Profiles in Coverage: Pennsylvania's HIPP Program
SCI talks with Joanne Slesser, the former director of Pennsylvania’s Health Insurance Premium Payment (HIPP) program.
Questions and text prepared by: Isabel Friedenzohn, SCI associate
Pennsylvania’s Health Insurance Premium Payment (HIPP) program has emerged as an efficient and financially successful employer buy-in program. HIPP, established as Section 1906 in the Medicaid statute, is one method of implementing employer buy-ins. Other states have typically developed employer buy-ins through SCHIP or through Section 1115 demonstration or Health Insurance Flexibility and Accountability (HIFA) waivers. Implemented in 1994, Pennsylvania’s program is one of 11 HIPP programs currently in operation. As of April 1, 2004, the program had enrolled more than 21,000 members who receive coverage from employers that vary from small businesses to large corporations.
Joanne Slesser, the former director of the program, has worked for the state of Pennsylvania for 19 years and was closely involved with the HIPP program’s design and implementation. Her first assignment on HIPP was to review the proposed Omnibus Budget Reconciliation Act of 1990 (OBRA ‘90) regulations that led to the program’s implementation in 1994. We asked Slesser about how Pennsylvania’s HIPP program works, its successes and challenges, and the lessons she learned along the way.
Slesser attributes the success of the program to its automated process for enrolling and tracking participants and effective outreach. The program’s 53 staff in five regional offices have established solid relationships with employers throughout the state. The most difficult obstacle to implementing the program was getting referrals and establishing the cost-effectiveness analysis, Slesser says. But with everything now in place, the program has achieved savings goals: Savings for Fiscal Year 2003 reached $76.3 million.
Overview
1. SCI: What kind of political and financial commitment did you need to make in order for the program to succeed?
SLESSER: Once HIPP was implemented as a result of OBRA ’90, our state legislature approved a request for funding based on the federal mandate and detailed projections of program savings, as well as the necessary staff and equipment. The staffing request was based on program size projections that were made using reports showing the number of employed persons currently receiving Medical Assistance and estimating the percentage of those employers who offered medical benefits. Costs were justified by showing return-on-investment projections.
The state’s financial commitment to provide the staff necessary to run the program was essential to its success. When compared to the savings generated by the HIPP program, the return on investment for staff is about 30:1. This reflects net savings after consideration of premium amounts, deductibles, and co-pay amounts, which could be billed to Medical Assistance. Operating expenses are compiled at the end of each fiscal year, and deducted from the reported savings at that time.
2. SCI: Of your 21,000 enrollees, 71 percent are under the age of 17. Why is there such a high proportion of young people in the program?
SLESSER: There are several reasons. First, a large number of children are eligible for Supplemental Security Income whose parents are not Medicaid-eligible. Second, many Medicaid-eligible parents with access to employer-sponsored insurance opt only to enroll their children, because their employer covers 100 percent of their coverage but not that of their dependents. Finally, many enrolled parents have multiple children.
3. SCI: Given the general lack of success of HIPP programs in other states, what distinguishes Pennsylvania’s program?
SLESSER: The automated system that we developed exclusively for HIPP distinguishes it from other programs. We created a software application that stores case records and generates payments. The application has interface capability with the mainframe eligibility files for the Department of Public Welfare. With the system and database, we can:
Process and maintain a large number of cases with minimal cost and effort.
Provide quality control and eliminate data-entry errors, especially with regard to the automated cost-analysis functions and the real-time transfer of data.
View reports and compare case statistics, such as the number of enrollments, average savings, average costs, policy benefits, employer data, etc., from an individual case level to a program-wide level. With this capability, management can identify needed program or procedure adjustments to respond to changes in the market or staffing needs.
Respond to all inquiries quickly and easily by accessing the case and looking at the narrative, which is a detailed history of the case and any action taken on it from the time of enrollment until the case is ended. This represents a huge time savings; often an inquiry can be resolved immediately during the initial phone call.
Generate a large number of HIPP payments to the correct payee. This helps establish and maintain good relationships with employers.
4. SCI: How does the automated referral process work?
SLESSER: When a case is being considered for HIPP enrollment, the system allows us to enter and import all the information needed to assess cost-effectiveness. This includes demographic information for all members of a household, and the premium amount and deductible for an employer’s insurance policy. The system has a matrix that returns cost-effectiveness information showing yearly and monthly cost-effective amounts.
Monthly, all cases scheduled for payment are pulled from the HIPP system and loaded onto a file, which interfaces with the eligibility files of the Department of Public Welfare. Once the eligibility edits are passed, a second file is generated and submitted to the Pennsylvania Department of Treasury for payment. Checks are generated monthly following established time frames, to ensure that checks are received prior to the first of the month. Checks can be made payable to employers, insurance carriers, or directly to employees.
Cases that do not pass the eligibility edits are returned to the HIPP worker for appropriate action. The HIPP worker receives one of three status codes:
Status code #1 identifies cases where there are fewer Medical Assistance-eligible members in the household than reported on the HIPP case. These cases generate a HIPP payment, but are returned to the operations specialist to re-evaluate cost-effectiveness. The worker will then either close the case as no longer cost- effective, or continue the case with an adjusted savings amount.
Status Code #2 identifies cases where all members have lost their eligibility for Medical Assistance for less than 30 days. These cases generate a payment but the operations specialist sends a HIPP notice to the client advising them that HIPP will no longer pay their employer group health insurance premium if they remain ineligible for Medical Assistance. The case is tracked until the next cycle to see if it remains closed.
Status Code #3 identifies cases where all members have lost their eligibility for Medical Assistance for longer than 30 days. These cases do not generate a HIPP payment. The operations specialist ends the case on the HIPP system and performs a savings adjustment to deduct the previous month’s savings amount.
Administration
5. SCI: How does the HIPP program coordinate with those eligible for Medical Assistance?
SLESSER: Pennsylvania’s application form for those applying for Medical Assistance has been modified to include three relevant questions, which are the backbone of the automated referral process:
1) Is anyone in the household employed by an employer who offers health insurance?
2) Did you or anyone in your family lose a job within the past 30 days where you had health insurance?
3) Is there someone in your family who is pregnant or seriously ill?
These questions are used to trigger the automated referral process. Once an individual is found eligible for Medical Assistance, his or her responses are entered by clerical staff in each County Assistance Office onto the Department’s mainframe eligibility file. On a weekly basis, a batch process pulls these responses and generates a HIPP referral letter to clients who answered “yes” to one or more of the three questions. The letter indicates that enrollment in the HIPP program is mandatory for Medical Assistance enrollees that meet eligibility criteria for the program. They must enroll in their employer’s health insurance, which will serve as their primary insurance; however, they will continue to maintain their eligibility for Medicaid.
Responses are required within 10 days of receipt of the referral. HIPP screens the referrals, and contacts employers for additional information when it appears a referral response could result in a HIPP enrollment. About 95 percent of all HIPP referrals are received using this automated referral process.
6. SCI: How does the system prove cost-effectiveness?
SLESSER: Our computerized matrix contains information on the benefits programs of employers in the state to simplify the cost-effectiveness analysis. Program staff calculate the average Medicaid cost per client from insurance data in the matrix; the information can be organized by employees’ age, insurance category, and geographic location. They then compare the estimate to HIPP program costs, including premiums, deductibles, co-payments, and administrative fees.
For fee-for-service Medicaid, staff calculate expenses yearly and compare them with the HIPP program’s paid claims history database. For managed care Medicaid, cost-effectiveness is determined by comparing the average cost of Medicaid’s health plan with that of the employer.
7. SCI: How does the HIPP program monitor enrollees?
SLESSER: Program staff do periodic re-evaluations of cases to verify such items as employment status, insurance carrier information, household composition, premium amounts, and levels of coverage.
8. SCI: How has the program dealt with recent changes in benefit packages and cost-sharing arrangements as employers try to manage rapidly rising premiums?
SLESSER: Our automated system gives us the ability to enter benefit information unique to each employer package, including benefit limitations such as co-pay and deductible amounts. All these variables, and any changes that may occur, are taken into account when the system calculates cost-effectiveness. We have experienced an increase in premiums and changes in benefits packages and have had to disenroll cases that are no longer cost-effective due to these changes. Although we don’t have any statistics on the number of disenrolled cases, our program is still strong. However, we are concerned that these trends may persist, and are also worried that employers may decide it is too costly to continue to offer group health benefits.
9. SCI: How does the state administer the COBRA continuation benefit?
SLESSER: We treat COBRA cases as any other HIPP enrollment, and our staff is trained in COBRA regulations. We have been very successful in working with COBRA administrators, and we have been assigned regular contact persons who handle the HIPP enrollments for COBRA enrollees.
10. SCI: How has the state addressed the obstacle of narrow open-enrollment periods determined by employers?
SLESSER: We have submitted proposed revisions to our state code of regulations that would make eligibility for the HIPP program a “qualifying event.” This would require employers to enroll employees as soon as they are found eligible for HIPP, and would allow us to circumvent the problem of employers only allowing enrollment in their benefit plans during open enrollment periods.
Right now, our workload is significantly increased during January and July—the open-enrollment periods for most employers—and, if we miss the open enrollment, we must pend the case until the next open enrollment. In these situations, enrollees stay in Medicaid because employers’ open enrollment requirements do not affect an individual’s Medical Assistance eligibility. Making HIPP a qualifying event would greatly improve our operational efficiency and increase our savings because we would not have to wait for these time frames.
Working with Employers
11 SCI: What role do the HIPP regional offices play in maintaining close working relationships with local employers?
SLESSER: Our offices are located in the regions they serve, so the staff are familiar with employers and the employment environment in their area. Cases are assigned alphabetically by employer. One operations specialist routinely deals with the same employer, eliminating duplicate phone calls, minimizing the burden on the employer, and enabling HIPP staff to establish good working relationships with employers. At first, it was difficult to forge these relationships because employers didn’t understand what the program was. However, once employers came to know us and realize that they could depend on receiving their checks in a timely fashion, things got much easier.
Anecdotally, employers have told us that HIPP enrollment enlarges the size of their group and may allow them to negotiate lower group rates. In addition, employers have found that employees who participate in their group benefits are more likely to stay on the job longer, as they are reluctant to give up their health benefits.
There are a few employers who refuse to accept our check, but this is largely due to their payroll withholding system. The majority of our employers are very cooperative, and some voluntarily contact us on a quarterly basis to submit a list of new employees, to determine if they would be HIPP-eligible.
12. SCI: How is the state trying to partner with employers that self-insure?
SLESSER: We do not have any special arrangements with employers whose employees are insured through Employee Retirement Income Security Act (ERISA) plans. When we encounter an ERISA plan, we work with the employer to make the same arrangements as with any other employer. For the most part, we have been very successful. However, we have drafted revisions to our existing regulations that will provide additional support for the HIPP program. The change will affect the ERISA plans, because they require every entity providing privately funded health care to give the Department of Public Welfare information on the health care benefits available to Medicaid recipients.
As I mentioned earlier, the regulations will require employers to recognize eligibility for the HIPP program as a qualifying event, thereby permitting employees and eligible beneficiaries to enroll in HIPP regardless of established open-enrollment periods. They also mandate that employers must accept premium payments from the Department, and allow disenrollment from the plan on request from the Department.
13. SCI: Overall, how do employers respond to your requests for assistance and partnership?
SLESSER: We have encountered very little resistance from employers. We are not asking them to give any special treatment to their employees who are enrolled in HIPP. However, it is illegal for employers to discriminate against employees due to their eligibility for Medical Assistance. In addition, we do not focus only on those with high-cost medical conditions. If HIPP determines that it would be cost-effective to enroll a Medical Assistance client in HIPP, we pay the employee’s portion of the premium and enroll him or her in the plan.
14. SCI: How have you overcome the challenges posed by the implementation of the Health Information Portability and Accountability Act (HIPAA)?
SLESSER: Our staff have completed HIPAA training, and our payments have been revised to exclude the Social Security Number of the company employee. However, HIPAA privacy regulations don’t require authorization for the release of information when such information is needed for the purpose of treatment, payment, or health care operations. Our staff has been provided the regulatory language to give to employers if they have concerns about providing us with employee information.
We have found it very helpful to use a subrogation clause in the HIPP application to be signed by the applicant. The clause gives the HIPP operations specialist the authority to enroll in employer insurance on behalf of the client, and also addresses the HIPAA privacy regulations. It should also be noted that HIPP has the subrogation right to elect COBRA on behalf of the Medical Assistance client if it becomes necessary.
I hereby authorize and request the disclosure to the Pennsylvania Dept. of Public Welfare any information that would be needed to determine eligibility for the Health Insurance Premium Payment (HIPP) Program, and appoint the Department my limited attorney –in-fact with the power to elect group health benefit coverage on my behalf, to enroll me in such coverage and to pay premiums or contributions on my behalf. This power of attorney shall remain in effect until revoked, in writing by me. I understand this information will be kept confidential and will be used only for the purpose of determining eligibility for the HIPP program. In compliance with Federal HIPAA privacy regulations I understand and agree that the HIPP Program may use and disclose protected health information (including but not limited to name, address, diagnosis and treatment) for treatment, payment or health care operations. I understand that I must consent to this use and disclosure in order to enroll in or receive services through the HIPP Program.
Other Issues
15. SCI: Moving forward, has the state considered implementing a buy-in to the State Children’s Health Insurance Program (SCHIP)?
SLESSER: In Pennsylvania, SCHIP is not part of Medical Assistance and, to date, the SCHIP program has not included an employer-sponsored component. Pennsylvania’s insurance department operates SCHIP. We have had other states contact us for information about our HIPP program so that they could use our ideas to support their SCHIP program.
For states just starting their buy-in programs, I recommend that the two programs be operated by the same agency because many of the HIPP functions could interface very easily with SCHIP. Many of the operational procedures used for HIPP also apply to SCHIP, so it would be operationally efficient to combine the administration of the two programs.
16. SCI: What have you learned by managing a successful public-private initiative?t
SLESSER: I attribute the success of our program to making sure that every member of our HIPP staff was given a sense of ownership. We have solicited input from all staff during the continuing development of our automated system. It is also critical that the program director believe in what he or she is doing. There must be a commitment to the program and the people.
The program should be treated as a business, even though it is part of a state program. As in any industry, you need to remain keenly aware of what is happening in the marketplace. You must also stay in tune with any new legislation and how it may affect your program.
Finally, be sure to make the best use of the latest technology. Program staff must constantly look for better ways to get the job done. As with any business, the minute you think you have the best product, someone finds a better way.
Background on HIPP
In fiscally challenging times, states have looked to partner their Medicaid and State Children’s Health Insurance Programs (SCHIP) with the private sector through premium-assistance programs. States have several options for implementing these programs, including:
Medicaid—through Section 1906—Health Insurance Premium Payment (HIPP);
SCHIP separate child health programs; or
Section 1115 demonstration waivers or Health Insurance Flexibility and Accountability (HIFA) waivers.
Although most states have used SCHIP or waiver authority to implement premium assistance programs, 11 states have adopted the HIPP model.
The HIPP provision was added to the Medicaid statute in 1990. It required states to establish Medicaid programs to pay for the cost of health insurance premiums, coinsurances, and deductibles for Medicaid-eligible people with access to employer-based insurance, when it is proven cost-effective for them to do so. Employer-based coverage is considered cost-effective if its costs are likely to be lower than the costs incurred by the state providing Medicaid coverage.
HIPP enrollees are entitled to all the states’ Medicaid benefits, including those not included in the employer-based insurance plans. State Medicaid programs must cover certain services that are not covered by private plans.
Although the original 1990 provision was mandatory for states, a 1997 amendment made the program voluntary. This change may have been a response to the failure of many states to implement the HIPP program. According to a 1994 report by the Office of the Inspector General, at least 30 states had not implemented the provision. Likewise, those states with active HIPP programs have struggled, experiencing very low enrollment, and achieving modest, if any, savings.
In 1997, the U.S. General Accounting Office (GAO) disseminated a report on the barriers states had experienced in enrolling beneficiaries to their HIPP plans. The major obstacles cited by the GAO included: difficulty in identifying eligibles, poor cooperation by employers to provide information regarding health insurance coverage offered, and difficulty enrolling HIPP eligibles within private health plans’ narrow open-enrollment periods.
Additional Resources
State Coverage Initiatives newsletter. “Pennsylvanania’s Buy-In: A Model of Efficiency and Savings,” October 2001, No. 6, pp. 10-11.
State Coverage Initiatives Stateside newsletter. “SCI Helps States Fine-Tune their Premium-Assistance Programs,” October 2003, pp. 4-5.
The State Coverage Initiatives team, in collaboration with the National Association of State Health Policy and the Centers for Medicare and Medicaid Services, is preparing a “toolbox” to guide state policymakers who are considering implementing premium-assistance programs. Watch www.statecoverage.net for the release of the four-part project.
Subrogation Clause
I hereby authorize and request the disclosure to the Pennsylvania Dept. of Public Welfare any information that would be needed to determine eligibility for the Health Insurance Premium Payment (HIPP) Program, and appoint the Department my limited attorney –in-fact with the power to elect group health benefit coverage on my behalf, to enroll me in such coverage and to pay premiums or contributions on my behalf. This power of attorney shall remain in effect until revoked, in writing by me. I understand this information will be kept confidential and will be used only for the purpose of determining eligibility for the HIPP program. In compliance with Federal HIPAA privacy regulations I understand and agree that the HIPP Program may use and disclose protected health information (including but not limited to name, address, diagnosis and treatment) for treatment, payment or health care operations. I understand that I must consent to this use and disclosure in order to enroll in or receive services through the HIPP Program.
