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The (Recommended) Future of the Healthy Families Program

Healthy Families Program Overview

We’ve been speculating on the future of California’s Healthy Families Program (HFP) since ACA was passed in March of 2010. HFP provides coverage for children (0-18) whose families earn less than 250% of the Federal Poverty Level ($4,656/month for a family of 4) and are ineligible for Medi-Cal (see eligibility chart below by ITUP’s Kiwon Yoo). HFP is operated by the Managed Risk Medical Insurance Board (MRMIB) and is funded by a combination of General Funds, Prop 10, and the Medi-Cal managed care tax. The program also receives a 2:1 federal match. Beneficiaries pay $15-$20 copays for hospital visits and $0-$100/day ($200 maximum) for inpatient hospital stays.

Currently, children have different eligibilities for coverage based on their age. Those eligible for Medi-Cal include children ages 0-1 under 200% FPL, children ages 1-6 under 133% FPL, and children ages 6-18 under 100% FPL. Those eligible for HFP include children ages 1-6 between 133% and 250% FPL and children ages 6-18 between 100% and 250% FPL. The current structure looks like this:

Above: Current public program structure for children in California, ages 0-18.

ACA’s Provisions Regarding Healthy Families

On January 1, 2014, states must launch their Health Benefit Exchanges (see the progress of California’s Exchange in this report). Exchanges will offer premium subsidies to individuals who fall between 133% and 400% FPL. In addition, Medicaid eligibility will expand to 133% FPL from the current 100% FPL.

And thus the question arises: What do we do with the Healthy Families Program?

ACA included a few provisions regarding the future of Children’s Health Insurance Programs (CHIP) that allow states to either keep their programs separate from the Exchange or fold them into the Exchange:

  • September 30, 2015: End of new federal funding for CHIP;
  • October 1, 2015: States may start enrolling CHIP-eligible children into the Exchange;
  • October 1, 2015: States begin drawing down an 88% federal match for CHIP (significantly higher than the current 2:1); and
  • January 1, 2019, the Maintenance of Eligibility (MOE) for CHIP ends.

Given the provision in ACA, California must decide between the following four scenarios:

  1. Keep HFP as it is;
  2. Move all HFP children into Medi-Cal;
  3. Shift HFP administration from MRMIB to the Exchange; or
  4. Move all HFP children into the Exchange, where they will continue to receive HFP-level benefits through commercial plans.

Recommendations for California from the Urban Institute

At the State Capitol building this afternoon, Stan Dorn (Urban Institute) provided recommendations on the future of HFP based on a series of predictions, calculations and stakeholder interviews. Dorn suggested a three-part policy approach that involves a partial shift, monitoring that shift, and then making a bigger decision. In order to come to this conclusion, Dorn evaluated the outcomes of each of the other scenarios. He came up with the following advantages and disadvantages to each option.

Scenario 2: Move all HFP Children into Medi-Cal

Advantages:

  1.  Coverage would be more affordable since Medi-Cal does not have copays or premiums and Medi-Cal retroactively covers bills incurred up to 90 days prior to application;
  2. Medi-Cal would fill gaps in employer-sponsored insurance (ESI) by covering benefits outside the ESI package and paying the copays/deductibles;
  3. Mental health is covered more broadly by Medi-Cal than HFP;
  4. EPSDT services beyond mental health are offered through Medi-Cal and not HFP;
  5. This would involve having one program rather than two children’s health programs, which would avoid losing children in the transition between programs; and
  6. Medi-Cal has more rigorous due process safeguards in that there are more protections for Medi-Cal beneficiaries if grievances cannot be resolved amicably.

Disadvantages:

  1. Medi-Cal has a smaller provider network, which could inhibit access;
  2. County social services offices provide less streamlined enrollment in Medi-Cal than HFP’s Single Point of Entry;
  3. MRMIB would lose its role in running the program, for which they provide a great deal of transparency, accountability, and flexibility; and
  4. Many children would need to change plans/providers during the transition.

Scenario 3: Shift HFP administration from MRMIB to the Exchange

Advantages:

  1. Children will not be covered by a potentially smaller MRMIB after many children are moved to Medi-Cal in 2014;
  2. There would only be 2 (rather than 3) administering agencies and a simpler overall program structure; and
  3. The additional population could give the Exchange more leverage.

Dorn noted that while we strive for a simplified system, it’s important to note that Massachusetts has a very complex, yet functioning program structure that is simplified for the consumer.

Disadvantages:

  1. Specific children’s health issues will likely get less attention from the Exchange than they would from MRMIB, given Exchange’s other responsibilities; and
  2. The Exchange is not yet established and is still a large, unknown entity.

Scenario 4: Move all HFP children into the Exchange, where they will continue to receive HFP-level benefits through commercial plans

Advantages (in addition to those in Scenario 3):

  1. Broader provider networks than either HFP or Medi-Cal;
  2. Families feel good about enrolling in well-known plans; and
  3. Children and parents will be in the same plan and program.

Disadvantages (in addition to those in Scenario 3):

  1. Children may lose access to the safety net plans that are better equipped to address needs of low-income families; and
  2. It is not politically feasible to fund HFP benefits at current commercial provider rates.

Recommendation: Three-Part Approach

Dorn’s suggested three-part approach would involve (1) Moving the lower income children (those below 133%-150% FPL) into Medi-Cal who will most likely be eligible for Medi-Cal in 2014; (2) Regularly evaluating effects on those children’s lives and on the development of the Exchange; and (3) After learning about the effects of the partial shift and the development of the Exchange, making a larger-scale decision.

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