Profiles in Coverage: New Mexico State Coverage Insurance
On July 1, 2005, New Mexico, a State Coverage Initiatives (SCI) Demonstration grantee, launched its new public–private partnership called State Coverage Insurance (NMSCI). NMSCI is designed for working adults, who earn less than 200 percent of the federal poverty level (FPL), and is funded with a combination of premium dollars (employer, employee), federal funds, and state general funds. As of January 1, 2006, there are approximately 3,000 NMSCI enrollees.
SCI recently talked with Pamela S. Hyde, J.D., Secretary, New Mexico Human Services Department, about New Mexico State Coverage Insurance.
1) SCI: Please describe the New Mexico State Coverage Insurance program.
Hyde: New Mexico’s NMSCI program was implemented under the auspices of the Health Insurance Flexibility and Accountability (HIFA) initiative effective July 1, 2005. This demonstration uses unspent State Children’s Health Insurance Program (SCHIP) funding to provide managed care coverage for uninsured employed adults with incomes up to 200 percent FPL. New Mexico’s blended funding model incorporates employee and employer contributions with state and federal funding to offer managed care coverage provided by plans selected through a competitive bid process, creating a unique public–private partnership. The more commonly used Employer Sponsored Insurance (ESI) models were found inappropriate for a state like New Mexico that has a disproportionately large number of small employers and a correspondingly low rate of employer sponsored insurance coverage. Hence, NMSCI is a unique model of a subsidized commercial product. Benefits are similar to a comprehensive commercial plan with a $100,000 annual benefit limit.
Cost sharing is on a sliding scale basis, with the premium and co-payment amounts corresponding to three income groupings (1-100 percent FPL, 101-150 percent FPL, and 151-200 percent FPL). Employers pay $75 per employee per month, and the employee pays from zero to $35 per month, depending on income grouping. Individuals not affiliated with an employer pay the $75 employer premium in addition to the employee premium. Sliding scale co-payments, based on the income groupings, are due upon the delivery of medical services. There is an out-of-pocket limit on cost sharing that represents five percent of the program participant’s countable income (after all income exclusions and disregards are applied).
NMSCI implementation was effective July 1, 2005, and the demonstration will last until July 1, 2010.
2) SCI: Governor Richardson included $4 million in the 2005 budget for the program. Why is NMSCI a priority?
Hyde: NMSCI is a priority because it is a unique public–private partnership that provides affordable health insurance products for small employers who have previously been unable to afford coverage for their employees. NMSCI also demonstrates a societal shift in awareness toward the need for insurance to improve the health of New Mexico residents. New Mexico ranks second highest in the United States in the rate of uninsured individuals.1 We know an inverse relationship exists between employer size and likelihood of offering health insurance.2 New Mexico has a disproportionate number of small employers: 76.6 percent of New Mexico employers have fewer than ten employees, and 88.1 percent have fewer than twenty.3 When polled about the lack of health insurance offerings, 81 percent of respondents cite cost as a primary obstacle, and research indicates that most of the uninsured adults in New Mexico are employed, thus, provision of access for uninsured low-income workers is a major focus in the state’s planning efforts.4
New Mexico was unable to use all of the federal funds allocated for SCHIP. New Mexico was one of a handful of states that had expanded children’s Medicaid eligibility prior to the enactment of the Balanced Budget Act of 1997; therefore New Mexico was only allowed to use SCHIP funds to cover children in families with income between 185-235 percent FPL. The Center for Medicare and Medicaid Services’ (CMS) invitation to design and implement Medicaid waiver programs using unspent SCHIP funds through HIFA was eagerly accepted. Because standard ESI Medicaid and Medicaid-waiver models were unsuited to New Mexico, New Mexico’s HIFA design featured a managed care product that was implemented via a competitive procurement process.
A critical feature of the NMSCI demonstration is the ability to explore issues and opportunities associated with blended funding. Because of its combination of federal, state, employer and employee funds, the NMSCI demonstration provides the perfect laboratory for the use of county and tribal funding models.
3) SCI: NMSCI is described as a program for the working uninsured. Who is eligible to enroll into NMSCI and are there any crowd-out provisions that prevent individuals from dropping coverage to enroll in the new initiative?
Hyde: Although NMSCI targets uninsured working adults, there is currently no program requirement for individuals to be employed. If an individual wishes to participate but the employer is not willing, the individual can enroll in the program as an “individual” rather than as part of an employer group. The program participant must then pay the employer portion of the premium as well as the employee portion. An individual who has had access to employer-sponsored commercial insurance but who has not taken it up due to affordability, and who meets all NMSCI eligibility requirements, may participate in the program. If the employer offers insurance and the individual is not eligible for the employer-sponsored insurance, that individual would potentially be eligible for NMSCI. In fact, employees who have been unable to take up their employer sponsored health plan because of cost can be covered by the employer through NMSCI if they meet eligibility and crowd out requirements.
NMSCI regulations prohibit NMSCI eligibility if an individual has voluntarily dropped health insurance coverage within the last six months, starting with the first month the insurance was dropped (i.e., the first month of no coverage) they are not eligible for NMSCI. This regulation is aimed at preventing crowd-out. In order for employers to participate, they must not have voluntarily dropped a commercial health insurance product in the past twelve months.
4) SCI: What are the requirements for an employer to participate in NMSCI? Are there any crowd-out provisions to ensure that employers are not dropping coverage to enroll in the new initiative? How do employers apply?
Hyde: NMSCI program regulations require a participating provider to be a small employer (i.e., an employer with 50 or fewer employees). In addition, an employer who has voluntarily dropped commercial health insurance coverage will be ineligible to enroll employees in NMSCI for 12 months. Managed care organizations (MCOs) also have department-approved field guidelines that describe each MCO’s standard practice for screening and enrolling NMSCI employer groups, in compliance with applicable state statutes and regulations.
Employers apply for NMSCI participation through the MCOs. MCOs use NMSCI regulations concerning employer size and crowd-out, in addition to standard employer enrollment procedures incorporated in approved field guidelines. Employers may initiate the process via the NMSCI website or through the Health Insurance Alliance (HIA)5, which is the information portal for Insure New Mexico! Initiatives. See question 11 for additional information on HIA.
5) SCI: Are employers or employees who do not qualify for this program able to purchase NMSCI at full price (without the Medicaid subsidy?)
Hyde: No. Instead, the state is currently in the process of implementing the Small Employers Insurance Program (SEIP), which mirrors the NMSCI program benefit package but lacks the low-income subsidy. The target date for SEIP implementation is July 2006.
6) SCI: How many people are estimated to be eligible for the NMSCI program? How many people does New Mexico anticipate covering through NMSCI? Is there a goal in terms of covered lives or employer groups participating?
Hyde: Currently, based on Annual Supplemental Economic Survey data and Health Services and Resources Administration funded research on the state’s uninsured, about 174,000 individuals are uninsured and are within the NMSCI eligibility age and income ranges. Take-up rates for the first year are currently projected at 5.7 percent among eligible individuals or about 8,576 unduplicated enrollees in the first year. New Mexico expects that 40,000 lives will be covered over the course of the five year demonstration. Although the program intent is to focus on coverage of employed individuals, there are not currently specific goals for covered lives, employer groups, or percentage of enrollees via employer groups. Since the demonstration is new and has limited funding, program participation goals focus on maximization of appropriated funding.
7) SCI: How do the benefits and cost sharing under NMSCI differ from what is covered under Medicaid? What is the difference between this project and what individuals/businesses can purchase in the commercial market (small group or individual market?)
Hyde: Benefits under NMSCI are more basic than benefits under the full New Mexico Medicaid benefit package, and include a $100,000 annual benefit limit. Medicaid benefits that are not included in the NMSCI benefit package include non-emergency transportation, vision benefits, chiropractic, routine dental, hearing aids, skilled nursing services, pulmonary rehabilitation, and hospice. The NMSCI benefit package is more similar to a commercial package, but less expensive for the participant, i.e., premiums and copayments are smaller and include a $12 per month limit on monthly prescription copayments (not on the number of monthly prescriptions covered) as well as CMS-mandated financial safeguards to assure that out-of-pocket cost sharing does not exceed five percent of a program participant’s annual income.
8. SCI: How many health plans participate in NMSCI? Do employers and individuals enrolling in NMSCI have a choice of different health plans? Are there differences in premiums or benefits among the plans? Do any of the current NMSCI plans also provide coverage in the commercial market?
Hyde: Three health plans participate in NMSCI: Molina Healthcare, Presbyterian, and Lovelace NMSCI. Two of these (Presbyterian and Lovelace NMSCI) also provide coverage in the commercial market. Employers have a choice in selection between the plans, if they are not already participating in one of the commercial plans, as do individuals who are not affiliated with an employer group. Each employer will participate with one of the NMSCI MCOs. There are no differences in the premium amounts or benefits of the three plans. All NMSCI contractors must provide the NMSCI benefits listed in the program policy manual (although the managed care contractors may provide enhanced benefits). Cost to employers and sliding scale cost sharing is identical under all three MCOs. The project will be analyzed for possible expansions using county and tribal funding, as well as alternative funding sources.
9. SCI: How did New Mexico gain health plan participation?
Hyde: New Mexico did not require managed care organizations participating in Salud! (New Mexico’s Medicaid managed care) to bid on NMSCI. New Mexico did require that in order for an MCO to bid on NMSCI, the offer must submit a proposal for the Salud! managed care program.
The state included the above-described requirement to maximize administrative efficiencies, to increase members’ access to care, to improve care coordination, and to ensure that the state obtained the maximum in cost-savings.
10. SCI: NMSCI uses a unique combination of funding from employers, employees, and the state Medicaid program. How do premiums under NMSCI differ from what is available in the small group or individual market? Besides the lower cost premium, are there other differences between NMSCI and what is available in the commercial market (benefit package, provider reimbursement rates, provider network)?
Hyde: Attachment I compares benefits between NMSCI and several of the most prevalent commercial products in the state.
While provider reimbursement rates are set by each contracted MCO, Medicaid reimbursement rates were used for NMSCI actuarial modeling. Provider networks are comparable to current Salud! and commercial networks.
NMSCI premium rates are roughly equivalent to Health Insurance Alliance (HIA) small employer group rates. HIA rates are equal to the average of the highest rate and the lowest rate in the commercial market for similar products. These average rates are approximately 25 percent higher than a rate that the healthiest groups would pay and 25 percent lower than the unhealthiest groups would pay.
While NMSCI and HIA rates are approximately equivalent, a direct comparison is complicated by the fact that there are different eligibility criteria for each program, HIA cost sharing is substantially higher than NMSCI cost sharing, HIA is based on commercial provider reimbursement, while NMSCI cost modeling uses Medicaid reimbursement rates; and lastly, administration and premium taxes differ between HIA and NMSCI.
Relationship with Existing Coverage Programs
11. SCI: New Mexico has existing initiatives to support insurance coverage. How does NMSCI fit in with these other initiatives? How are the target populations different?
Hyde: During the 2005 New Mexico legislative session, a number of bills were enacted as a result of recommendations made by the Insure New Mexico! Council. Implementation of the Small Employers Insurance Program (SEIP) and expanded functions of the Health Insurance Alliance (HIA) were part of the legislated package. NMSCI and SEIP are critical components of the Insure New Mexico! solutions to expand access to health insurance for small employers in the state. This demonstration of expanded health insurance access incorporates use of SEIP, NMSCI, and the state’s high-risk pool, the New Mexico Medical Insurance Pool (NMMIP) to create “custom-designed” products suited to the needs of each small employer group. Benefits to small employers include simplification of enrollment and administration of the health insurance program they choose.
The Small Employer Insurance Program allows state employers to buy into a group plan administered by the state; it does not allow participation in the state employee’s group health plan. The target population for SEIP is employees of small employers who do not meet NMSCI income eligibility criteria. The target population for NMMIP is individuals with preexisting conditions as well as those who are otherwise considered “uninsurable” and who do not meet Medicaid criteria.
NMSCI is a critical component of the Insure New Mexico! model. This strategy incorporates use of NMSCI along with other publicly administered health care programs targeted to small employers. The expanded outreach model allows one stop shopping for employers to resolve insurance needs. Custom design of a single premium and program administration is blended from a menu of health care products selected to suit the needs of each small group employee. The model will embed the NMSCI program in the menu of health care products, while simplifying enrollment and administration for the small employer.
An important design feature of the NMSCI demonstration is the ability of an employer to add NMSCI to a currently offered commercial product line. This feature allows an employee to smoothly transition from NMSCI to the commercial product, without a change of carrier, when the employee moves to a higher income level. Two of the NMSCI-contracted MCOs provide commercial products as well as the NMSCI product.
12. SCI: NMSCI was created under a HIFA waiver to New Mexico’s Medicaid program. How is the eligibility criteria and process different than under the traditional Medicaid program?
Hyde: The eligibility and application processes for NMSCI eligibility are streamlined to accommodate the working population. Eligibility requirements do not include a resource test. The income definitions and disregards are based on the state’s Section 1931 Medicaid income definitions and disregards thereby assuring continuity between the state’s Section 1931 population and the NMSCI population. This program continuity is critical to assure that applicants who meet Section 1931 Medicaid criteria are approved for the full-coverage, no-cost Medicaid category, that program participants who may transition from program to program are determined using parallel criteria, and that complexity is reduced for the caseworkers who process both types of applications on the state’s eligibility information technology systems. The state’s automated eligibility system processes eligibility for NMSCI, SCHIP, Section 1931 Medicaid, and other state-administered Medicaid programs, thus embedding coordination between the programs in the state’s information systems and application processing systems. In addition, special outreach for parents of SCHIP-eligible children is currently in process (please note that the program was effective July 2005, with the first coverage month being August 2005).
NMSCI coordination with the state’s Medicaid managed care program, Salud!, is embedded in the NMSCI design. The three Salud! contractors are also NMSCI contractors. Contract administration for Salud! and NMSCI is thus streamlined, and Salud! contractors are familiar with both programs, which have many administrative similarities. In addition, both contracts are administered by the single state agency, and staff enters eligibility information in the information technology systems used for other Medicaid eligibility categories. All of these issues were significant in the NMSCI program design to assure continuity, quality, and maximum opportunities for coordination between NMSCI and other New Mexico Medicaid programs.
Coordination with Indian Health Services (IHS) includes contractual agreements with MCOs for reimbursement of IHS services provided to NMSCI members at the federal Office of Management and Budget rate. Native American NMSCI enrollees may continue to access services at IHS facilities in addition to MCO services providers. Services provided at Indian Health Service facilities, by urban Indian providers, and by tribal organizations that own or operate health care facilities are also exempt from the co-payment requirement.
13. SCI: Is there an outreach or marketing plan? Are there different outreach strategies for employers, employees, or other groups?
Hyde: Outreach strategies have been tested and modified as the program is implemented. A core group of county entities has been given information on the Insure New Mexico! Initiatives. Possibilities for expansion of the public-private concept continue to evolve. These possibilities include strategies to engage the nineteen tribal/pueblo governments in New Mexico.
Partnerships with state and local government entities will assist in the development of contacts throughout the New Mexico business network. A formal marketing plan is in the design process and will engage small employers and their employees, as well as small business and community organizations. Other vehicles for outreach include the websites for Insure New Mexico!, NMSCI, SEIP, HIA, and New Mexico Medical Insurance Pool; distribution of brochures/information to various communities by local community entities; press conferences with Governor Bill Richardson; media coverage; and other innovative partnerships with state agencies including the Children, Youth and Families, Labor, General Services and other departments.
14. SCI: Employer participation is a critical part of the NMSCI program and it’s financing. What outreach to employers has New Mexico conducted? Are brokers or agents being used to market the new product?
Hyde: NMSCI employer outreach is being addressed in a number of ways, including visits and mailings to local chambers of commerce, trade associations, and business-oriented service organizations. Initial information about the program took the form of press releases and articles for the general public, and a formal marketing plan that targets small employers is being finalized.
Program policy allows brokers to market the products after being certified as having completed NMSCI training. Regulations have been promulgated to prohibit MCOs from claiming any direct or indirect costs for broker reimbursement from the program. This is to assure that no federal or state funds are used to pay for broker services. Consequently, broker reimbursement is made by NMSCI-contracted MCOs, which set their own broker commission levels on an individual basis.
The HIA expanded function is also a pivotal piece in the NMSCI marketing strategy. NMSCI is one of the Insure New Mexico! solutions that allow for construction of custom-designed packages for small employers. These custom-designed packages feature a single employer premium that blends a number of publicly administered and/or funded health care products to fit the individual needs of the small employer group, based on specific employee demographics.
15. SCI: Does the state anticipate that employers or individuals who enroll in NMSCI may ultimately enroll in a traditional commercial product? Are there any features of the NMSCI program that help it serve as stepping stone to the commercial market?
Hyde: NMSCI is intended for, and has design features to facilitate use in conjunction with a commercial product for employers who have employees with income over the NMSCI limits. With respect to the possibility that an individual could progress from full coverage no-cost Medicaid to a commercial product with NMSCI as the “transition” coverage, the cost-sharing across all Medicaid categories and through and within the NMSCI demonstration program have been configured as a continuum, from the lowest income individuals with no cost-sharing to a commercial product that may require a greater share of the participant’s income.
16. SCI: New Mexico received CMS approval for its HIFA waiver in the summer of 2002, and only implemented the program in July 2005. Why was there a delay in the implementation of the program? What, if any, were the major changes to the program since the original waiver submission? How did the state build and maintain support from key stakeholders over this time?
Hyde: In January 2004, the state administration transitioned from Republican Governor Gary Johnson to Democratic Governor Bill Richardson. The new administration understandably needed time to review and approve the proposed NMSCI demonstration prior to its implementation. Slight changes in cost sharing were made to assure that low-income individuals would be able to afford cost sharing, and the benefit package was slightly recalibrated.
During the period of time between waiver approval and program implementation, the Department continued to work at consensus building with consumers and stakeholders as well as legislative leaders and legislative subcommittees.
17. SCI: Please reflect upon lessons learned and what challenges have you experienced moving forward?
Hyde: The NMSCI demonstration has been operational only since July 2005. Consequently, there is not yet sufficient data for analysis. NMSCI represents a new and unique model for the state, and New Mexico is still within the early implementation phase. Plans for discussion and analysis of lessons learned will be forthcoming.
As mentioned previously, many of the uninsured in New Mexico are employed. The state has a disproportionately high percentage of small employers, and a strong correlation between the size of the employer and the likelihood of offering employer-sponsored commercial health insurance, resulting in a comparatively low rate of employer-sponsored health coverage. When surveyed concerning the reasons for lack of health insurance offerings, employers cited three factors: cost, lack of knowledge regarding how to obtain coverage, and the “hassle factor” of finding insurance easily. ESI models implemented in many states were unsuited to New Mexico. Because a new model was clearly needed to suit New Mexico’s demographics, work groups collaboratively designed the current public–private partnership to create a new and affordable health insurance product available to small employers.
The public–private partnership is the cornerstone of the NMSCI product, as well as the source of significant challenges in merging processes and systems with profoundly divergent cultures and operations. The process of understanding public–private operational differences and similarities to form common protocols and vocabularies is ongoing. Issues range from information systems interfaces to application processes that suit the needs of the working population. The question “is NMSCI Medicaid or commercial coverage?” is answered in different ways depending on the perspective. Since the demonstration is a Medicaid waiver, NMSCI eligibility criteria and reporting requirements mirror Medicaid. Other NMSCI protocols were constructed to comport with commercial insurance protocols (i.e., enrollment processes and timelines and system interfaces with employers), while many are new, such as the new information technology model for merging eligibility and enrollment systems on the state Medicaid Management Information System (MMIS). The difficult work of making a public–private partnership work on a day–to–day basis continues. Systems and protocols are being recalibrated as necessary while striving toward the most effective use of the state’s limited resources.
NMSCI eligibility application processing is a case in point. One of the original concepts for NMSCI included use of a contracted entity to make eligibility determinations, along with use of a refreshed Medicaid eligibility system. The refreshed system would allow NMSCI cases to be “partitioned off” from other categories on the state’s system, allowing information to be entered on NMSCI without affecting cash and food assistance for the NMSCI program participant. Due to complications involving funding of the eligibility system refresher as well as complications arising from integration of new and existing systems, information systems plans were reconstructed using the existing Medicaid eligibility and MMIS systems. In addition, eligibility application processing was revised to use existing Department eligibility staff instead of contractors. New Mexico Human Services Department local offices and staff are located in 35 offices throughout the state. Communications with the front-line staff is sometimes slow, reflective of the large number of staff involved, the multiple chains of command, the high staff turnover rates in some parts of the state, and the procedural and policy differences between standard Medicaid and the NMSCI waiver. As a result, New Mexico has converted to a single NMSCI eligibility office with staff dedicated to NMSCI eligibility processing. The smaller staff is expected to facilitate quicker and more direct communication between program administrators, front-line eligibility staff, and contracted MCOs.
A second issue involves the pent-up demand for health coverage in New Mexico. As mentioned, New Mexico is a poor state with a high percentage of uninsured adults. The state’s Medicaid eligibility system does not include a Medically Needy program. Thus, many uninsured have unmet health care needs, some of which are associated with chronic conditions. While unemployed individuals are not prohibited from participation in NMSCI, there must be a significant percentage of healthy working adults to assure a financially viable managed care product. During the first several months of NMSCI enrollment, pent-up health care needs of the uninsured population combined with minimal cost sharing for the lowest income group resulted in concerns regarding early enrollment trends. Initial program response to assure sufficient enrollment of working adults includes a recalibration of cost sharing for the unemployed, (to require payment of the $75 per month employer portion of the premium, regardless of income level), as well as development of a formal marketing plan to target small employers. The state will continue to closely monitor enrollment trends for adverse selection as program enrollment continues.
A third major concern involved consenesual planning processes. New Mexico is well aware of the complexities of health care reform planning and need for consensus in any major reform. The appointment of the Insure New Mexico! Council by Governor Richardson was an important step in moving toward a successful consensual process. Maine’s health care reform consensual planning process was studied as a successful model. New Mexico plans to use “America Speaks” forums, suggested by the Maine consensus-building model, to assure consensual processes in the execution of the 2005 New Mexico HRSA planning grant to gain consensus in future health planning discussions.
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1 Income, Poverty, and Health Insurance Coverage in the United States: 2004, DeNavas-Walt, Proctor, and Lee, August 2005. See www.census.gov/prod/2005pubs/p60-229.pdf
2 Uninsured Employer Survey, New Mexico Health Policy Commission, January 2005
3 2005 Quick Facts, New Mexico Health Policy Commission, January 2005
4 ibid.
5 The Health Insurance Alliance is a non-profit organization created by the state Legislature to provide increased access to health insurance for small businesses, self-employed individuals, and other qualified individuals. HIA is an alliance of independent health insurers, which operates without medical underwriting, sets yearly rates, and simplifies participation for employers. Funding is via annual administrative fee withholdings from gross premiums. Costs not covered by premium assessments are collected from the carriers proportionately by market share.
