As the number of uninsured continues to grow and ESI rates decline, individual States have stepped in to help improve access to insurance. With the help of HRSA State planning grants, several States decided to build on employment-based coverage, generally through publicly funded premium subsidies.

The purpose of this report was to closely examine six State coverage initiatives to identify key design issues confronted by the architects of these programs. By following the initiatives through the implementation phase, we have been able to glean insights into the range of choices and the implications of pursuing different paths.

States embarking on insurance expansion will benefit from the detailed descriptions of the six State programs included in the Case Studies section that follows. Taken as a whole, the cross-State analysis reveals some overall lessons which clarify the trade-offs all States face when they come to grips with the realities of constructing and managing insurance programs targeted at low-income workers. A particular conundrum is finding the right balance between affordable premiums and attractive benefit packages. The size of the public subsidy affects the level of difficulty in striking the right balance. Finally, controlling administrative complexity and resultant costs is a major challenge.

1. Make realistic enrollment goals – Programs targeted at small businesses have a long take-up process in part because States not only have to implement these complex programs, but they and their partners also have to sell them to a skeptical audience. This is both positive and negative. On the positive side, low enrollment means that States do not need as much money to pay subsidies in the early stages of the program. On the negative side, stakeholders and even States often expect the program to grow more quickly and when it does not, political pressure is exerted to make changes to jumpstart enrollment.
   
2. Pay attention to the whole package – Premiums have to be affordable and benefit packages have to be meaningful for small employers to participate in the programs. States need to listen to their small employer community before designing the benefit package and the cost-sharing strategies.
   
3. Carefully consider the employee cost-sharing requirements – Affordability is key as most of the programs studied targeted low-wage workers. Although health insurance is important to this population, this need has to be balanced against such daily needs as housing, food, and transportation. The employer share of the premium and available public subsidies will often make the difference in this population’s ability to participate in the program.
   
4. Making it easy for the employer/employee does not translate into making it easy for the State – A lot of work has to go on behind the scenes for the State-sponsored program to appear like a regular employer-sponsored insurance program. There is recognition that employers and employees are not likely to participate unless the administrative processes are sufficiently simple and clear. States need to carefully plan for expansions and build an infrastructure that allows for a smooth implementation.
   
5. Marketing is critical – States must develop strategic plans and have adequate funding for marketing to employers, employees/ individuals and to health plans/ insurers. Most small employers do not have dedicated human resources staff. Therefore, successful programs need to engage small employers through insurance brokers or agents or by hiring individuals dedicated to this function. States have to carefully consider how they are going to pay insurance agents or brokers if they are going to rely on them for marketing. For programs that depend on attracting and sustaining employee or individual consumer interest, adequate marketing to consumers needs to be in place. For example, having an online application process can help make the paperwork manageable. Finally, most States studied provided services through health plans. In order to attract sufficient health plans, some States developed stop loss reinsurance programs so that health plans would be protected from adverse selection
   
6. Individual means testing is a significant administration burden and barrier to enrolling members quickly in the program – State programs that do not require individual means testing are easier to administer. Three of the six States studied required individual means testing. This requires the application process to involve a review of family income. States try to streamline this process by having mail-in or online applications. In addition, some States do not require verification of income (pay stubs) by the applicant, but instead use other internal methods to verify income such as State workforce agency data or data from other means tested programs, like food stamps. Alternatively, some States do post eligibility audits to verify that submitted information is valid.
   
7. Plan on the program costing more than expected per member due to pent up demand for services – States have estimated the per-person cost of services based on past experience and then found that the per-person costs have out-stripped these estimates. Two factors undoubtedly contribute to problem. First, some people have put off obtaining health services because they did not want to pay out-of-pocket for care when they were uninsured. Second, the initial population applying for services may be sicker than expected because healthier individuals may not want to pay even nominal premiums for health insurance.
   
8. Appreciate the tension between adding benefits and keeping program costs low – Employers, employees, and the general public are often not aware of the true cost of health care services. Therefore, they have unrealistic expectations of what they should be paying for health insurance. They also have strong expectations regarding services that should be included in the benefit package. States have found that they need to be cautious in making changes to benefit packages that result in large increases in premium costs. At the same time, benefits need to be at an acceptable level to attract buyers.
   
9. States without premium subsidies or with small subsidies must be extremely creative in developing affordable benefit packages – HCG is the perfect example of this situation. Arizona began the program with a State subsidy. When Arizona lost the subsidy, it did not abandon the program, but instead developed multiple benefit packages. These packages meet the needs of certain employers and employees and HCG has been able to maintain enrollment levels and even expand coverage to additional employers through this strategy.
   
10. Know your target population – Each of the lessons learned illustrates the importance of knowing the target populations of the State initiatives. Understanding the behavior of small employers can help States set realistic enrollment goals through an understanding of employer take-up behavior. Knowledge of consumer’s insurance needs and their ability to share costs aids in the design of attractive benefit packages, affordable premiums, and meaningful subsidies.