oversight

Children's Health Insurance: Opportunities Exist for Improved Access to Affordable Insurance

Published by the Government Accountability Office on 2012-06-22.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States Government Accountability Office

GAO                          Report to Congressional Requesters




June 2012
                             CHILDREN’S HEALTH
                             INSURANCE
                             Opportunities Exist
                             for Improved Access
                             to Affordable
                             Insurance




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GAO-12-648
                                                 June 2012

                                                 CHILDREN’S HEALTH INSURANCE
                                                 Opportunities Exist for Improved Access to
                                                 Affordable Insurance
Highlights of GAO-12-648, a report to
congressional requesters




Why GAO Did This Study                           What GAO Found
PPACA sought to increase access to               GAO estimates that under the 2010 Patient Protection and Affordable Care Act
affordable health insurance, and major           (PPACA), about three-quarters of approximately 7 million children who were
provisions, such as a tax credit to              uninsured in January 2009 would be eligible for Medicaid, the State Children’s
offset the cost of private insurance             Health Insurance Program (CHIP), or the new premium tax credit. The remaining
premiums, will become effective in               children had family incomes too high to be eligible, were noncitizens, or would be
2014. GAO estimated the extent to                ineligible for the premium tax credit because they would be considered to have
which (1) uninsured children would be            access to affordable employer-sponsored insurance per the Internal Revenue
eligible for Medicaid, CHIP, or the              Service’s (IRS) proposed affordability standard, in which IRS interpreted PPACA
premium tax credit under PPACA, and
                                                 as defining affordability for an employee’s eligible family members based on the
(2) children would experience a
                                                 cost of an employee-only plan. Some commenters raised concerns that IRS’s
change in eligibility among Medicaid,
CHIP, and the premium tax credit
                                                 interpretation was inconsistent with PPACA’s goal of increasing access to
under PPACA because of income                    affordable health insurance as it does not consider the higher cost of family
changes. GAO also assessed CMS                   insurance and could result in some children remaining uninsured. Under PPACA,
steps thus far to help states enroll             CHIP is not funded beyond 2015, and states may opt to reduce CHIP eligibility or
children and related state challenges.           eliminate programs in fiscal year 2020. Without CHIP, more children could
GAO applied proposed and final 2014              become uninsured. In May 2012, IRS finalized its rule but deferred finalizing the
PPACA eligibility rules to nationally            proposed affordability standard.
representative 2009 data from the U.S.
Census Bureau and interviewed                    Estimated Eligibility for Medicaid, CHIP, and the Premium Tax Credit under 2014 PPACA
                                                 Rules, among Children Who Were Uninsured in January 2009
officials from CMS and IRS, two
federal agencies responsible for
implementing relevant PPACA
provisions, and six states that received
federal funds for enrollment efforts.

What GAO Recommends
GAO recommends that in future rule
making, the Secretary of the Treasury,
in consultation with the Commissioner
of Internal Revenue, consider the
impact of the proposed standard for
determining affordability of employer-
sponsored insurance on eligible family
members, and whether it would be
consistent with PPACA to adopt an
approach that would consider the cost
of insuring eligible family members, or
                                                 GAO estimates that about 14 percent of children in January 2009 who met 2014
as necessary, seek clarification from            PPACA eligibility criteria for these programs experienced a change in household
Congress regarding its intent with               income that would affect eligibility within 1 year. Changes in eligibility among
respect to this standard. HHS and                children in states without policies allowing them to remain eligible for Medicaid
Treasury were given a draft of this              and CHIP for a full year were estimated to be higher than in states with such
report for review, but neither provided          policies. Frequent eligibility changes could deter enrollment if the process for
formal comments. Treasury provided               changing enrollment is burdensome.
technical comments, which GAO
                                                 The Centers for Medicare & Medicaid Services (CMS) has provided states with
incorporated as appropriate.
                                                 financial incentives and technical guidance to improve enrollment and to
View GAO-12-648. For more information,           implement PPACA provisions. States reported challenges to enrolling eligible
contact Katherine Iritani at (202) 512-7114 or   children, including the need for guidance to implement certain provisions—which
iritanik@gao.gov.
                                                 CMS indicated was forthcoming—and state budget constraints.
                                                                                             United States Government Accountability Office
Contents


Letter                                                                                          1
               Background                                                                       6
               An Estimated Three-Quarters of Uninsured Children Would Be
                 Eligible for Medicaid, CHIP, or the Premium Tax Credit under
                 PPACA, but the Proposed Affordability Standard May Result in
                 Some Children Remaining Uninsured                                            12
               An Estimated 14 Percent of Children Eligible for Medicaid, CHIP,
                 or the Premium Tax Credit under PPACA Would Experience a
                 Change in Eligibility within 1 Year                                          17
               CMS Has Provided States with Tools to Increase Enrollment, and
                 States Express a Need for Further Guidance and Note Budget
                 Constraints                                                                  20
               Conclusions                                                                    26
               Recommendation for Executive Action                                            27
               Agency Comments                                                                27

Appendix I     Scope and Methodology of the Survey of Income and Program
               Participation Analysis                                                         29



Appendix II    Federal Initiatives and Funding Available to States to Facilitate
               Enrollment of Eligible Children and Implement PPACA                            37



Appendix III   GAO Contact and Staff Acknowledgments                                          40



Tables
               Table 1: Selected PPACA Provisions for Health Plans and Issuers in
                        the Private Health Insurance Market                                   10
               Table 2: Estimated Percentage of Eligible Children Who Would
                        Experience a Change in Eligibility under PPACA Because
                        of Household Income Fluctuations                                      18
               Table 3: Estimated Percentage of Eligible Children Who Would
                        Experience a Change in Eligibility under PPACA Because
                        of Household Income Fluctuations in States without
                        Continuous Eligibility for Either Medicaid or CHIP                    19
               Table 4: CHIPRA Initiatives to Improve Children’s Enrollment in
                        Medicaid and CHIP                                                     21


               Page i                             GAO-12-648 Children’s Access to Health Insurance
Figures
          Figure 1: Estimated Eligibility for Medicaid, CHIP, and the
                   Premium Tax Credit under 2014 PPACA Eligibility Rules
                   among Children Who Were Uninsured in 2009                                        14
          Figure 2: Estimated Eligibility for the Premium Tax Credit among
                   Children Estimated to Be Eligible for CHIP under 2014
                   PPACA Eligibility Rules, Who Were Uninsured or Enrolled
                   in Medicaid or CHIP in 2009                                                      15
          Figure 3: Summary of States’ Implementation of Initiatives and
                   Receipt of Federal Funding to Facilitate Enrollment of
                   Children and Implement PPACA                                                     38




          Abbreviations

          BHP               Basic Health Program
          CHIP              State Children’s Health Insurance Program
          CHIPRA            Children’s Health Insurance Program Reauthorization
                              Act of 2009
          CMS               Centers for Medicare & Medicaid Services
          FMAP              Federal Medical Assistance Percentage
          FPL               federal poverty level
          HHS               Department of Health and Human Services
          IRS               Internal Revenue Service
          MAGI              modified adjusted gross income
          PPACA             Patient Protection and Affordable Care Act
          SIPP              Survey of Income and Program Participation
          SNAP              Supplemental Nutrition Assistance Program
          TANF              Temporary Assistance for Needy Families



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          Page ii                                  GAO-12-648 Children’s Access to Health Insurance
United States Government Accountability Office
Washington, DC 20548




                                   June 22, 2012

                                   The Honorable Harry Reid
                                   Majority Leader
                                   United States Senate

                                   The Honorable Max Baucus
                                   Chairman
                                   Committee on Finance
                                   United States Senate

                                   The Honorable Tom Harkin
                                   Chairman
                                   Committee on Health, Education, Labor, and Pensions
                                   United State Senate

                                   The Honorable John D. Rockefeller IV
                                   Chairman
                                   Committee on Commerce, Science, and Transportation
                                   United States Senate

                                   Approximately 7 million children in the United States had no health
                                   insurance for some or all of 2010, many of whom were in families with low
                                   incomes. 1 Medicaid and the State Children’s Health Insurance Program
                                   (CHIP), federal-state programs that finance health care for certain low-
                                   income populations, play an important part in providing health insurance
                                   for low income children. 2 However, not all children who lack health
                                   insurance are eligible for these publicly financed programs. In addition,
                                   some uninsured children who are eligible for these programs do not
                                   enroll.

                                   Recent federal legislation has aimed to maintain and increase Americans’
                                   access to affordable health insurance. The Patient Protection and


                                   1
                                    Carmen DeNavas-Walt, Bernadette D. Proctor, and Jessica C. Smith, U.S. Census
                                   Bureau. “Income, Poverty, and Health Insurance Coverage in the United States: 2010,”
                                   Current Population Reports, P60-239 (Washington, D.C.: U.S. Government Printing
                                   Office, September 2011).
                                   2
                                    In 2011, according to the Medicaid and CHIP Payment Access Commission’s March
                                   2012 report, nearly 44 million low-income children were enrolled in Medicaid or CHIP.




                                   Page 1                                  GAO-12-648 Children’s Access to Health Insurance
Affordable Care Act (PPACA), as amended by the Health Care and
Education Reconciliation Act of 2010, 3 extended CHIP funding through
2015, prohibited states from lowering children’s existing Medicaid and
CHIP eligibility through 2019, 4 and included provisions that aim to expand
adults’ and certain children’s eligibility for and enrollment in these
programs. 5 While the majority of uninsured individuals gaining eligibility
for health insurance under PPACA are adults, who make up the majority
of the uninsured population, children also gain new eligibility—particularly
beginning in 2014, by which time major provisions of PPACA must be in
place, including the following:

•   American Health Benefit Exchanges (hereafter referred to as
    exchanges), which are marketplaces where eligible families and
    individuals can purchase private health insurance.

•   A new refundable health insurance premium tax credit generally paid
    on an advance basis (hereafter referred to as the premium tax credit)
    to offset the cost of health insurance purchased through state
    exchanges by eligible low- to moderate-income families with incomes
    too high to qualify for Medicaid or CHIP. 6




3
 Hereafter, “PPACA” will refer to PPACA as amended by the Health Care and Education
Reconciliation Act of 2010. See Patient Protection and Affordable Care Act, Pub. L.
No. 111-148, 124 Stat. 119 (Mar. 23, 2010), and Health Care and Education
Reconciliation Act, Pub. L. No. 111-152, 124 Stat. 1029 (Mar. 30, 2010).
4
 For purposes of this report, we refer to Washington, D.C. as a state. PPACA specifically
required states to maintain current Medicaid and CHIP eligibility levels, policies and
procedures for children until fiscal year 2020. If CHIP funding is not available beyond fiscal
year 2015, states will have to transition children enrolled in CHIP to other health insurance
programs available at that time.
5
 The expansion of eligibility to adults is accompanied by an increase in the Federal
Medical Assistance Percentage, the federal share of Medicaid expenditures, which is
based on a statutory formula.
6
 Advance payments of the premium tax credit are made directly to the issuer of the
qualified health plan in which a taxpayer enrolls. The amount of the advance payments is
determined based on expected annual household income, and a taxpayer must reconcile
the amount of the advance payments with the actual premium tax credit for the taxable
year as computed on the taxpayer’s tax return. For purposes of this report, we refer to
both advance payments of the premium tax credit and the actual premium tax credit
amount as the premium tax credit.




Page 2                                    GAO-12-648 Children’s Access to Health Insurance
•   Methods to determine eligibility and increase enrollment, which will
    generally be consistent across Medicaid, CHIP, and the new premium
    tax credit.

PPACA builds upon prior federal legislation, namely the Children’s Health
Insurance Program Reauthorization Act of 2009 (CHIPRA), which
established new Medicaid and CHIP enrollment policy options for states,
and incentives, such as performance bonuses, for adopting them. 7

States, the Department of Health and Human Services (HHS), and the
Department of the Treasury all play a role in implementing this
legislation. 8 While states manage and run their individual Medicaid and
CHIP programs, and may choose to run their own exchanges, HHS’s
Centers for Medicare & Medicaid Services (CMS) and the Department of
the Treasury’s Internal Revenue Service (IRS) are responsible for
implementing PPACA’s eligibility rules. For example, CMS is responsible
for implementing changes to Medicaid eligibility under PPACA in addition
to providing guidance, grant funding, and other assistance to the states;
overseeing enrollment provisions of CHIPRA and PPACA; and providing
performance bonuses to states that meet or exceed specified Medicaid
enrollment goals. IRS is responsible for overseeing tax-related provisions
of PPACA, including issuing regulations to implement certain eligibility
rules for the premium tax credit. As states, CMS, and IRS work to
implement the various PPACA provisions, questions remain regarding
PPACA’s anticipated effect on children’s access to affordable health
insurance. For example, uncertainty exists regarding whether some low-
income children will remain ineligible for any of these types of assistance,
whether changes in eligibility caused by shifting family circumstances or
differences in eligibility between children and their parents could deter
enrollment, and whether states will be able to fully implement key
provisions of PPACA by 2014.

Because of your interest in ensuring that all children have access to
affordable health insurance, you asked for information about children’s
access to health insurance under PPACA. This report examines the
following questions:



7
See Pub. L. No. 111-3, 123 Stat. 8 (Feb. 4, 2009).
8
 Other federal entities, such as the Department of Labor, also have roles in implementing
certain provisions of PPACA.




Page 3                                   GAO-12-648 Children’s Access to Health Insurance
1. To what extent would uninsured children be eligible for Medicaid,
   CHIP, or the premium tax credit under PPACA?

2. To what extent would children experience a change in eligibility
   among Medicaid, CHIP, or the premium tax credit because of
   changes in household income during the course of a year, under
   PPACA?

3. What steps has CMS taken thus far to help states enroll eligible
   children, and what challenges have states encountered?

To examine the extent to which uninsured children would be eligible for
Medicaid, CHIP, or the premium tax credit under PPACA, we analyzed
2009 data from the Survey of Income and Program Participation (SIPP)—
a nationally representative survey conducted by the U.S. Census Bureau.
The SIPP follows households over a multiple-year period and collects
relevant information for each individual on a monthly basis, such as type
of health insurance (if any), amount and types of income, age, citizenship
status, and state of residence. To determine the reliability of SIPP data,
we reviewed related documentation and conducted electronic testing for
missing data, outliers, and apparent errors, and determined that the SIPP
data were sufficiently reliable for our purposes. For purposes of this
analysis, we used final or proposed 2014 eligibility rules in place as of
April 2012. To estimate the percentage of uninsured children that would
be eligible for Medicaid, CHIP, or the premium tax credit, we applied final
CMS and proposed IRS 2014 PPACA eligibility rules to SIPP data
representing the United States population of noninstitutionalized children
ages 0 through 18 in January 2009. 9 Specifically, we calculated
household income expressed as a percentage of the federal poverty level
(FPL), 10 based on IRS and CMS rules for counting household income and
family size for Medicaid, CHIP, and the premium tax credit. We compared
these calculations to federally specified FPL eligibility levels for the
premium tax credit and Medicaid and to state-specific Medicaid and CHIP
FPL eligibility levels, accounting for variation in eligibility levels for


9
 As discussed later in this report, IRS’s proposed rule was finalized in May 2012, after we
had completed our analysis; however, the eligibility standards we used were consistent
with the final rule.
10
  We use FPL to refer to federal poverty guidelines issued by HHS each year in the
Federal Register. These guidelines provide poverty income thresholds that vary by family
size and for certain states and are updated using the consumer price index.




Page 4                                   GAO-12-648 Children’s Access to Health Insurance
children of specific ages. We also considered other eligibility criteria, such
as citizenship status, in our analyses. The estimates are based on 2009
data and do not project forward to 2014; rather, they illustrate what
uninsured children’s eligibility for health insurance assistance would be
had 2014 PPACA eligibility rules as issued by CMS and IRS to date been
in place in 2009. (See app. I for more information on our analysis of SIPP
data and limitations of the analysis.) We also interviewed IRS officials and
reviewed comments submitted by state agencies and certain other
organizations in response to IRS’s 2011 proposed rule implementing the
premium tax credit. 11

To estimate how many changes in eligibility within 1 year would have
occurred among children eligible for Medicaid, CHIP, or the premium tax
credit because of changes in household income if the proposed IRS and
final CMS 2014 PPACA eligibility rules had been in place in 2009, we also
relied on the SIPP analysis. In developing our estimates, we considered
whether states had policies—known as continuous eligibility—that
allowed children to remain eligible for Medicaid and CHIP for a full year,
regardless of changes in household income. We also analyzed the extent
to which the frequency of eligibility changes differed among children living
in states with such policies versus children in states without such policies.

To identify the steps that CMS has taken to help states enroll eligible
children, and the challenges that states have encountered, we reviewed
CMS data on grants and bonuses awarded to states, reviewed CMS
guidance implementing relevant provisions of CHIPRA and PPACA, and
interviewed CMS officials about plans for future guidance. To identify the
challenges that states have encountered, we spoke to Medicaid, CHIP,
and exchange officials from six states, which we selected from among
those states that had received a CHIPRA performance bonus reflecting
state progress in increasing enrollment of uninsured children in Medicaid,
or a PPACA grant reflecting state progress in implementing an
exchange. 12 We also reviewed all comments submitted by state agencies
and national associations of state officials in response to CMS’s 2011




11
 Health Insurance Premium Tax Credit, 76 Fed. Reg. 50931 (Aug. 17, 2011).
12
  At the time we selected the 6 states, CHIPRA performance bonuses were awarded to
16 states, and PPACA exchange implementation grants were awarded to 17 states. The
6 states are California, Illinois, Indiana, Maryland, Oregon, and Washington.




Page 5                                GAO-12-648 Children’s Access to Health Insurance
                          proposed rules implementing PPACA eligibility and enrollment
                          provisions. 13

                          We conducted this performance audit from June 2011 through June 2012
                          in accordance with generally accepted government auditing standards.
                          Those standards require that we plan and perform the audit to obtain
                          sufficient, appropriate evidence to provide a reasonable basis for our
                          findings and conclusions based on our audit objectives. We believe that
                          the evidence obtained provides a reasonable basis for our findings and
                          conclusions based on our audit objectives.


                          The federal government has historically established minimum eligibility
Background                requirements for Medicaid and CHIP and provided states with
                          considerable flexibility in expanding eligibility to individuals in households
                          with higher incomes. PPACA made numerous changes to existing federal
                          Medicaid and CHIP eligibility requirements and specified eligibility criteria
                          for new types of assistance, such as the premium tax credit. PPACA also
                          provided for a continued focus on certain CHIPRA initiatives; specified
                          additional policies to facilitate eligible children’s enrollment in Medicaid,
                          CHIP, and the premium tax credit; and included provisions to facilitate
                          children’s access to private health insurance. Federal and state
                          implementation of PPACA enrollment and eligibility provisions is under
                          way.


Current Eligibility       Eligibility for Medicaid and CHIP is limited to U.S. citizens and certain
Requirements and          legally residing immigrants and is generally based on household income
Enrollment Policies for   in relation to the FPL. For Medicaid, the federal government requires that
                          states cover children with household incomes at or below specific
Medicaid and CHIP         eligibility levels, which range from 100 through 133 percent of FPL
                          depending on the age of the child. States have flexibility to increase
                          eligibility levels beyond the federally required levels for children of
                          specific ages. For example, several states have Medicaid eligibility levels
                          of 185 percent of FPL for infants, and a more limited number of states
                          also have eligibility levels higher than the federal requirement for children
                          older than age 1. Because Medicaid eligibility levels vary by children’s


                          13
                           Medicaid Program: Eligibility Changes Under the Affordable Care Act of 2010, 76 Fed.
                          Reg. 51148 (Aug. 17, 2011) and Exchange Functions in the Individual Market; Eligibility
                          Determinations; Exchange Standards for Employers 76 Fed. Reg. 51202 (Aug. 17, 2011).




                          Page 6                                  GAO-12-648 Children’s Access to Health Insurance
age, some members of a given family may qualify for Medicaid, while
others do not. With CHIP programs, states cover children whose
household incomes are too high for Medicaid eligibility; most states’ CHIP
eligibility levels are between 200 and 300 percent of FPL. 14 States use
different methods for counting household income; for example, some
states disregard portions of certain types of income, such as earned
income, and states have varying standards regarding which household
members to include when determining family size.

State enrollment policies, which encompass state efforts to identify,
enroll, and retain eligible individuals in publicly financed health programs,
are also important to children’s access to Medicaid and CHIP. States
have authority to coordinate Medicaid and CHIP enrollment with other
human services programs; this coordination can occur through a variety
of mechanisms. For example, some states have joint applications for
Medicaid, CHIP, and other human service programs, such as the
Supplemental Nutrition Assistance Program (SNAP), 15 while other states
have implemented “express lane” eligibility, a relatively new tool
authorized by CHIPRA, whereby they use eligibility information such as
household income data from a separate human service program, such as
SNAP, or other public agency to determine eligibility for Medicaid or
CHIP. In addition to coordination with other human service programs,
states may adopt other optional policies to facilitate Medicaid and CHIP
enrollment and retention, such as 12-month continuous eligibility policies
for children, under which children who are determined to be eligible for
Medicaid or CHIP generally remain eligible for 12 months, despite any
fluctuations in household income within this time frame. CHIPRA
authorized an incentive to encourage states to adopt such policies by
providing performance bonuses beginning in fiscal year 2009 through
2013 to states that both employed at least five policies to facilitate
enrollment and achieved specific goals with respect to the enrollment of
eligible children in Medicaid. Beginning in fiscal year 2009, CHIPRA also
provided outreach grants for efforts to identify and help enroll Medicaid-
and CHIP-eligible children.




14
  States have the choice of three design approaches for their CHIP programs: (1) a CHIP-
funded Medicaid expansion, (2) a separate CHIP program, or (3) a combination program,
which has both a Medicaid expansion program and a separate CHIP program.
15
 SNAP was formerly known as the Food Stamp Program.




Page 7                                  GAO-12-648 Children’s Access to Health Insurance
Eligibility Requirements   With regard to changes to children’s eligibility for Medicaid and CHIP and
for Medicaid, CHIP, and    eligibility specifications for the new premium tax credit, which are to be
the Premium Tax Credit     fully effective in 2014, PPACA included the following provisions.
under PPACA                •    PPACA expanded Medicaid eligibility to children and adults under age
                                65 with household incomes at or below 133 percent of FPL. 16 As a
                                result, minimum eligibility levels for Medicaid will generally be the
                                same for all family members. 17 Some children with household
                                incomes higher than 133 percent of FPL will continue to be eligible for
                                Medicaid in states that have established higher eligibility levels for
                                children. These states are not allowed to lower their Medicaid
                                eligibility levels for children until fiscal year 2020.

                           •    PPACA required a uniform method of counting household income,
                                based on a household’s modified adjusted gross income (MAGI) to
                                determine eligibility for Medicaid, CHIP, and the premium tax credit.
                                As a result, household income for Medicaid and CHIP, as well as for
                                the premium tax credit, will be determined consistently in all states. 18

                           •    PPACA defined eligibility criteria for the new premium tax credit,
                                which will apply in all states. Similar to Medicaid and CHIP, eligibility
                                for the premium tax credit will be limited to U.S. citizens and legally
                                residing immigrants. Eligibility will also be limited to individuals with
                                household incomes between 100 and 400 percent of FPL. In addition,
                                to be eligible for the premium tax credit, an individual cannot have
                                access to public insurance such as Medicaid or CHIP or to affordable




                           16
                             Medicaid eligibility will remain limited to U.S. citizens and certain legally residing
                           immigrants. In addition, income equivalent to 5 percent of FPL will be disregarded when
                           determining Medicaid eligibility. Therefore, the effective federally required income eligibility
                           level will be 138 percent of FPL.
                           17
                             We previously reported that children are more likely to be insured if their parents are
                           insured. See GAO, Medicaid and CHIP: Given the Association between Parent and Child
                           Insurance Status, New Expansions May Benefit Families, GAO-11-264 (Washington,
                           D.C.: Feb. 4, 2011).
                           18
                             Some Medicaid eligibility categories, such as the blind or disabled, will not be subject to
                           the MAGI income counting method; eligibility for these populations will continue to be
                           determined based on existing criteria.




                           Page 8                                     GAO-12-648 Children’s Access to Health Insurance
                                employer-sponsored health insurance that provides a minimum
                                value. 19, 20
                           A child’s eligibility for Medicaid, CHIP, and the premium tax credit can
                           change over time under PPACA as his or her household income
                           fluctuates. For example, a child who begins the year eligible for the
                           premium tax credit may become eligible for Medicaid or CHIP if
                           household income declines during the year. Conversely, depending on
                           the state, a child who begins the year eligible for Medicaid or CHIP may
                           lose eligibility for these programs if household income increases.


Enrollment Policies for    PPACA also contained provisions to facilitate eligible children’s
Medicaid, CHIP, and the    enrollment in Medicaid, CHIP, and private health insurance subsidized by
Premium Tax Credit under   premium tax credits. For example, PPACA extended funding for CHIPRA
                           outreach and enrollment grants through fiscal year 2015, prohibited states
PPACA                      from requiring in-person interviews for enrollment beginning in 2014,
                           provided for income to be verified through a federally managed hub of
                           data electronically accessible to states, and specified a coordinated
                           enrollment process, whereby with one federally defined uniform
                           application, states will assess families for eligibility for Medicaid, CHIP, or
                           the premium tax credit. PPACA also made funding available to states to
                           plan and implement exchanges, which will provide eligible individuals and
                           families—including those eligible for premium tax credits—the ability to
                           compare, select, and enroll in participating private health insurance plans
                           with standardized benefit and cost-sharing packages. Under PPACA,
                           exchanges must be established in every state by January 1, 2014, either
                           by the state itself or by the Secretary of HHS.


PPACA’s Private Health     Although not the focus of this report, PPACA also contained provisions to
Insurance Market           facilitate children’s access to private health insurance, apart from the
Provisions                 provision of the premium tax credit. For example, as of September 2010,
                           PPACA prohibited health plans and issuers from limiting or denying


                           19
                             Effective January 1, 2014, PPACA also provides for cost-sharing subsidies for
                           individuals and families with household incomes up through 250 percent of FPL to reduce
                           out-of-pocket costs for deductibles, co-payments, and other costs.
                           20
                             PPACA also provides states with the option to create a new public health insurance
                           program, called the Basic Health Program, for children and adults whose household
                           incomes are low—less than or equal to 200 percent of FPL—but too high to qualify for
                           Medicaid or CHIP.




                           Page 9                                  GAO-12-648 Children’s Access to Health Insurance
                                          coverage for children under age 19 because of preexisting health
                                          conditions. (See table 1.)

Table 1: Selected PPACA Provisions for Health Plans and Issuers in the Private Health Insurance Market

Provision                   Description
Annual limit                Generally prohibits health plans and issuers from imposing annual limits on the dollar value of certain
                            covered health benefits, effective January 2014; restricted annual limits on the value of those benefits
                                                       a,b
                            are allowed until that time
Appeals process             Requires an internal appeals process for determinations and claims, and an external review process
                                                                                   a,c
                            that meets certain standards, effective September 2010
Dependent coverage          Requires health plans and issuers offering dependent coverage to continue to make such coverage
                                                                                                             a,d
                            available to unmarried children until they reach age 26, effective September 2010
Lifetime limit              Prohibits lifetime limits on dollar value of certain covered health benefits for any individual, effective
                                              e
                            September 2010
Patient protections         Establishes patient protections, such as coverage of emergency services without prior authorization,
                                                      a,f
                            effective September 2010
Preexisting condition       Prohibits health plans and issuers from imposing any preexisting condition exclusions for children
                            under age 19, effective September 2010; this prohibition will be extended to adults effective January
                                 a,g
                            2014
Preventive services         Requires coverage of preventive health services, effective September 2010; for example, for children
                                                                                                                 a,h
                            these services include behavioral assessments, obesity counseling, and immunizations
Rescissions of coverage     Prohibits health plans and issuers from rescinding coverage, except in the case of fraud or intentional
                                                                                        i
                            misrepresentation of material fact, effective September 2010
                                          Source: PPACA and Health Care and Education Reconciliation Act.
                                          a
                                              Not applicable to certain health plans that were in effect as of March 23, 2010.
                                          b
                                              PPACA, § 10101(a), 124 Stat. at 883, adding § 2711(a)(2) of the Public Health Service Act.
                                          c
                                              PPACA, § 10101(g), 124 Stat. at 887, adding § 2719 of the Public Health Service Act.
                                          d
                                              PPACA, § 1001, 124 Stat. at 132, adding § 2714 of the Public Health Service Act.
                                          e
                                              PPACA, § 10101(a), 124 Stat. at 883, adding § 2711(a)(1) of the Public Health Service Act.
                                          f
                                              PPACA, § 10101(h), 124 Stat. at 888, adding § 2719A of the Public Health Service Act.
                                          g
                                              PPACA, §§ 1201, 10103(e)(2), 124 Stat. at 154, 895, adding § 2704 of the Public Health Service Act.
                                          h
                                           PPACA, § 1001, 124 Stat. at 131, adding § 2713 of the Public Health Service Act; Health Care and
                                          Education Reconciliation Act, § 2301(b), 124 Stat. at 1082, amending § 2713 of the Public Health
                                          Service Act.
                                          i
                                              PPACA, § 1001, 124 Stat. at 131, adding § 2712 of the Public Health Service Act.


Implementation of PPACA                   Implementing PPACA’s changes to Medicaid and CHIP eligibility
Eligibility and Enrollment                determination and enrollment policies and preparing for implementation of
Provisions                                the premium tax credit and other provisions of PPACA will require
                                          significant state and federal efforts. In August 2011, CMS and IRS




                                          Page 10                                                  GAO-12-648 Children’s Access to Health Insurance
separately issued three proposed rules to implement key PPACA
provisions related to eligibility and enrollment for Medicaid, CHIP, and the
premium tax credit; the CMS rules were finalized in March 2012. 21
According to CMS, more detailed guidance, such as the specific
information to be collected in the uniform application or the nature of the
data available from the federal hub, will be distributed at a later date. The
IRS proposed rule specified how to calculate household MAGI for
determining premium tax credit eligibility, and the CMS rules adopted
these methods for determining Medicaid and CHIP eligibility, with certain
exceptions. 22 IRS finalized its proposed rule in May 2012 with minimal
change to these methods. 23 The IRS proposed rule also described the
standard for determining whether an individual has access to affordable
employer-sponsored insurance for purposes of determining eligibility for
the premium tax credit. Under the proposed affordability standard,
employer-sponsored insurance is considered affordable if the cost of a
self-only plan—meaning a plan that only covers the employee—does not
exceed 9.5 percent of household income. Under the proposed standard, if
one family member has access to affordable self-only employer-
sponsored insurance, all other family members who are eligible to enroll
in the employee’s plan are also considered to have access to affordable
insurance and are therefore ineligible for the premium tax credit. In this
manner, the proposed rule applied the same standard to all family
members eligible for the employee’s plan, even if the cost of enrolling the
family as a whole exceeds the 9.5 percent threshold. In the preamble to
its proposed rule, IRS stated that the PPACA statute specifies using the
self-only insurance affordability standard for employees as well as for
spouses and dependents of an employee, citing a report issued by the
Joint Committee on Taxation that similarly interpreted the law. Some who
commented on the proposed rule suggested that it would be more



21
 See Medicaid Program; Eligibility Changes Under the Affordable Care Act, 77 Fed.
Reg. 17144 (Mar. 23, 2012) and Patient Protection and Affordable Care Act;
Establishment of Exchanges and Qualified Health Plans; Exchange Standards for
Employers, 77 Fed. Reg. 18310 (Mar. 27, 2012).
22
  For example, how certain types of income, such as lump sum payments and educational
grants, are treated in calculating MAGI differ when determining Medicaid and CHIP
eligibility versus eligibility for the premium tax credit.
23
  The definition of MAGI was, however, revised to include Social Security benefits, as
required by the Three Percent Withholding Repeal and Job Creation Act, Pub. L. No. 112-
56, § 401, 125 Stat. 711, 734 (Nov. 21, 2011).See Health Insurance Premium Tax Credit,
77 Fed. Reg. 30377 (May 23, 2012).




Page 11                                GAO-12-648 Children’s Access to Health Insurance
                         consistent with congressional intent to interpret the statute to require the
                         use of the cost to an employee of insuring all eligible family members in
                         determining access to affordable employer-sponsored insurance. 24 In its
                         final premium tax credit rule, IRS confirmed that the proposed self-only
                         insurance affordability standard would apply to employees, but it deferred
                         a decision on the affordability standard for other eligible family members,
                         such as children, to future rule making. Therefore, because this report
                         focuses on children, the relevant affordability standard remains a
                         proposed standard, and is referred to as such for the remainder of the
                         report.


                         Over three-quarters of uninsured children in January 2009 would be
An Estimated Three-      eligible for Medicaid, CHIP, or the premium tax credit under 2014 PPACA
Quarters of Uninsured    eligibility rules, according to our estimates. 25 Applying final CMS and
Children Would Be        proposed IRS rules for 2014 program eligibility to 2009 SIPP data, we
                         estimate that on the basis of household income and other eligibility
Eligible for Medicaid,   criteria, such as citizenship, nearly 68 percent of the approximately
CHIP, or the Premium     7 million children who were uninsured in January 2009 would be eligible
                         for Medicaid or CHIP—about 48 percent for Medicaid and about
Tax Credit under         20 percent for CHIP. 26 In addition, 7.5 percent of the uninsured children
PPACA, but the           would be eligible for the premium tax credit. Nearly 13 percent of the
                         uninsured children were noncitizens for whom we did not estimate
Proposed                 eligibility because of limitations in the data. 27 We estimate that the final
Affordability Standard   approximately 12 percent of uninsured children would be ineligible for

May Result in Some
Children Remaining       24
                           GAO did not conduct an independent analysis of the scope of IRS’s authority with
Uninsured                regard to this issue.
                         25
                           Researchers estimated that in 2008, 65 percent of uninsured children were eligible for
                         Medicaid or CHIP but not enrolled. Genevieve M. Kenney, Victoria Lynch, Allison Cook,
                         and Samantha Phong, “Who and Where Are the Children Yet to Enroll in Medicaid and the
                         Children’s Health Insurance Program?” Health Affairs, vol. 29, no. 10 (2010): 1920-1929.
                         26
                          The 20 percent includes children who would be eligible for either a CHIP-funded
                         Medicaid expansion or a separate CHIP program.
                         27
                           SIPP data generally do not provide information about the documentation status of
                         children who are noncitizens. We treated noncitizen children as eligible legally residing
                         immigrants if they or their parents participated in public assistance programs such as
                         SNAP, which require documentation of legal residence, and treated other noncitizen
                         children as potentially ineligible noncitizens. SIPP data do include information on whether
                         certain noncitizens who were aged 15 and older were permanent U.S. residents; we did
                         not incorporate this information into our analysis.




                         Page 12                                   GAO-12-648 Children’s Access to Health Insurance
Medicaid, CHIP, or the premium tax credit. Specifically, 5.5 percent would
be ineligible because they were in families with a household income that
was too high—at greater than 400 percent of FPL. The remaining
6.6 percent would be ineligible because, though their families were
considered low-income in that they met the household income
requirements for the premium tax credit, they were considered to have
access to affordable employer-sponsored insurance based on IRS’s
proposed affordability standard. In particular, these children had at least
one parent with employer-sponsored insurance that had an estimated
cost below 9.5 percent of household income for a self-only plan. 28 (See
fig. 1.)These children would not be automatically eligible for the premium
tax credit if the affordability standard were instead based on a family plan;
their eligibility would depend on the cost of the family plan to which they
had access. See appendix I for more information about our estimates.




28
  Our analysis used 2011 data on costs of employer- sponsored insurance and did not
estimate or otherwise consider how the affordability standard or other PPACA provisions
could affect employers’ contributions to employees’ premiums in the future.




Page 13                                 GAO-12-648 Children’s Access to Health Insurance
Figure 1: Estimated Eligibility for Medicaid, CHIP, and the Premium Tax Credit
under 2014 PPACA Eligibility Rules among Children Who Were Uninsured in 2009




Notes: Percentages and estimated numbers of children reflect proposed IRS and final CMS 2014
PPACA eligibility rules applied to uninsured children in January 2009. The CHIP category includes
children eligible for CHIP-funded Medicaid expansion and separate CHIP programs.


The proposed affordability standard could potentially affect significantly
more children than the approximately 460,000 uninsured children we
estimated above under certain scenarios. Many children eligible for CHIP
have a parent with employer-sponsored insurance. 29 Under PPACA,
CHIP is not funded beyond 2015, and, even if federal funding is
extended, states may opt to reduce eligibility levels for CHIP or eliminate
CHIP programs altogether beginning in fiscal year 2020. 30 Without CHIP-
funded Medicaid expansion or separate CHIP programs, we estimate that


29
  We limited our estimates of the effect of the affordability standard to uninsured and
CHIP-eligible children and did not consider the effect of the standard on additional
populations, such as children with private health insurance.
30
  The CHIP maintenance of eligibility provision expires in fiscal year 2020, at which time
states may opt to eliminate CHIP programs or limit CHIP eligibility. The Congressional
Budget Office has projected that about half of states will eliminate CHIP programs at that
time.




Page 14                                      GAO-12-648 Children’s Access to Health Insurance
an additional 1.9 million children who would otherwise be eligible for CHIP
would be considered to have access to affordable insurance under this
proposed standard and would be ineligible for the premium tax credit. 31
(See fig. 2.)

Figure 2: Estimated Eligibility for the Premium Tax Credit among Children
Estimated to Be Eligible for CHIP under 2014 PPACA Eligibility Rules, Who Were
Uninsured or Enrolled in Medicaid or CHIP in 2009




Notes: Percentages and estimated numbers of children reflect proposed IRS and final CMS 2014
PPACA eligibility rules, applied to uninsured or publicly insured children in January 2009. The CHIP
category includes children eligible for CHIP-funded Medicaid expansion and separate CHIP
programs.


In commenting on IRS’s proposed rule on eligibility for the premium tax
credit, some states and other organizations noted that IRS’s proposed
interpretation of access to affordable employer-sponsored insurance—
defining affordability on the basis of the cost of a self-only plan, and not
on the cost of a family plan—could result in some children remaining
uninsured. They explained that although a self-only plan for the employee


31
  This estimate included both children who were uninsured and children who were
participating in CHIP or Medicaid in 2009.




Page 15                                       GAO-12-648 Children’s Access to Health Insurance
may cost less than the 9.5 percent threshold, a family plan that would
also insure the employee’s eligible family members could exceed it. As a
result, some employees would not be able to afford the higher premiums
to insure their family members, who therefore could remain uninsured.
We did not estimate the cost associated with defining the affordability
standard based on the cost of a family plan. The cost of such a change
would depend on multiple factors, many of which remain uncertain, such
as the availability of CHIP funding beyond 2015, the extent to which
eligible families avail themselves of the premium tax credit, employer
decisions, and the extent to which additional enrollees could affect the
aggregate cost of premiums. The Congressional Budget Office has
commented on the high degree of uncertainty inherent in projecting the
future actions of employees and employers under PPACA as well as
other factors that may affect federal costs, such as the number of
individuals and families who will have household income in specific
eligibility ranges in future years.

We did not examine how many of the children estimated to be ineligible
for the premium tax credit because of access to affordable employer-
sponsored insurance would become eligible if the affordability standard
were instead based on the cost of a family plan; the cost of family plans
available to employees who chose not to purchase them was not
available in the data we analyzed. However, separate data on the cost of
family plans among employees who purchased a family plan suggest that
some of these uninsured children, particularly those in families facing
higher-than-average premium contributions, could become eligible for the
premium tax credit if the affordability standard were based on the cost of
a family plan. For example, in a 2011 survey, the Kaiser Family
Foundation and Health Research & Education Trust found that on
average, employees contributed $4,129 annually for a family plan, or
28 percent of the total cost to the employer of an annual family premium,
which averaged $15,073. 32 For a family of four with household income
equivalent to 250 percent of the FPL, $4,129 represents about 7 percent
of household income. However, the percentage of the annual premium
paid by employees ranged widely around this average, and 15 percent of
employees with family plans paid more than 50 percent of the annual
premium. For a family of four with household income equivalent to



32
 Kaiser Family Foundation and Health Research & Education Trust, Employer Health
Benefits 2011 Annual Survey (Menlo Park, Calif., and Chicago, Ill.: September 2011).




Page 16                                 GAO-12-648 Children’s Access to Health Insurance
                          250 percent of the FPL, paying 51 percent of the average annual
                          premium (or $7,687) would represent just over 13 percent of household
                          income, exceeding the 9.5 percent threshold. Whether families ultimately
                          choose to purchase insurance for children will depend on many factors,
                          including individual decisions regarding what they can afford for health
                          insurance.


                          Applying final CMS and proposed IRS 2014 PPACA eligibility rules to
An Estimated 14           children in 2009, we estimate that nationally, 9 percent of children eligible
Percent of Children       for Medicaid, CHIP, or the premium tax credit experienced a change in
                          household income within 6 months that would affect their eligibility for a
Eligible for Medicaid,    specific form of assistance, and 14 percent of these children experienced
CHIP, or the Premium      at least one such change within 1 year. 33 (See table 2.) In addition, some
Tax Credit under          children experienced multiple income changes within these time periods
                          that would affect their eligibility for assistance more frequently. We
PPACA Would               estimate that, nationally, 2 percent of eligible children experienced
Experience a Change       changes in household income that would affect eligibility two or more
                          times within 6 months, and 6 percent experienced two or more such
in Eligibility within 1   changes within 1 year.
Year




                          33
                            This analysis considered state-specific continuous eligibility policies in place as of March
                          2012. We did not count Medicaid- and CHIP- eligible children who lived in states with
                          applicable continuous eligibility policies as experiencing changes in program eligibility,
                          regardless of any change in household income. According to CMS data, as of March 2012
                          there were 23 states with continuous eligibility policies for Medicaid and CHIP. We
                          estimate that 52 percent of eligible children in our analysis lived in these states. There
                          were 18 states without continuous eligibility policies for Medicaid or CHIP; we estimate
                          that 22 percent of eligible children in our analysis lived in these states. An additional
                          10 states have adopted continuous eligibility for CHIP but not Medicaid. Although children
                          who become eligible for Medicaid or CHIP mid-year do not necessarily lose eligibility for
                          the premium tax credit, we considered such children as having experienced a change in
                          eligibility because they would gain eligibility for potentially lower-cost insurance through
                          Medicaid or CHIP.




                          Page 17                                   GAO-12-648 Children’s Access to Health Insurance
Table 2: Estimated Percentage of Eligible Children Who Would Experience a
Change in Eligibility under PPACA Because of Household Income Fluctuations

 Type of eligibility change                                                     6 months        1 year
 Between Medicaid and CHIP                                                                2           4
 Between Medicaid and the premium tax credit                                              3           4
 Between CHIP and the premium tax credit                                                  1           2
 Between Medicaid or CHIP and ineligibility for any assistance                            3           4
 Total                                                                                    9         14
Source: GAO analysis of 2009 SIPP data.

Notes: Percentages reflect estimated eligibility changes among children, had states’ 2012 continuous
eligibility policies and proposed IRS and final CMS 2014 PPACA eligibility rules been in place in
2009. We defined eligibility for the premium tax credit as lasting for 1 year; however, we considered
children who were eligible for the premium tax credit at the beginning of the year, but who were in
families that experienced a midyear decrease in income that would make them eligible for Medicaid
or CHIP, as having experienced a change in eligibility because they would gain eligibility for
potentially lower cost insurance. The CHIP category includes children eligible for CHIP-funded
Medicaid expansion and for separate CHIP programs; however, we did not consider a change in
eligibility between Medicaid and CHIP-funded Medicaid expansions to be a change in program
eligibility. We did not count Medicaid- and CHIP-eligible children who lived in states with applicable
continuous eligibility policies as experiencing changes in program eligibility, regardless of any change
in household income.


The effect of continuous eligibility policies for Medicaid and CHIP on the
frequency of eligibility changes becomes apparent when we consider
children in states with versus states without such policies separately.
Eligibility changes are higher than the national average in states without
continuous eligibility policies in either their Medicaid or CHIP programs,
and lower than the national average in states with them. In states with
continuous eligibility policies for Medicaid and CHIP, eligibility changes
under PPACA would be limited to children who begin the year eligible for
the premium tax credit but experience a decrease in household income
that would result in eligibility for Medicaid or CHIP instead. Therefore, the
percentage of children experiencing changes in eligibility, and at risk of
experiencing disruptions in coverage, is lower than the national average
among children in the 23 states that have adopted continuous eligibility in
both their Medicaid and CHIP programs and greater than the national
average among children in the 18 states that do not have continuous
eligibility in either program. Specifically, we estimate that about 3 percent
of eligible children in states with continuous eligibility for Medicaid and
CHIP experienced a change in household income that would affect
eligibility under PPACA within 1 year. In contrast, we estimate that about
19 percent of eligible children in states without continuous eligibility
experienced a change in household income that would affect program




Page 18                                        GAO-12-648 Children’s Access to Health Insurance
eligibility under PPACA at least once within 6 months, and about
30 percent experienced such a change within 1 year. (See table 3.)

Table 3: Estimated Percentage of Eligible Children Who Would Experience a
Change in Eligibility under PPACA Because of Household Income Fluctuations in
States without Continuous Eligibility for Either Medicaid or CHIP

 Type of eligibility change                                                 6 months           1 year
 Between Medicaid and CHIP                                                            5              9
 Between Medicaid and the premium tax credit                                          3              5
 Between CHIP and the premium tax credit                                              3              4
 From Medicaid or CHIP to ineligible for any assistance                               8             12
 Total                                                                              19              30
Source: GAO analysis of 2009 SIPP data.

Notes: Percentages reflect estimated eligibility changes among children living in states without
continuous eligibility for either Medicaid or CHIP, had states’ 2012 continuous eligibility policies and
proposed IRS and final CMS 2014 PPACA eligibility rules been in place in 2009. We defined eligibility
for the premium tax credit as lasting for 1 year; however, we considered children who were eligible for
the premium tax credit at the beginning of the year, but who were in families that experienced a
midyear decrease in income that would make them eligible for Medicaid or CHIP, as having
experienced a change in eligibility because they would gain eligibility for potentially lower-cost
insurance. The CHIP category includes children eligible for CHIP-funded Medicaid expansion and
separate CHIP programs; however, we did not consider a change in eligibility between Medicaid and
CHIP-funded Medicaid expansions to be a change in program eligibility. According to CMS data, as of
March 2012 there were 18 states without continuous eligibility policies for either Medicaid or CHIP.


Changes in eligibility caused by income fluctuations could deter children’s
enrollment in relevant programs if the process for changing enrollment is
burdensome for the families and could further complicate other eligibility
complexities, such as variation in eligibility within households. Eligibility
for specific types of assistance can vary within households because
low- to moderate-income adults with household incomes greater than
133 percent of FPL will typically be ineligible for any assistance or will be
eligible for the premium tax credit rather than Medicaid or CHIP, while
children in some of these households—particularly in states with higher
income eligibility levels for Medicaid and CHIP—will be eligible instead for
Medicaid or CHIP. We estimate that based on 2009 data, 21 percent of
children eligible for Medicaid, CHIP, or the premium tax credit under
PPACA would have different eligibility from their parents as of the
beginning of the year. However, because of income fluctuations that
occurred over the course of the year, we estimate that an additional 9
percent of eligible children would encounter this situation.




Page 19                                        GAO-12-648 Children’s Access to Health Insurance
                            CMS has provided states with incentives and guidance to implement
CMS Has Provided            current initiatives to improve enrollment policies and has made progress
States with Tools to        assisting states in implementing PPACA requirements aimed at further
                            simplifying Medicaid and CHIP enrollment. State officials reported
Increase Enrollment,        ongoing challenges with regard to enrolling eligible children, including the
and States Express a        need for timely guidance to implement PPACA provisions, concerns
Need for Further            about enrolling family members who are not eligible for the same
                            program, and state budget constraints.
Guidance and Note
Budget Constraints

CMS Has Provided States     Through an array of financial incentives and technical assistance, CMS
with Financial and          has worked with states to enroll and retain eligible children in Medicaid
Technical Assistance to     and CHIP and to set up state exchanges under PPACA. Many of these
                            efforts were initiated with funds appropriated under CHIPRA and continue
Facilitate the Enrollment   under PPACA. For example, CHIPRA appropriated $100 million for fiscal
and Retention of Eligible   years 2009 through 2013 in outreach grants and related efforts to improve
Children in Medicaid and    the enrollment and retention of underserved populations in Medicaid and
CHIP                        CHIP, and by the end of fiscal year 2011, CMS had awarded $80 million
                            in such grants. 34 CMS awarded the first round of outreach grants in fiscal
                            year 2009 to 69 applicants in 43 states, which included state agencies
                            and community-based and other nonprofit groups, and the second round
                            in fiscal year 2011 to 39 applicants in 23 states. 35 In our interviews with
                            officials from selected states, officials noted that the outreach grants had
                            helped the agencies reach eligible children. For example, Oregon
                            Medicaid officials said that the CHIPRA outreach grant their agency
                            received was crucial to reaching the state’s Hispanic population. The
                            grant sought to support outreach by safety net providers, public health
                            departments, and school-based health centers.

                            Since fiscal year 2009, CMS has also awarded performance bonuses
                            annually to states that implemented at least five of the eight enrollment
                            initiatives outlined in CHIPRA and met specific enrollment goals, which



                            34
                              PPACA amended the CHIPRA provision, appropriating an additional $40 million in grant
                            funding and extending the availability of funding through fiscal year 2015.
                            35
                              Individual grants in the first round ranged from approximately $70,000 to nearly
                            $1 million, and grants in the second round ranged from $200,000 to $2.5 million. Individual
                            grantees were eligible to apply for grants in both rounds of funding.




                            Page 20                                  GAO-12-648 Children’s Access to Health Insurance
                                          are based on the state’s current Medicaid enrollment and population
                                          growth. 36 (See table 4.) The number of states receiving these bonuses
                                          has more than doubled over the 3 years that bonuses have been
                                          awarded, increasing from 10 states in fiscal year 2009 to over 23 states in
                                          fiscal year 2011. 37 In 2011, the amount of the performance bonuses
                                          ranged from approximately $1.3 million for Idaho to over $28 million for
                                          Maryland. (See app. II for a summary of the states that received these
                                          performance bonuses and the amounts of the awards.) In addition,
                                          among the 23 states that received a performance bonus in 2011,
                                          16 received an enhanced bonus for exceeding their enrollment target by
                                          more than 10 percent. 38 CMS plans to provide these performance
                                          bonuses annually through fiscal year 2013.

Table 4: CHIPRA Initiatives to Improve Children’s Enrollment in Medicaid and CHIP

CHIPRA enrollment initiative           Description of initiative
Elimination of in-person interview     No longer require an in-person interview to enroll in Medicaid or CHIP
Liberalization of asset requirements   Do not impose an asset test, or allow administrative verification of assets
Same application and renewal forms     Use same or interchangeable application and renewal forms for Medicaid and CHIP
12-month continuous eligibility        Assure coverage of a child for 12 months, regardless of changes in circumstances, with
                                       some exceptions
Automatic/administrative renewal       Make renewal determinations automatically, based on information the state has available,
                                       provide a prepopulated renewal form to families, or both
Presumptive eligibility                Enroll children who appear to be eligible for Medicaid and CHIP pending a full determination
                                       of eligibility
Express lane eligibility               Enroll children in Medicaid or CHIP based on information available through other public
                                       programs
Premium assistance                     Provide premium assistance for private coverage through a state’s Medicaid or CHIP
                                       program
                                          Source: CMS.




                                          36
                                            CHIPRA authorizes performance bonuses to be awarded annually, from 2009 through
                                          2013.
                                          37
                                             CMS awarded over $37 million in performance bonuses to 10 states in fiscal year 2009,
                                          over $167 million to 16 states in fiscal year 2010, and nearly $300 million to 23 states in
                                          fiscal year 2011.
                                          38
                                            The performance bonus a state received was based on a formula that considers the
                                          percentage that enrollment increased and the current per capita cost of covering each
                                          child in the state. The enhanced bonus is based on a similar formula for rewarding
                                          increased enrollment but does so at a higher level per percentage point increase in
                                          children’s enrollment.




                                          Page 21                                    GAO-12-648 Children’s Access to Health Insurance
CMS has also provided states with financial assistance to facilitate their
implementation of PPACA provisions aimed at simplifying enrollment. For
example, recognizing that states will need to upgrade their information
technology systems to comply with PPACA, CMS has provided states
with the opportunity to claim an enhanced Federal Medical Assistance
Percentage (FMAP) through fiscal year 2015 for the costs associated with
certain Medicaid systems improvements, such as updates to their claims
processing and enrollment systems, and beyond 2015, for costs
associated with administering new systems. Specifically, instead of the
50 percent FMAP historically available for most Medicaid administrative
expenses, qualified states can obtain a 90 percent FMAP for the costs of
implementing new information systems and a 75 percent FMAP for the
costs of administering these new systems. 39 California officials said they
plan to use the enhanced FMAP to better integrate their Medicaid
eligibility systems with their SNAP and Temporary Assistance for Needy
Families (TANF) eligibility systems and are interested in eventually using
their Medicaid system to determine the eligibility of enrollees for other
state programs. 40 In addition to the enhanced FMAP for information
systems improvements, CMS has awarded exchange planning grants and
exchange establishment grants under PPACA to assist states in planning
and developing exchanges. In September 2010, CMS awarded exchange
planning grants totaling nearly $50 million to 50 states, 41 and from May
2011 through February 2012, CMS awarded exchange establishment




39
  To be eligible for the enhanced FMAP, states must submit explicit plans for upgrading
their information systems to CMS for approval. Medicaid Program; Federal Funding for
Medicaid Eligibility Determination and Enrollment Activities, 75 Fed. Reg. 21950 (Apr. 19,
2011). As of April 27, 2012, CMS had approved plans from 36 states, and an additional
8 states had submitted plans for approval.
40
  TANF is a government program that provides cash assistance and other services to
eligible low-income families.
41
  Exchange planning grants were designed to provide resources for states to conduct
research and planning and determine how exchanges will be operated and governed.
States were able to apply for an exchange planning grant of up to $1 million, and most
states were awarded the full amount. Louisiana returned the exchange planning grant
money that it had received. If states choose not to set up their own exchanges, the federal
government is required to do so.




Page 22                                  GAO-12-648 Children’s Access to Health Insurance
grants totaling over $600 million to 34 states. 42 (See app. II for more
information on the initiatives and funding available to states to facilitate
enrollment and implementation of PPACA.) CMS plans to award
exchange establishment grants on a quarterly basis through 2014.

In addition to financial assistance, CMS has provided states with technical
assistance to facilitate their efforts to enroll and retain eligible children.
For example, CMS has hosted conference calls and meetings to provide
support to outreach grantees. CMS officials told us that a conference of
outreach grantees served as a venue for identifying best practices and
getting state input on additional ways that CMS can assist states with
enrollment. CMS has also helped states implement the enrollment
initiatives outlined in CHIPRA. For example, Oregon officials worked
directly with CMS when developing a renewal form for Medicaid and
CHIP to make sure their approach met the administrative renewal
requirements for the CHIPRA performance bonus. CMS has also
provided technical assistance to states on a number of PPACA
provisions. For example, CMS has issued letters to state Medicaid
directors, including one on the new eligibility groups for Medicaid
(e.g., covering children up through 133 percent of FPL) and published
frequently asked questions related to essential health benefits and
maintenance of effort requirements. CMS officials also told us that the
agency has contracted with groups of states to develop guidance on key
issues, such as eligibility, enrollment, and information technology, that will
be disseminated to all states. CMS officials said that the agency has
offered states additional opportunities for technical assistance through
calls, webinars, user groups, working group meetings, larger conference
meetings, and establishment reviews, a process under which CMS
directly assists and monitors a state’s effort to meet the requirements to
build an exchange. Most recently, CMS’s final exchange rule, which
allows states to hire private entities to help enroll eligible individuals into
qualified health plans participating in their exchanges, could further
facilitate state enrollment efforts.


42
  There are two levels of exchange establishment grants. Level one grants are awarded to
states in the earlier stages of exchange development, and award amounts have ranged
from about $1.6 million to nearly $58 million. States receiving a level one grant can apply
for a second year of funding, if necessary. To be eligible for a level two grant, states must
meet a series of specific criteria, including legal authority to establish and operate an
exchange, a budget and plan for financial stability by 2015, and a plan to prevent fraud,
waste, and abuse. As of March 2012, Rhode Island was the only state that had received a
level two grant.




Page 23                                   GAO-12-648 Children’s Access to Health Insurance
Challenges Reported by   States identified incomplete federal guidance as a challenge to their
States Include Ongoing   efforts to prepare to enroll eligible children under PPACA in our interviews
Need for Guidance and    and in comments on CMS’s proposed eligibility rules. During the course
                         of our review, in March 2012, CMS finalized its Medicaid and exchange
Budget Constraints       eligibility rules, which responded to some areas of state concern. For
                         example, in comments on the proposed Medicaid eligibility rule, several
                         states requested that CMS’s final rule allow them to continue to use joint
                         applications for Medicaid and other human services programs, such as
                         SNAP and TANF, a coordinated enrollment approach that 39 states
                         currently use. 43 The final Medicaid eligibility rule clarified that states may
                         continue to use such joint applications as long as a simplified application
                         specifically for health programs is also in place. However, states’ need for
                         ongoing guidance remains. For example, in addition to the need for
                         finalized rules, states frequently noted, during our interviews and in
                         written comments on the proposed rules, that supplementary guidance in
                         key areas such as the federal data hub, the conversion to MAGI for
                         eligibility determinations, and the elements of the uniform application was
                         needed in order for them to make the necessary changes to their
                         business processes and information systems. For example, several
                         states commented that they need additional guidance on what will be
                         available in the federal data hub and how to coordinate data from the
                         federal data hub with their current systems. States also expressed the
                         need for additional guidance on other aspects of PPACA, such as the
                         Basic Health Program (BHP). CMS officials told us that the agency is in
                         the process of developing additional guidance and that the agency’s
                         highest priority is to provide states with guidance related to their eligibility
                         and enrollment systems. For example, officials cited guidance on the
                         federal data hub as a high priority.

                         States are also seeking additional guidance from CMS on how to
                         minimize the potential for negative consequences when family members
                         are eligible for different types of assistance. For example, in their


                         43
                           We have previously reported that differences in eligibility determination requirements
                         among human services programs led to duplication of efforts, and we have an
                         outstanding recommendation that HHS and the Food and Nutrition Service work together
                         to (1) encourage state officials to explore better aligning participant reporting
                         requirements, particularly for TANF and Medicaid, and (2) disseminate information and
                         guidance to states on the opportunities available for better aligning requirements among
                         Medicaid, SNAP, and TANF. See GAO, Food Stamp Program: Farm Bill Options Ease
                         Administrative Burden, but Opportunities Exist to Streamline Participant Reporting Rules
                         among Programs, GAO-04-916 (Washington, D.C.: Sept 16, 2004).




                         Page 24                                 GAO-12-648 Children’s Access to Health Insurance
comments on the proposed Medicaid eligibility rule, California officials
requested guidance on how to handle complex situations in which family
members are eligible for different types of assistance, including options
for reducing the confusion and burden such families may face when
enrolling in multiple plans. Further, Illinois officials requested permission
to enroll children and their parents in the same type of insurance, whether
Medicaid, a BHP, or a plan through the exchange. They suggested that
greater harm could result from differences in insurance within families
than any higher costs or reduced benefits that may result from enrolling
families in the same plan. CMS officials said they would clarify policy
options available to states to allow certain families to have the same type
of insurance coverage. For example, to allow CHIP-eligible children and
their parents to share the same insurance, CMS officials said that states
could use CHIP funds to allow CHIP-eligible children to purchase the
same private insurance plan as their parents through the exchange,
though they had not yet provided guidance to states in this area as of
April 2012. Recognizing the potential difficulties such families could face,
Tennessee sought guidance from CMS in September 2011 on whether
PPACA would allow the state to implement a “bridge plan,” where
managed care organizations would provide a single insurance card that
could be used by the entire family. This approach would be available to
eligible families while at least one dependent was enrolled in Medicaid or
CHIP and for a defined period afterward. However, Tennessee officials
told us that as of February 2012, CMS had not indicated whether such an
approach would be acceptable or how it could be implemented in a
manner consistent with the law.

State officials also reported that ongoing budget constraints have affected
their ability to enroll eligible children. A recent survey by the National
Association of State Budget Officers found that states continue to face
budgetary pressures as a result of the lack of a strong national economic
recovery. 44 Under these circumstances, states continue to examine all
their state programs, including Medicaid, to identify additional
opportunities for cost savings. Medicaid officials in the six states in our
review also acknowledged that budget constraints have affected their
outreach and enrollment efforts. For example, California and Illinois
officials reported reducing funding to community groups that have



44
  National Association of State Budget Officers, Fiscal Survey of States, Fall 2011
(Washington D.C.: 2011).




Page 25                                  GAO-12-648 Children’s Access to Health Insurance
              historically assisted families in applying for Medicaid. In addition, officials
              in four of the six states we interviewed added that budget constraints
              have also affected their funding of enrollment initiatives, such as express
              lane eligibility, that can increase children’s enrollment in these programs.
              For example, Washington officials said the state was considering
              implementing express lane eligibility in 2011 for Medicaid. However, when
              estimating the cost of this initiative, the state determined that the
              anticipated increases in enrollment would be too expensive—despite the
              possibility that these costs could be offset by CHIPRA performance bonus
              payments—and decided not to pursue the initiative further at the time.
              Uncertainty about the availability of additional federal funds for future
              outreach and enrollment efforts creates additional challenges for states.
              For example, CHIPRA performance bonuses and CHIPRA outreach
              grants, as extended by PPACA, will no longer be provided after 2013 and
              2015, respectively, and officials from a number of states raised concerns
              that PPACA did not authorize additional funds for outreach or enrollment.


              A key goal of PPACA was to increase Americans’ access to affordable
Conclusions   health insurance. PPACA expanded eligibility for existing federal health
              programs and private health insurance, offered a new premium tax credit
              to offset the cost of private health insurance for some low- to moderate-
              income families whose incomes are too high to qualify for Medicaid or
              CHIP, and provided means for streamlining enrollment. Although our
              estimates are based on 2009 data, they illustrate the potential impact of
              PPACA, when fully implemented in 2014, on children’s access to
              affordable health insurance, and highlight the importance of many of the
              policies introduced in CHIPRA and continued in PPACA. For example,
              our estimates suggest that about 68 percent of children who were
              uninsured in 2009 would be eligible for Medicaid or CHIP under PPACA,
              underscoring the continued importance of outreach and simplified
              enrollment policies to ensure that eligible children are enrolled in the
              appropriate program. Similarly, significantly higher estimates of changes
              in eligibility within a year among children in states without continuous
              eligibility policies compared to states with such policies underscore the
              importance of a continued emphasis on such policies to minimize
              changes in eligibility.

              In addition, a small but significant number of uninsured children from low-
              to moderate-income families whose incomes are too high to qualify for
              Medicaid or CHIP would be ineligible for the premium tax credit under
              IRS’s proposed definition of access to affordable employer-sponsored
              insurance, which is based on the cost of a self-only plan available to the


              Page 26                             GAO-12-648 Children’s Access to Health Insurance
                     employee. Yet the cost of insuring other eligible family members could be
                     higher and potentially unaffordable for some families. One implication of
                     this proposal is that some families in which one member has an offer of
                     self-only, employer-sponsored health insurance could be less likely to
                     obtain family insurance than if no employer insurance were offered,
                     because of their ineligibility for the premium tax credit. We recognize that
                     in finalizing the affordability standard for an employee’s eligible family
                     members, IRS must weigh many complex factors, such as costs to the
                     federal government and effects on employers and families, some of which
                     are difficult to predict, as well as the scope of its authority. However,
                     under the proposed standard, an offer of affordable employer-sponsored
                     health insurance to one family member could impede other family
                     members’ access to affordable insurance—an outcome which would not
                     further the broader goals of PPACA.


                     In the Department of the Treasury’s future rule making, we recommend
Recommendation for   that the Secretary of the Treasury, in consultation with the Commissioner
Executive Action     of Internal Revenue, consider the impact of the proposed standard for
                     determining affordability of employer-sponsored insurance on children
                     and other family members who are eligible to enroll, and whether it would
                     be consistent with the goals of PPACA to adopt an alternative approach
                     that would consider the cost of insuring eligible family members, or as
                     necessary, seek clarification from Congress regarding its intent with
                     respect to this standard.


                     We provided a draft of this report for comment to HHS and the
Agency Comments      Department of the Treasury. Neither HHS nor the Department of the
                     Treasury provided general comments on the report or its
                     recommendation. Department of the Treasury officials provided technical
                     comments, which we incorporated as appropriate.


                     As agreed with your offices, unless you publicly announce the contents of
                     this report earlier, we plan no further distribution until 30 days from the
                     report date. At that time, we will send copies to relevant congressional
                     committees, the Secretary of Health and Human Services, the Secretary
                     of the Treasury, and other interested parties. In addition, the report will be
                     available at no charge on the GAO website at http://www.gao.gov.




                     Page 27                            GAO-12-648 Children’s Access to Health Insurance
If you or your staff have any questions about this report, please contact
me at (202) 512-7114 or iritanik@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made key contributions to this report
are listed in appendix III.




Katherine M. Iritani
Director, Health Care




Page 28                          GAO-12-648 Children’s Access to Health Insurance
Appendix I: Scope and Methodology of the
              Appendix I: Scope and Methodology of the
              Survey of Income and Program Participation
              Analysis


Survey of Income and Program Participation
Analysis
              Our first two objectives were to assess the extent to which uninsured
              children would be eligible for Medicaid, the State Children’s Health
              Insurance Program (CHIP), or the premium tax credit available under the
              Patient Protection and Affordable Care Act (PPACA) and the extent to
              which they would experience a change in eligibility among these forms of
              assistance because of changes in household income during a year. We
              identified the Survey of Income and Program Participation (SIPP), a
              nationally representative, longitudinal survey conducted by the U.S.
              Census Bureau, as a useful data set for our purposes because it provides
              detailed monthly information over a multiyear period about specific types
              of income, family relationships, and health insurance status of individuals
              and households representing the civilian, noninstitutionalized population
              of the United States. We analyzed data from the most recently available
              SIPP, which began in 2008, and surveyed the occupants of approximately
              42,000 households.

              Our analysis of SIPP data is subject to limitations. The analysis uses
              2009 data to illustrate the extent to which uninsured children would be
              eligible for Medicaid, CHIP, or the premium credit program had proposed
              and final 2014 PPACA eligibility rules been in effect at that time. To the
              extent that patterns in household income, insurance status, or other
              eligibility criteria differ in 2014, eligibility in 2014 will also differ. In
              addition, the estimates are based on a sample of the population and may
              differ from estimates that would be obtained if the full population had
              been surveyed using the same methods, and the estimates are based on
              self-reported information that may contain errors because of factors such
              as differing interpretation of survey questions, inability or unwillingness of
              survey participants to provide correct information, or data processing
              errors. The Census Bureau reported that quality control and edit
              procedures were used to reduce such errors. 1 Studies of SIPP income
              data have shown that the SIPP captures less income compared to other




              1
               For example, survey participants are encouraged to use financial records to aid their
              responses. In addition, to improve the accuracy of responses on monthly earnings,
              interviewers remind survey participants that certain months of the year contain 5 paydays
              for workers paid on a weekly basis, and 3 paydays for workers paid on a biweekly basis.




              Page 29                                  GAO-12-648 Children’s Access to Health Insurance
                     Appendix I: Scope and Methodology of the
                     Survey of Income and Program Participation
                     Analysis




                     surveys, particularly for higher-income survey participants. 2 While our
                     analysis focuses on lower-income survey participants, to the extent that
                     the SIPP data underrepresent income in this population as well, our
                     estimates would indicate that more children meet income requirements
                     for Medicaid or CHIP versus the premium tax credit, and for the premium
                     tax credit versus being ineligible for any type of assistance, than other
                     surveys might suggest. Our analysis variables approximate but do not
                     always fully capture key PPACA eligibility criteria, such as household
                     income or citizenship status, as described further below. To determine the
                     reliability of SIPP data, we reviewed related documentation and
                     conducted electronic testing for missing data, outliers, and apparent
                     errors. For example, we tested whether persons who reported being
                     uninsured in January 2009 had reported having health insurance in the
                     prior and following month. We also compared our results to estimates
                     based on data from another Census Bureau survey, the American
                     Community Survey, and to other studies that addressed related research
                     questions. We determined that the SIPP data were sufficiently reliable for
                     the purposes of our engagement.


                     A child’s eligibility for Medicaid, CHIP, or the premium tax credit under
Analysis Variables   PPACA is based in part on having household income below specified
                     limits relative to the federal poverty level (FPL). The Centers for Medicare
                     & Medicaid Services (CMS) and the Internal Revenue Service (IRS) have
                     specified methods for determining a child’s household income under
                     PPACA in final and proposed eligibility rules, and differences exist in how
                     household income is determined for Medicaid and CHIP versus the
                     premium tax credit. A child’s eligibility for these programs is also based
                     on citizenship or legal residence, and, for the premium tax credit, on
                     whether the child is considered to have access to other affordable
                     insurance. From the available SIPP data, we developed variables for our
                     analysis based on these eligibility rules.




                     2
                      For example, one study estimated that, overall, SIPP captured 89.1 percent of calendar
                     year 2002 income compared to the Census Bureau and the Bureau of Labor Statistics’
                     Current Population Survey. However, for persons in the lowest three income quintiles,
                     SIPP captured 105.6 percent, 97.0 percent, and 92.5 percent of income, respectively. See
                     John L. Czajka and Gabrielle Denmead, “Income Data for Policy Analysis: A Comparative
                     Assessment of 8 Surveys, Final Report” (Washington, D.C.: Mathematica Policy
                     Research, Inc, Dec. 23, 2008) 131.




                     Page 30                                 GAO-12-648 Children’s Access to Health Insurance
Appendix I: Scope and Methodology of the
Survey of Income and Program Participation
Analysis




Household composition. We created two household composition
variables for children on the basis of final CMS and proposed IRS rules
for determining household composition for the premium tax credit and for
Medicaid or CHIP. The premium tax credit household composition
variable defined households as composed of a taxpayer and spouse, if
applicable, and tax dependents. Tax dependents were defined as follows:

•   Children under age 19 (or ages 19 through 23 who were full-time
    students) whose taxable income (together with a spouse’s income, if
    applicable) was not more than half of household income.

•   Other family members, who (together with a spouse, if applicable),
    earned less than the IRS threshold and whose total income was not
    more than half of household income.

Taxpayers were those who did not meet the above definition of a tax
dependent. This definition of a tax dependent excluded those with
significant income, but did not capture tax rules about the amount of
financial support a taxpayer must provide for children or other dependents
in order to claim them as tax dependents.

For example, most children under age 19 were defined as tax
dependents. Households of tax-dependent children included the child, the
child’s taxpayer parents or guardians, and any other tax dependents of
the taxpayers, such as the child’s siblings. When children lived with two
unmarried parents, the parent with the higher income was designated as
the taxpayer parent. This household composition variable did not account
for children who may be claimed as tax dependents by a noncustodial
parent or for spouses who choose to file taxes separately.

The Medicaid household composition variable was the same as the
premium tax credit household composition variable, with certain
exceptions. When a tax-dependent child did not live with a taxpayer
parent or lived with two parents who were not married to one another, or
had household income below tax filing thresholds, the child’s household
for purposes of determining Medicaid and CHIP eligibility was composed
of the child, the child’s parents, siblings under age 19 (or ages 19 and 20
who were full-time students), and any children of the child. In addition,
pregnant women were counted as two household members when
determining Medicaid and CHIP eligibility. Pregnancy status is not directly
available from the SIPP data; we estimated that women were pregnant in
a given month if they had a new infant during one of the following
8 months.


Page 31                                 GAO-12-648 Children’s Access to Health Insurance
Appendix I: Scope and Methodology of the
Survey of Income and Program Participation
Analysis




Household income. We constructed four household income variables for
children based on rules for counting income for Medicaid and CHIP and
for the premium tax credit under PPACA. Tax dependent’s income was
not included in any household income variable if it was less than the
amount that would necessitate filing a tax return.

•   To approximate modified adjusted gross income (MAGI) household
    income under PPACA, a child’s premium tax credit household income
    was defined as the sum of all income, less means-tested assistance
    income; child support or foster care payments; veterans and workers
    compensation or sickness or accident insurance payments; or gifts
    from relatives or friends—self-reported by individuals included in the
    premium tax credit household composition variable defined above,
    during calendar year 2009. 3

•   A child’s baseline Medicaid household income was the sum of the
    same income types in the Medicaid household composition variable
    defined above, during specific months of 2009. 4

•   A child’s adjusted Medicaid household income was equal to the
    baseline Medicaid household income variable, less income
    deductions applied in specific states in their Medicaid eligibility
    determination processes, including deductions of certain amounts of
    earned income and child care expenses.

•   A child’s adjusted CHIP household income was equal to the baseline
    Medicaid household income variable, less income deductions applied
    in specific states in their CHIP eligibility determination processes,
    including deductions of certain amounts of earned income and child
    care expenses.




3
 Our analysis was limited to children participating in SIPP throughout 2009. However,
children who participated throughout 2009 could have had family members who left the
survey or the child’s household during the year. For family members with fewer than
12 months of 2009 income data, we divided the total income by the number of months of
income data, and then multiplied the result by 12 to estimate full 2009 income. We did this
in order to approximate how calendar year household income would have been projected
for 2009, given a child’s household composition as of January 2009.
4
 Our Medicaid household income variables did not capture the special treatment of lump
sum or scholarship income for Medicaid eligibility determinations.




Page 32                                  GAO-12-648 Children’s Access to Health Insurance
Appendix I: Scope and Methodology of the
Survey of Income and Program Participation
Analysis




FPL. We constructed four percentages of FPL variables based on the
four household income variables and two household composition
variables defined above.

•   A child’s baseline Medicaid percentage of FPL was the Medicaid
    household income variable divided by the 2009 poverty threshold
    applicable to the child’s state and family size contained in the
    Medicaid household composition variable.

•   A child’s adjusted Medicaid percentage of FPL was the adjusted
    Medicaid household income variable divided by the 2009 poverty
    threshold applicable to the child’s state and family size contained in
    the Medicaid household composition variable.

•   A child’s adjusted CHIP percentage of FPL was the adjusted CHIP
    household income variable divided by the 2009 poverty threshold
    applicable to the child’s state and family size contained in the
    Medicaid household composition variable.

•   A child’s premium tax credit percentage of FPL was the premium tax
    credit household income variable divided by the 2009 poverty
    threshold applicable to the child’s state and household size contained
    in the premium tax credit household composition variable.

Insurance status. Employer-sponsored insurance was defined as
insurance obtained through an individual’s or a family member’s
employer, former employer, union, or the military. Individuals were not
categorized as having employer-sponsored insurance if they also had
Medicaid or CHIP coverage. We used a procedure that the Census
Bureau has adopted for the American Community Survey to address
under-reporting of Medicaid coverage. Specifically, respondents were
recategorized as having Medicaid if they were one of the following:

•   a child under age 19 and the unmarried child of a parent with public
    assistance or Medicaid,

•   a citizen parent with public assistance,

•   a citizen parent married to a citizen with public assistance or
    Medicaid,

•   a foster child, or




Page 33                                 GAO-12-648 Children’s Access to Health Insurance
              Appendix I: Scope and Methodology of the
              Survey of Income and Program Participation
              Analysis




              •   a Supplemental Security Income 5 recipient who met one of the
                  following conditions: (1) did not have children or (2) had children but
                  was not working.

              Individuals were defined as uninsured if they were not categorized as
              having employer-sponsored or other private insurance, Medicaid, CHIP,
              or other public insurance.

              Access to affordable employer-sponsored insurance. Children who
              had a taxpayer parent as part of their household composition who had
              employer-sponsored insurance, and children who were taxpayers and
              had employer-sponsored insurance, were defined as having met the
              proposed standard for access to affordable employer-sponsored
              insurance if the average annual employee contribution for a self-only
              plan, $921, was less than or equal to 9.5 percent of premium tax credit
              household income. This definition of access to affordable employer-
              sponsored insurance did not take into account the requirement that
              employer-sponsored insurance must provide a minimum value in order to
              be considered affordable, and it assumed that children were eligible to
              enroll in a parent’s employer-sponsored insurance.

              Citizenship or legal residence. Citizenship status is available in SIPP
              data, but the legal status of noncitizens is not directly available from SIPP
              data. 6 We defined noncitizens as legally residing if they or a parent
              reported receiving public insurance, such as Medicaid, or other public
              assistance, which requires documentation of citizenship or legal
              residence. The remaining noncitizens were defined as potentially
              ineligible noncitizens.


              Based on the variables defined above, we categorized children as eligible
Methodology   or ineligible for Medicaid, CHIP, and the premium tax credit under
              proposed and final 2014 PPACA eligibility rules.




              5
               The Social Security Administration’s Supplemental Security Income program provides
              cash benefits to eligible low-income disabled individuals, including children, as well as
              certain others.
              6
               SIPP data include information on whether certain non-citizens ages 15 and over were
              permanent U.S. residents; we did not incorporate this information into our analysis.




              Page 34                                   GAO-12-648 Children’s Access to Health Insurance
Appendix I: Scope and Methodology of the
Survey of Income and Program Participation
Analysis




•   We defined children as eligible for Medicaid under PPACA if they
    were citizens or legally residing noncitizens whose baseline Medicaid
    percentage of FPL was less than or equal to 138 percent, or who had
    an adjusted Medicaid percentage of FPL that was less than or equal
    to the 2012 state-specific income eligibility level for their age group. 7
    Foster children and Supplemental Security Income recipients were
    also defined as Medicaid eligible.

•   We defined children as eligible for CHIP under PPACA if they were
    citizens or legally residing noncitizens not estimated to be eligible for
    Medicaid, with an adjusted CHIP percentage of FPL that was less
    than or equal to the applicable 2012 CHIP state-specific income
    eligibility level. CHIP included both CHIP-funded Medicaid expansion
    programs and separate CHIP programs. Children with employer-
    sponsored or other private insurance were defined as ineligible for
    separate CHIP programs.

•   We defined children as eligible for the premium tax credit under
    PPACA if they were citizens or legally residing non-citizens not
    estimated to be eligible for Medicaid or CHIP, with premium tax credit
    percentage of FPL between 100 and 400 percent and without access
    to affordable employer-sponsored insurance.

Our analyses considered three groups of children: uninsured children
ages 0 through 18, CHIP-eligible children ages 0 through 18 who were
uninsured or publicly insured, and all children ages 0 through 18 eligible
for Medicaid, CHIP, or the premium tax credit. We limited our analysis to
children who participated in the SIPP for all of calendar year 2009.

•   Among uninsured children, we used January 2009 SIPP data to
    estimate the percentage who would be eligible for Medicaid, CHIP,
    and the premium tax credit based on the above definitions of 2014
    PPACA eligibility rules, as well as the percentage who would be
    ineligible.


7
  PPACA required states to maintain their existing Medicaid and CHIP income eligibility
levels until fiscal year 2020. Prior to determining a child’s household income level, many
states currently disregard certain amounts of specific types of income. In its Medicaid rule,
CMS specified that states will need to convert their existing effective income eligibility
levels to a MAGI-equivalent level that adjusts for any existing practices of disregarding
specific types of income. The methodology for doing this conversion has not been
finalized. To approximate this standard, we created adjusted household income variables
that incorporated applicable state income deductions into children’s household income.




Page 35                                   GAO-12-648 Children’s Access to Health Insurance
Appendix I: Scope and Methodology of the
Survey of Income and Program Participation
Analysis




•   Among uninsured or publicly insured children estimated to be eligible
    for CHIP, we used January 2009 SIPP data to estimate the
    percentage who would be eligible for the premium tax credit based on
    the above definitions of 2014 PPACA eligibility rules, as well as the
    percentage who would be ineligible, if CHIP were not available.

•   Among all children estimated to be eligible for Medicaid, CHIP, or the
    premium tax credit in January 2009, we used calendar year 2009
    SIPP data to estimate the percentage who would have experienced
    one or two changes in eligibility for specific types of assistance,
    including becoming ineligible for any type of assistance, under 2014
    PPACA eligibility rules within 6 months and a year. We incorporated
    state-specific continuous eligibility policies; for children living in states
    that according to CMS had a continuous eligibility policy in place as of
    2012, we did not count them as changing eligibility for the relevant
    program even if their income eligibility changed.

•   Among all children estimated to be eligible for Medicaid, CHIP, or the
    premium tax credit in January 2009, we used calendar year SIPP data
    to estimate the percentage who would be eligible for Medicaid and
    CHIP under 2014 PPACA eligibility rules with a Medicaid percentage
    of FPL higher than 138 percent in January 2009 and during 2009 as a
    whole, in order to examine the percentage of children who could be
    eligible for different program than their parents.

For all estimated percentages, we used the SIPP 2009 calendar
year sampling weight and calculated a lower and upper bound at the
95 percent confidence level using replicate weights that took into account
the complex survey design.




Page 36                                 GAO-12-648 Children’s Access to Health Insurance
Appendix II: Federal Initiatives and Funding
               Appendix II: Federal Initiatives and Funding
               Available to States to Facilitate Enrollment of
               Eligible Children and Implement PPACA


Available to States to Facilitate Enrollment of
Eligible Children and Implement PPACA
               The Children’s Health Insurance Program Reauthorization Act of 2009
               (CHIPRA) and PPACA included a number of initiatives and provisions
               under which states may obtain federal funding to assist in enrolling
               eligible children, and most states have taken advantage of at least one of
               these. For example, CHIPRA provided incentives to states to undertake
               eight enrollment initiatives. Beginning in fiscal year 2009, CMS awarded
               performance bonuses to states that implemented at least five of the eight
               enrollment initiatives and also achieved specific enrollment goals. 1 (See
               fig. 3.) PPACA authorized the provision of planning grants and
               establishment grants to assist states with the implementation of the
               American Health Benefit Exchanges (referred to as exchanges)—
               marketplaces where eligible families and individuals can purchase private
               health insurance. 2 Recognizing that states will need to upgrade their
               Medicaid information technology systems to comply with PPACA, CMS
               has provided states with the opportunity to claim an enhanced Federal
               Medical Assistance Percentage (FMAP)—the federal share of Medicaid
               expenditures—through fiscal year 2015 for the costs associated with
               certain systems improvements, such as updates to their claims
               processing and enrollment systems. Specifically, instead of the
               50 percent FMAP that has historically been available for most Medicaid
               administrative expenses, qualified states can obtain a 90 percent FMAP
               for the costs of implementing new information systems and a 75 percent
               FMAP for the costs of administering these new systems. 3




               1
                The specific enrollment goal a state needed to meet was based, generally, on the state’s
               current Medicaid enrollment and population growth.
               2
                States were able to apply for an exchange planning grant of up to $1 million, and most
               states applied for, and were awarded, the full amount. Louisiana returned the exchange
               planning grant money it had received. Alaska did not apply for an exchange planning
               grant. There are two levels of exchange establishment grants. Level one grants are
               awarded to states in the earlier stages of exchange development. States receiving a level
               one grant can apply for a second year of funding, if necessary. To be eligible for a level
               two grant, states must meet a series of specific criteria, including legal authority to
               establish and operate an exchange, a budget and plan for financial stability by 2015, and
               a plan to prevent fraud, waste, and abuse. As of March 2012, Rhode Island was the only
               state that had received a level two grant.
               3
                To be eligible for the enhanced FMAP, states must submit explicit plans for upgrading
               their information systems to CMS for approval. As of April 27, 2012, CMS had approved
               plans from 36 states, and an additional 8 states had submitted plans for approval.




               Page 37                                     GAO-12-648 Children’s Access to Health Insurance
                                          Appendix II: Federal Initiatives and Funding
                                          Available to States to Facilitate Enrollment of
                                          Eligible Children and Implement PPACA




Figure 3: Summary of States’ Implementation of Initiatives and Receipt of Federal Funding to Facilitate Enrollment of Children
and Implement PPACA




                                          Page 38                                     GAO-12-648 Children’s Access to Health Insurance
Appendix II: Federal Initiatives and Funding
Available to States to Facilitate Enrollment of
Eligible Children and Implement PPACA




Note: In this figure, ● stands for “yes.”
a
    This information covers initiatives as of January 1, 2012.
b
    This information covers grants as of February 22, 2012.
c
 As of April 27, 2012. CMS has provided states with the opportunity to claim an enhanced FMAP for
the costs associated with certain systems improvements, such as updates to their claims processing
and enrollment systems.
d
 States were able to apply for to up to $1 million in funding and most states received close to
$1 million, while Wyoming received $800,000. Alaska did not apply for an exchange planning grant.
e
    Louisiana returned the exchange planning grant money that it had received.
f
Rhode Island has received both a level one grant, for $5,240,668, and a level two grant, for
$58,515,871.
g
    South Carolina uses express lane eligibility for Medicaid and CHIP renewal.
h
    Numbers may not sum to totals because of rounding.




Page 39                                           GAO-12-648 Children’s Access to Health Insurance
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Katherine M. Iritani, (202) 512-7114 or iritanik@gao.gov
GAO Contact
                  In addition to the contact named above, Susan T. Anthony, Assistant
Staff             Director; Susan Barnidge; Emily Beller; Sandra George; Eagan Kemp;
Acknowledgments   and Roseanne Price made key contributions to this report.




(290937)
                  Page 40                               GAO-12-648 Children’s Access to Health Insurance
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