New Mexico (The New Mexico State Coverage Insurance)

Background – The New Mexico State Coverage Insurance (NMSCI) began enrolling small employers (less than 50 employees) and individuals on July 1, 2005. The program provides access to a statewide managed care system primarily targeted to employers and low-wage employees, although low-income uninsured individuals are also allowed to participate in the program. Individuals must have family incomes below 200 percent of the Federal poverty level (FPL) to participate in the program. As of December 2006, there were 4,623 individuals enrolled in the program.

NMSCI is a Medicaid and SCHIP (State Children’s Health Insurance Program) expansion program. The Federal funds are composed of New Mexico’s unspent SCHIP funds. In addition to the Federal SCHIP funding and the required State match, it is also financed with employer and employee contributions. This blended funding is used to offer managed care coverage provided by private plans selected through a competitive bidding process. New Mexico decided not to use an Employer Sponsored Insurance (ESI) model because the State has a low rate of ESI coverage among small businesses. Benefits are similar to a comprehensive commercial plan, but with a $100,000 annual benefit limit.

Program History – In 2001, the New Mexico Human Services Department (HSD) applied for planning and implementation funding through the Robert Wood Johnson State Coverage Initiatives program. The funding was received in April (for planning) and October (for implementation) of 2001. This funding allowed New Mexico to develop options for targeting the uninsured.

In August 2002, New Mexico received Federal approval under a Health Insurance Flexibility and Accountability (HIFA) waiver to implement a Medicaid expansion—NMSCI—to provide managed care coverage for uninsured adults with incomes up to 200 percent of the FPL. The adults are divided into two groups: 1) parents of children with SCHIP or Medicaid coverage and 2) childless adults.

In September 2003, New Mexico received a State planning grant (SPG) from the Health Resources and Services Administration (HRSA). This grant allowed the State to conduct surveys of households, employers, non-profit agencies, and State employees. These surveys provided critical data to the Insure New Mexico! Council, which was created by Governor Bill Richardson in October of 2004. The Council utilized data provided through the SPG to develop a number of initiatives aimed at reducing the number of uninsured people in New Mexico. One of the recommendations of the Council was for the State to fund the NMSCI program.

NMSCI received funding from the legislature during the 2005 legislative session and was implemented July 1, 2005. NMSCI combines unspent Federal SCHIP funding, State matching funds, and employee and employer contributions, to offer managed care coverage for low-income uninsured State residents. Care is provided by three managed care organizations (MCOs) selected through a competitive bidding process and by the University of New Mexico Health Sciences Center (UNM). The first phase of the demonstration will last until July 1, 2010.

Eligibility Requirements for Employers – In order to participate in NMSCI, employers must have fewer that 50 employees. In addition, they must not have voluntarily dropped commercial health insurance in the past twelve months. The MCOs that contract with HSD to provide health care services under NMSCI directly market and enroll small employers in the program. Employers may initiate the process via a website.

MCOs are allowed to use enrollment brokers to market and help enroll businesses, but MCOs are not allowed to pay the brokers with State or Federal funding. This funding restriction has a negative effect on the marketing of the program. HSD also provides outreach and marketing to small employers, as well as to individuals not attached to employers.

Eligibility Requirements for Employees – Although NMSCI targets uninsured working adults between the ages of 19 and 65 with family incomes below 200 percent of the FPL, there is no program requirement for individuals to be employed. In addition, individuals below 200 percent of the FPL can enroll in the program even if their employer is unwilling to participate. In this scenario, the individual would pay the employer portion of the premium as well as the employee portion. In addition, employees who have been unable to take up their employer-sponsored health plan because of cost can be covered by the employer through NMSCI if they meet eligibility and crowd-out requirements.

The program prohibits eligibility if an individual has voluntarily dropped insurance coverage within the last six months. In addition, NMSCI is not available to individuals with other insurance coverage, including Medicaid, Medicare, private health insurance, and other public or private insurance programs. All NMSCI applicants are screened for Medicaid coverage before being allowed in the program.

State staff determine eligibility for all programs administered by HSD, including NMSCI and Medicaid. New Mexico has developed a single NMSCI eligibility office with staff dedicated to processing NMSCI applications. The smaller size staff allows for more rapid communication concerning changes in policies and procedures between program administrators, front-line eligibility staff, and contracted MCOs. The application process is streamlined to accommodate working populations. For example, eligibility requirements do not include a resource test. Also, NMSCI income definitions and disregards are based on the State’s Section 1931 Medicaid income definitions and disregards so that there is continuity between the programs.

Individuals found eligible for NMSCI are assigned to an NMSCI eligibility category based on income grouping/tiers as determined at the time of application. Premium and co-payment amounts vary based on the individual’s income tier. Benefits begin only after eligibility has been established, the individual has enrolled in a health plan, and the individual has paid his or her premium to the selected health plan.

As of December 1, 2006:

• 4,263 people were enrolled in NMSCI
• 3,297 people (77 percent) were below 100 percent of the FPL, 675 (16 percent) were between 100 and 150 percent, and 291 (7 percent) were between 150 and 200 percent
• 2,434 people (57 percent) were not parents and 1,829 (43 percent) were parents
• 292 people (7 percent) had employers that paid a premium
• 3,961 (93 percent) were individually enrolled

Program Funding – The program is funded with unspent Federal SCHIP funding and State matching funds. In addition, employers pay $75 per employee per month (this is not used as the SCHIP State match). Cost sharing for individuals is on a sliding fee scale, with the premium and co-payment amounts corresponding to three income groups. Individuals with incomes under 100 percent of the FPL pay no monthly premiums; individuals between 101 and 150 percent of the FPL pay a $20 monthly premium; and individuals between 151 and 200 percent of the FPL pay a $35 premium. Self-employed individuals or those without employer participation pay the $75 employer premium in addition to the employee premium. Also, the State has allowed University of New Mexico Health Sciences Center (UNM) to pay the employer contribution for individuals enrolled by UNM in NMSCI .

The financing model for NMSCI is different from the ESI model used by most of the other States in this study because New Mexico has a disproportionately large number of small employers and a low rate of employer-sponsored insurance coverage.

In addition to premiums, the program has sliding scale co-payments and a $12 per month limit on prescription co-payments. Beneficiaries are responsible for keeping track of their co-payment expenditures and notifying the MCO if cost sharing exceeds the out-of-pocket maximum of 5 percent of the program participant’s annual income.

Program Design – Program coverage is provided by three private MCOs selected through a competitive bidding process. Two of these plans also provide coverage in the commercial market. One MCO has an arrangement with UNM, the State teaching hospital, to administer care through its health care delivery system. UNM pays the cost of premiums for those members. Employers have a choice in selection between the plans if they are not already participating in one of the commercial plans, as do individuals who are not affiliated with an employer group.

There are no differences in the premium amounts or benefits between the three plans, although MCOs are allowed to provide enhanced benefits. In order for an MCO to participate in NMSCI, it must submit a proposal to participate in the Medicaid managed care program, SALUD! Both programs are overseen by HSD and staff enter eligibility information for both programs into the same information technology system.

Delivery of Services – Services are delivered by providers that contract with the three MCOs and by providers within the UNM system. Because they participate in the Medicaid managed care program, the MCOs were already familiar with its administrative requirements, which are similar to NMSCI’s. Because HSD oversees both the Medicaid and SCI programs, program administrators were already familiar with the MCO operations and already had procedures in place for monitoring the adequacy of provider networks.

The program allows MCOs to have contracts with Indian Health Service (IHS) facilities and Native Americans enrolled in SCI may access services at IHS facilities as well as other MCO service providers. Services provided at IHS facilities, by urban Indian providers and by tribal organizations that own or operate health care facilities, are also exempt from co-payment requirements. MCOs are also allowed to determine whether or not to have contracts with FQHCs.

Payment and Reimbursement – Capitation payment rates are negotiated with each individual MCO during the competitive bidding process, as is the case with the Medicaid managed care program. HSD pays the MCOs a “net capitation” amount, which is the total capitation for the rate cell less the employer and the employee premiums collected by the MCO. Please note that under Federal Medicaid rules, these negotiated rates must be actuarially sound and approved as such by an actuary meeting the qualification standards of the American Academy of Actuaries.

The MCOs pay providers directly for services delivered under the program. The providers negotiate payment rates with MCOs before signing contracts to deliver services. MCOs use the same payment schedule for both Medicaid and SCI. The State requires MCOs to pay IHS facilities at the rate established by the Federal Office of Management and Budget. In addition, MCOs can negotiate payment rates with FQHCs or opt not to contract with them.

Plan Benefits – Benefits under NMSCI are fairly comprehensive (although not as comprehensive as the full New Mexico Medicaid benefit package) and include a $100,000 annual benefit limit. The benefit package includes, but is not limited to:

• Physician office visits
• Preventive services
• Inpatient hospital and home health services (25-day combined limit)
• Outpatient services
• Pharmacy services
• Emergency and urgent services
• Women’s health services
• Behavioral health services

Benefits not included are non-emergency transportation, vision, chiropractic, routine dental, hearing aids, skilled nursing services, pulmonary rehabilitation, and hospice. With the exception of the $100,000 limit, the package is similar to commercial packages, only less expensive because the program provides a significant Federal/State subsidy. The program estimates that the Federal/State subsidy is approximately 80 percent of the premium.

The benefit package was designed via extensive interactions with a design workgroup as well as input from focus groups and experience garnered from a managed care indigent program at the University of New Mexico Health Sciences Center.

NMSCI co-payments are smaller than in commercial plans and are different depending on family income. The program has provisions to step in and cover the costs when out-of-pocket cost sharing exceeds 5 percent of a program participant’s annual income. Under the program, participants keep track of their out-of-pocket costs and then bring the evidence to the State for reimbursement. States with such provisions need to build in costs for staff to review and handle such requests. Co-payment details can be found in the following table.

Current SCI Co-Payments

Impact of SPG Program – New Mexico received funding through a Health Resources and Services Administration (HRSA) State planning grant (SPG) in September of 2003. The grant helped the State gain significant new data on its uninsured populations. Funding was used to conduct an extensive household survey, which included information on barriers to health care coverage and the types of coverage needed by the uninsured. It also included a survey of New Mexican employers to determine what percentage did not provide coverage, why coverage was not provided, and what factors might encourage employers to provide health insurance for their employees. There was also a small survey that focused on specific issues relating to non-profit agencies and a survey to determine why some State employees chose not to take up employer sponsored insurance.

The data were used to provide technical assistance to the Insure New Mexico! Council, which was created by Governor Bill Richardson in October 2004. The Council was charged by the Governor to identify initiatives to reduce the number of uninsured New Mexicans. It also aims to increase the number of small employers, including non-profits, offering health insurance to their employees. The HRSA SPG project supplied information that allowed the Council to focus on specific initiatives. As surveys were completed and analyzed, information was presented to the Council, which then recommended initiatives to the Governor. The SPG was a primary factor in aiding reform efforts, which culminated in March 2005 when the Governor signed six Insure New Mexico! initiatives into law, including NMSCI.

Lessons from Administering the Program - The State found it difficult to gain acceptance of an ESI product for workers with family incomes below 100 percent of the FPL. Employers hiring this very low wage population have been hesitant to take on the added financial burden of paying monthly premiums. The program is designed so that if the employer does not agree to pay the premium, then the program participant may choose to pay the employer portion of the premium. Often individuals with family incomes below 100 percent of FPL are unable to pay the employer share. This has made it difficult for program has to meet enrollment projections.

When applying for Federal Medicaid funds, the State had to agree not to allow insurance brokers or agents to receive any Federal or State funds to help with enrolling businesses and low wage workers into the program. This requirement has made it difficult for the State to elicit the support of these critical marketing partners. The Federal government may need to reconsider issues that make it more difficult for States to expand coverage through ESI programs.

Initially, the State attempted to use local eligibility workers to process applications. However, communications with local staff can be slow because of the large number of staff involved and high staff turnover rates in some parts of the State. The program is also very different from the standard Medicaid program; therefore, it became more efficient for the State to set up a central office for processing eligibility applications.

Cost per member under the program was more expensive than expected because of pent-up demand for services. This may in part relate to the fact that the New Mexico Medicaid program does not include a Medically Needy program.

The program includes a $100,000 annual benefit cap. Other States implementing such a feature as part of a Medicaid waiver may want to consider building an inflation index onto such a cap so that they do not make ongoing waiver amendments.

The recent Deficit Reduction Act of 2005 has added further complications to the program because now States with Federal Medicaid waivers will have to verify citizenship for ESI programs. By adding administrative burdens, the Federal government is discouraging the successful implementation of ESI programs.

Evaluation – The program was implemented in July 2005 and therefore has not yet been through a formal evaluation. The two main topics that will be studied in the future include whether:

• Employers/employees will sign up for a State-determined, standardized benefit package
• An affordable, basic benefit package that costs less than the typical commercial product will result in crowd-out of the private insurance market