Reaching Uninsured Children
4.6 Million Youth in This Category
A Key Issue for SREB Policymakers

“Children who must deal with illness, hunger, lack of family support, or other forms of physical and mental deprivation may never be ready to make the most of first or any other grade.”

from Readiness for School:
The Early Childhood Challenge
Southern Regional Education Board, 1992

        An estimated 14 percent of American children under the age of 18 have no health insurance coverage, despite the fact that the relationship between good health and success in school is widely acknowledged.
        In the SREB region the problem is even more severe, with 17.7 percent of children uninsured, a total of more than 4.6 million, almost half of all the uninsured children in the United States.
        In the past several years, many states have begun exploring possible ways of providing these children with the health care they need to have a fair chance at school success. One of the earliest and most widely heralded of these efforts is the Florida Healthy Kids Corporation, authorized by the state legislature in 1990. Since it began enrolling children in 1992, using public schools as the basis for identifying and grouping children for insurance purposes, Florida Healthy Kids has extended coverage to more than 45,000 children.
        More recently, the problem of uninsured children has also become a major concern at the federal level. With the Balanced Budget Act of 1997, Congress funded a major new initiative to help states deal with this problem. The State Children’s Health Insurance Program (SCHIP) was enacted as Title XXI of the Social Security Act “to provide funds to states to enable them to initiate and expand the provision of child health assistance to uninsured low-income children.” Title XXI guarantees approximately $40 billion over a ten year period to expand health insurance coverage for children below 200 percent of the federal poverty level (approximately $32,000 per year for a family of four in 1997) who are not eligible for Medicaid.
        The new federal child health insurance program allows states substantial flexibility in designing programs to best meet their needs, but there are also important requirements that state plans must meet. Because it has had considerable success in a relatively short period, the Florida Healthy Kids Corporation has been one of the models that states have been most interested in. This report looks at the experience of the Healthy Kids program and briefly describes the new federal program. It then identifies a number of key questions that state policymakers should ask as they attempt to develop programs to reach the uninsured children in their states.

Florida Healthy Kids Corporation

        The key to providing affordable health insurance coverage is the use of population grouping to level the overall risk to the insurer. The innovative concept on which the Florida Healthy Kids Corporation is based is that public school students can be insured under a group plan as easily as employees, the grouping model most commonly used today.
        The concept of school-based health insurance was first proposed in 1988 by the staff of the Institute for Child Health Policy at the University of Florida. The Florida Legislature responded to this proposal in 1990 by providing authority for the creation of a non-profit corporation to explore the feasibility of this approach. The target population for Healthy Kids is public school children between the ages of 5-19 who are not covered under private insurance plans and are not eligible for Medicaid.
        The first Healthy Kids demonstration project began enrolling children in 1992 in Volusia County, on Florida’s east central coast, with funding provided by a grant from the U.S. Health Care Financing Administration (the agency that administers Medicare, Medicaid and other federal health programs). By the end of 1997, 20 of Florida’s 67 counties were participating in the program. Though that number represents less than one-third of the counties in the state, those 20 counties are home to more than half of all the children in Florida, and additional counties are either in the planning stages or have expressed interest in joining the program. Healthy Kids estimates that, on average, approximately half of all eligible children in participating counties are covered under the program.
        Today, Healthy Kids is financed through a combination of state and local funding and premiums paid by participating families. To participate, a local school district must submit an application to the Corporation. A minimum local contribution of five percent of total funding is required to begin a project. That figure is expected to increase gradually to a maximum local contribution of 40 percent for fully developed programs.

        Participating families also pay a portion of the program cost through premiums that are based on a sliding scale developed for each participating school district. Eligibility for a reduced premium is based on each family’s enrollment in the federal free and reduced lunch program. The maximum monthly premium paid by families is about $53 per child, with those enrolled in the free or reduced lunch program paying from $5-27.
        The balance of program funding is paid by the state. In 1996-97, the state contributed a total of $13 million, or 49 percent of total program funds, while families bore another 35 percent and the average local contribution was 16 percent.
        The minimum benefits provided under Healthy Kids are listed on page 2. In addition to monthly premiums, families are also required to make modest co-payments for some services. Recommended co-payments are indicated below. However, counties have the option of negotiating lower co-payments with insurers. Benefits are limited to a life-time maximum of $1 million, and no limitations can be placed on pre-existing conditions.
        Coverage under the Healthy Kids program is provided exclusively by private insurers selected by the Corporation and the local community through a competitive bidding process. Criteria for selecting insurers include not only price and benefits offered but also the adequacy of the provider network, reporting capabilities, and other criteria such as solvency and accreditation. Twelve different insurers currently are providing Healthy Kids coverage in participating Florida counties. Studies of the use of services in participating counties have documented the impact of the Healthy Kids program in not only improving the health of uninsured children but in reducing inappropriate emergency room visits and unreimbursed pediatric care provided by local hospitals.

Lessons for Other States

        The Florida Healthy Kids program has attracted considerable attention from states seeking solutions to the continuing dilemma of how to reach uninsured children. In 1996, the Robert Wood Johnson Foundation created a National Program Office within the Healthy Kids Corporation. The purpose of the national office is to provide technical assistance and grants up to a total of $3 million to as many as seven states to plan and implement similar programs. As of the fall of 1997, two SREB states—Georgia and Texas—were participating in this effort.
        In spite of its overall success, the Florida Healthy Kids program has some limitations. Mental health benefits are quite limited, for example, and coverage for dental care is not included, even though poor dental health can have a serious impact on children’s readiness to succeed in school by contributing to poor nutrition and causing distracting pain and discomfort.
        Equally serious are limitations in the scope of coverage of Healthy Kids. The target population is children between the ages of 5-19 enrolled in public schools. This means that the program does not cover prenatal and obstetric care, which are vitally important in getting children off to a healthy start, unless the mother is a public school student in a participating program. Healthy Kids also does not reach many children during the crucial years between birth and age five, when many health problems with lifelong implications can develop. Counties do have the option of extending coverage to younger siblings of school age children, and 16 of the 20 participating counties have done this. One of these programs extends coverage to children between one and five, while the others generally cover ages three to five. This still leaves large numbers of preschool age children without coverage, however, including those in families who do not yet have a school-age child.
        An additional problem lies in the fact that, while Healthy Kids cannot cover children who are eligible for Medicaid, there is no mechanism in place to help eligible families obtain Medicaid coverage. As a result, while the 45,000 children currently covered under Healthy Kids represents approximately half of the target population in participating counties, it accounts for less than 10 percent of all uninsured children in Florida
        Healthy Kids’ requirement that local communities provide up to 40 percent of the funding for fully-operational programs presents yet another problem, especially in rural areas. Rural communities may be among those with the greatest need for such a program but may find it impossible to meet the matching funds requirements. A similar problem arises from the fact that many rural areas do not have adequate provider resources to meet their health care needs even if insurance coverage is available. Florida’s Healthy Kids program relies heavily on managed care networks because of their emphasis on prevention, but many rural areas in the SREB region have little or no access to managed care.
        States that were considering Healthy Kids as a possible model for their own programs were trying to address these limitations even before the passage of the new federal child health insurance program, but all states now will have to wrestle with these and similar problems. The federal program provides an entirely new framework, albeit a fairly flexible one, that the states must work within. It also opens up significant new options for reaching uninsured children whether in or out of school.

The State Children’s Health Insurance Program

        The new SCHIP/Title XXI program is a federal grant-in-aid program designed to help states provide health care coverage for uninsured children who currently are not eligible for Medicaid. Over a ten year period, the program makes about $4 billion per year available to states that adopt child health insurance plans and provide matching funds.
        Under existing Medicaid law, all states are required to provide Medicaid coverage for all children through age five whose families fall below 133 percent of the federal poverty level and for children age 6-13 below 100 percent of the poverty level. Children from age 14-18 must be covered only if they meet the eligibility standards for the old Aid to Families with Dependent Children (AFDC) program. Many states have already expanded Medi-caid coverage beyond these minimum levels either by raising the income level at which children are eligible for Medicaid or through other non-Medicaid programs such as Florida’s Healthy Kids Corporation.
        States may use the new federal matching funds to expand health insurance coverage to all children under 19 who fall below 200 percent of the federal poverty level, or in some cases even higher in states that have already expanded Medicaid eligibility levels. For example, a number of states currently provide Medicaid coverage for infants up to one year in families below 185 percent of the poverty level. These states could use the new federal initiative to expand eligibility for infants by another 50 percent, up to 235% percent of poverty.
        Each state’s allocation under Title XXI for the fiscal years 1998-2000 is based solely on the estimated number of uninsured children. After FY 2000, allocations will be determined using a more complicated formula that will include a “state cost factor” based on variations in health care costs. Participating states must provide matching funds based on a formula that is similar to that for the Medicaid program but less burdensome to the states. Federal allocation levels and required state matching funds for SREB states for FY 1998—which began October 1, 1997—are listed in the box below.

Unlike the Medicaid program, which directly entitles individuals to specified levels and types of coverage, the SCHIP program allows states considerable flexibility in program design and implementation. States may choose to expand Medicaid by raising the maximum income levels required for eligibility or they may establish or expand separate child health insurance programs such as Florida’s Healthy Kids program or they can use a combination of the two approaches.
        For example, a state could expand Medicaid for children under one year while providing one or more separate insurance programs for uninsured children from 1-18. States also have other more limited options available for targeting specific population groups, including using a portion of Title XXI funds for direct purchases of services from providers; contracting with community-based health care systems such as federally-funded community health centers or local public health agencies; or purchasing family coverage under employer-based insurance plans. Where states decide to use existing non-Medicaid insurance programs such as Healthy Kids, it may be necessary to make some programmatic changes to meet the federal requirements in areas such as eligibility, benefits offered and cost-sharing requirements. In general, however, federal program stipulations are not overly stringent and states are allowed considerable flexibility for designing programs to meet their particular needs.
        The decisions that each state will need to make about the implementation of new health insurance programs for children under Title XXI—including the question of whether to participate at all—will be based on careful analysis of a complex combination of social, political and financial factors that will be different for every state. In making those decisions, policymakers should keep in mind that the implications of improving children’s access to health care go well beyond the basic issue of individual health. Helping children be ready to succeed in school has been one of the most important goals of educational reform. New research about the importance of the preschool years to children’s later success in school is reported almost daily, and no issue is more important to children’s development than good health.
        In addition, readiness to learn does not cease to be an issue once a child has entered school. Good health is a prerequisite to success in school at any age. The new federal funds for expanding child health insurance coverage can realistically be viewed as a significant step toward helping guarantee that all children are able to achieve in school to the best of their ability.
        As they consider their options for participation in the new program, policymakers in every state should be aware of the complexities involved in reaching different populations of uninsured children effectively. Following is a list of key questions that should be asked to help guarantee that whatever type of program is chosen will have the maximum possible impact.

• Are the benefits to be offered under the proposed program truly comprehensive? Is there adequate coverage for prenatal and obstetric care and for vision, hearing, dental and mental health services, including substance abuse treatment, especially for adolescents and pregnant women?
• Are there adequate provisions in place for assuring that services provided under the plan are of high quality?
• Are there provisions for effective outreach to all families, including those with small children who are not yet in school and women expecting their first child?
• Will the proposal under consideration ensure equal access in rural areas where existing provider networks may be inadequate?
• If premiums and co-payments are required for participation, are they at levels that may discourage participation by low-income families who may be most in need of coverage?
• If local communities are required to provide a portion of the funds for the program, will all communities in the state be able and willing to participate?
• Are benefit and payment levels determined by a coordinated process informed by expert opinion rather than by political or financial expediency?
• Does the plan ensure that funds will be spent equitably on services for both healthy children and those with chronic illnesses or disabilities?
• If the system uses a combination of different approaches and/or insuring entities, are adequate mechanisms provided for smooth linkages between the different systems?
• If a combination of approaches and/or insurers is to be used, are benefits structured in ways that might encourage some health care providers to participate in one but not the other, resulting in unequal access to care?
• Are there ways in which schools and school districts can play a role in identifying uninsured children and helping them to obtain coverage?
• Are there provisions to ensure that the program will not 1) provide incentives for employers to eliminate or reduce existing insurance programs for employees, or 2) encourage the working poor to use the Title XXI program instead of employer-based plans that may be more expensive?
• Are there plans for educating participants in how to make the most effective use of their insurance coverage, such as using preventive services and seeing a primary care provider for routine services as opposed to resorting to emergency care?
• If your state does not contribute to coverage for dependents of state employees, does the proposed plan ensure that those dependents have access to coverage comparable to that available to others? (Under the new federal program, children of state employees may qualify for expanded Medicaid coverage but may not be covered under a non-Medicaid model.)

In making decisions about these and other issues, policymakers should be aware that their choices are not irreversible. States may make changes in their programs in the future as experience dictates. A decision to try an innovative or unproven model to reach more children more effectively does not commit the state to maintaining that model indefinitely. The business of designing a system that will provide children with the maximum opportunity to achieve their full potential in school and in life necessarily involves a steep learning curve.

(Written by David Denton, director of the Southern Regional Education Board's Health and Human Services Programs.)

For further information, please contact David Denton. david.denton@sreb.org.