

Posted with permission from The White House Blog 

Small Businesses in Illinois Lack Knowledge of What the ACA Has to Offer Them

With Illinois granted early access to the Small Business Health Options Program exchange, or SHOP, small businesses in the state already have the opportunity to familiarize themselves with a new online resource for purchasing health insurance for their employees.

For those that qualify, purchasing health insurance through the SHOP exchange can represent a smart business decision. They can receive tax credits covering up to 50% of their contribution to employee premiums, plus the SHOP allows small businesses to combine their purchasing with other small businesses to keep costs low.

The healthcare law does not require small businesses with fewer than 50 full-time equivalent employees to provide health insurance. Because 94% of businesses in Illinois employ fewer than 50 people, a large majority are exempt from offering health insurance.

The SHOP was meant to minimize the number of people left out of health reform by helping small businesses provide health insurance anyway, with tax credits and collaborative purchasing power incentivizing this option by keeping costs lower.

But to what extent are small businesses taking advantage of the SHOP? Health & Disability Advocates and Crain’s Chicago Business teamed up to find out and conducted a survey of small business owners. The results are documented in a recently released report from Health & Disability Advocates and an article in Crain's Chicago Business.

The survey found that small businesses are not using the SHOP to purchase health insurance and are largely uninformed about it:

• Fewer than 18% of small business owners said they had learned “a lot” or a “a great deal” about the SHOP.
• Only 11% took advantage of the small business healthcare tax credit.
• And finally, 31% of small businesses surveyed said they did not know whether they were receiving the small business healthcare tax credit.

These findings mirror national trends. In a national survey by the National Small Business Association, 8% of small business owners reported they would use the SHOP to buy health insurance. Similar figures from the Kaiser Family Foundation were cited in a recent blog post at The New York Times.

Small businesses would gain from outreach and education on benefits of the SHOP and how to use this resource. Informing the business owners about the SHOP would equip them with information that they could use to enroll their employees in health insurance, an important benefit that helps in retaining and attracting workers.

Since small businesses overwhelmingly rely on brokers when purchasing insurance, the broker community could be a resource in outreach and education efforts. Indeed, brokers are increasingly viewed as vital partners in healthcare outreach and enrollment efforts. For example, during the first enrollment period they played a key role in the famously successful effort in Kentucky. Partnering with brokers to conduct outreach can help increase the numbers of small businesses that offer health insurance – and the number of individuals enrolled in healthcare.

The bottom line is that small businesses in Illinois are not aware of the Small Business Health Options Program, the tax credits available to them, or other ACA provisions that could benefit them. For us to effectively reach these important job creators and help them take advantage of these provisions, we must engage the broker community to provide this new outreach and education to their existing clients.

Bryce Marable, MSW
Policy Analyst
Health & Disability Advocates

Illinois Entrepreneurs and Small Business Need SHOP Employee Choice

Illinois is one of 18 states recently granted a delay by the Department of Health and Human Services for the employee choice feature of the small business health options program marketplace, or SHOP.

But what exactly is employee choice, and why is this important to small business owners? Below are some frequently asked questions and answers to help small employers learn more about this crucial provision of the SHOP.

Q: Just what is employee choice?
A: Employee choice is a feature of SHOP that allows small business workers to choose from a number of plans from different insurance carriers. The employer chooses a healthcare plan tier level (bronze, silver, gold and platinum), and the employee then chooses among a variety of health insurance carriers within that tier.

The healthcare plan tier level is based upon what percentage of healthcare costs a plan will cover. For bronze plans, insurers pay 60%. For silver plans, insurers pay 70% of healthcare expenses. Gold plans pay 80% and platinum plans pay 90%. The employee choice option is important to employers and their workers because it allows employees to pick a plan and carrier that works best for their needs, instead of the business owner choosing for them.

Q: Why is the employee choice feature important to small businesses?
A: By including employee choice in the SHOP, the Affordable Care Act reverses a longstanding market trend that left small employers on unequal footing. These kinds of benefits have historically been reserved for large businesses and public employees, while small businesses often have to offer a “one-size fits all” plan with added cost and fewer benefits.

Based on Small Business Majority’s opinion polling, it is clear small business owners want to offer this to their employees. The Small Business Majority found two-thirds of small employers believe allowing employees to choose from multiple carriers is an important element of the SHOP. And for small businesses, this component is fundamental in distinguishing the new SHOP marketplace from the outside health insurance market.

Q: What impact does the delay of employee choice have on Illinois’ small businesses?
A: The HHS final rule allowing states to opt out of employee choice for yet another year harms small businesses because it puts them at a competitive disadvantage to large firms that are able to offer a choice of plans to their employees. In states like Illinois, where the SHOP marketplace is run by the federal government, allowing further delay of employee choice puts small businesses at a competitive disadvantage to small employers in other states where marketplaces have employee choice.

Q: When will Illinois small businesses have access to employee choice through SHOP?
A: Barring any further delays, Illinois will implement employee choice in 2016. Employers will then be able to offer the additional benefit of allowing their employees to choose which insurance carrier they’d prefer to use for their health insurance.

While the Administration’s decision to allow states to delay employee choice for an additional year was a letdown for small business owners, the SHOP still helps small employers compare and evaluate health insurance options and get the small business tax credit to help with employee premiums.

Learn more about the SHOP, employee choice and enrollment by reading the Small Business Majority’s Health Coverage Guide which contains a wealth of information for small business owners regarding enrollment, the Affordable Care Act, and the healthcare system.

Jesse Greenberg
Director, Midwest and West
Small Business Majority

Illinois Granted Early Access to SHOP Marketplace

Yes, the Affordable Care Act offers individuals and families quality health insurance, but did you know small employers with less than 50 full-time equivalent employees can take full advantage of the Health Insurance Marketplace? Online functionality for the SHOP, aka the Small Business Health Options Program, is available starting later this October as part of SHOP early access, which is only available to 5 states. Illinois is one of the lucky few. Brokers and Small Businesses, check it out at HealthCare.gov!

This incremental launch will help identify issues early and assist brokers and businesses in building confidence in utilizing the SHOP online system.

During SHOP early access, Illinoisians can do the following to initiate enrollment:

• Establish a Marketplace SHOP account
• Establish an agent or broker to their account if they wish
• Complete an employer application
• Obtain an eligibility determination
• Upload an employee roster when enrollment functionality is available
• Starting in November, browse health plans with coverage starting in 2015

The SHOP Call Center can be reached at 1-800-706-7893 (TTY: 711) Monday through Friday, 9 a.m. to 7 p.m. EST.

While small businesses have always had group plan options, many even available online, there were challenges that got in the way of providing group coverage to their employees. Premiums were expensive and small businesses lacked the purchasing power of larger organizations. The SHOP makes some pretty substantial changes to the ways in which small businesses can buy plans.

Why SHOP?

First, financial assistance is now available in the form of a tax credit. This can substantially help employers by covering up to 50% of employer contributions towards employee premiums. This assistance provides the opportunity for businesses to offer employee coverage where it would have previously been unaffordable. Second, the SHOP helps small businesses harness the purchasing power of other small businesses, thus letting them play in the big leagues along with larger organizations.

Small businesses do not have to offer health benefits under the Affordable Care Act, but it is in their best interest to check out options and see what is possible, particularly if they are concerned with employee retention. Whether or not they decide to provide group health insurance coverage, small businesses are nonetheless required to inform employees of the Health Insurance Marketplace, so that individual coverage options can be explored.

Brokers and Small Businesses take note. The time is now to explore options, prepare, and get ready for a new system opening up possibilities for small businesses in Illinois.

Emily Gelber MSW, LSW
Health Policy Analyst
Health & Disability Advocates

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TAKE OUR SURVEY HDA and Crain’s Chicago Business are teaming up to poll local small businesses about new health benefit options. Why participate? By taking this short survey about the changing healthcare landscape, you can inform policymakers, insurers and other small business owners. Results will run in a November 17 article in Crain’s. Take the survey now