SOURCE: Concord Monitor

By Margot Sanger-Katz, Monitor staff, Aug 24, 2007

New rules recently handed down to the state from federal regulators could compromise the health insurance coverage of 2,000 New Hampshire children, state officials said.

The rules, detailed in a letter sent to state officials last Friday, change the standards that states must follow in administering the State Children's Health Insurance Program, known in New Hampshire as Healthy Kids. According to Healthy Kids President Tricia Brooks, those requirements will make it more difficult for the state to offer coverage for children whose parents earn more than 250 percent of the federal poverty limit, or $51,625 for a family of four.

"Under the changes, 2,000 children who are currently receiving quality, affordable health care through S-CHIP could be in danger of losing coverage," said Gov. John Lynch, a Democrat, yesterday. Lynch has pledged to enroll more children in the Healthy Kids program and said the rule changes could jeopardize that plan.

The Children's Health Insurance Program was designed by Congress to provide health insurance for low-income children whose parents make too much to qualify for Medicaid but earn too little to purchase private insurance. In the letter, federal regulators said the more stringent measures were designed to ensure that the program was serving its target, low-income population and that families that could afford private insurance weren't choosing government insurance instead, a phenomenon called "crowd out."

The new rules come in the midst of Congressional debate about the future of the federal-state program. The House and Senate have both passed bills to reauthorize the program, which will expire Sept. 30 if it is not renewed. The bills from the two houses differ significantly, but both aimed to expand the number of children eligible to purchase insurance.
Both New Hampshire congressmen, who are Democrats, voted for the House version of the bill. In the Senate, Sen. John Sununu voted for reauthorization while Sen. Judd Gregg voted against it. Both New Hampshire senators, who are Republicans, said they would have preferred a more modest reauthorization.

President Bush has threatened to veto the bill, and federal regulators have said that the program's expansion will discourage families from buying private insurance. In his budget proposal this year, Bush recommended funding the program only for families that earn less than twice the federal poverty limit.

In New Hampshire, families that earn up to three times the poverty limit, or $61,950 for a family of four, can sign their children up, though families at higher income levels must pay monthly premiums to the state. Brooks said the Legislature chose the income limit to account for the higher cost of living in New Hampshire compared with other parts of the country. The federal poverty limit, $20,650 for family of four, is the same across the country. Other states, including New York, California and New Jersey, have sought to cover children at even higher family income levels.

Brooks said that she has seen no evidence of "crowd out" in the state. New Hampshire has a strong employer-based health insurance system, she said, but some employers are dropping dependent coverage as premiums rise.

"I think these children would be uninsured if SCHIP did not exist," she said.

Before enrolling children at higher income levels, the new rules require states to:

• Enroll 95 percent of eligible children below twice the poverty limit before enrolling any children above 250 percent of poverty. Currently, no state has achieved that target.

• Make children wait one year after losing private insurance before enrolling them in the state plan. Currently, New Hampshire children must wait six months, unless there is a clear reason why they've lost coverage, such as a parent losing a job.

• Charge higher-income families premiums, similar to private insurance premiums.

• Check families' insurance status before enrolling children.

• Show that the number of eligible children with private insurance has not declined by more than two percentage points over the last five years.

Brooks said that states had been using some of these standards, but the requirement that they meet them all would be close to impossible. New Hampshire has one of the country's lowest rates of children without insurance, but Brooks said it has not achieved the target 95 percent enrollment for the lowest-income children.

She also anticipated difficulties meeting some of the other requirements.

"It's pretty hard to imagine that any state is going to be able to comply with that," she said.

The letter gives states like New Hampshire, which already provide coverage to higher income children, a year to come into compliance with the rules, "or (the federal government) may pursue corrective action."

"We would not expect any effect on current enrollees from this review strategy," it says.

Unless Congress specifically addresses the issues raised in the rules, they would remain in effect even if reauthorization passed. Brooks and Colin Manning, a spokesman for the governor, said that state officials would likely wait to see how Congress reacts before developing a plan to comply.

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By MARGOT SANGER-KATZ

Monitor staff