State health coverage plan falls flat

OLYMPIA –Washington’s Health Insurance Partnership to help small businesses and low-wage workers pay for medical coverage was first conceived some four years ago, and got a big boost last September when the federal government announced it would send the state a $30 million, three-year federal grant.

As many as 650 people could have insurance through the program by 2011, and that could grow to 1,100 enrollees in the coming years, Gov. Chris Gregoire predicted Sept. 1 in announcing the grant from the U.S. Department of Health and Human Services.

It was “a new approach that will give affordable access to health care for thousands of families and save small businesses money at the same time,” she said.

Small businesses could be subsidized for up to 35 percent of a worker’s premium; depending on family income levels, the worker’s share of the premium could be subsidized for as much as 90 percent.

But HIP, as it is called in the world of government and medical acronyms, fell far short of that lofty target. Congress pulled back the grant this April in a round of budget cuts. Between the time the first workers were enrolled in January and the program was closed to new enrollees in May, only 16 small businesses signed up.

In all, 66 people, a combination of workers at those businesses and their dependents, got insurance coverage. That coverage will end a year after a worker signed up.

Most of the federal grant was canceled before it made its way to Washington state. All told, HIP will have spent about $1 million in state and federal money – first setting up the program, marketing it, hiring a third-party administrator and, eventually, subsidizing premiums – when the last enrollees are dropped next May

That’s about $15,000 per person covered.

Beth Walter, program director of HIP, said the quick demise is disappointing. “I think the program had a lot of potential.”

But some who criticized the program from the time the Legislature first considered it say they aren’t surprised it failed. “The process took too long, it was too cumbersome,” said Patrick Connor of the National Federation of Independent Business office in Washington state. “It’s an abysmal failure.”

Walter disagrees. The state learned many things it can use to set up health care exchanges required in 2014 by federal health care reform. “Our experience in building HIP will definitely serve Washington well.”

HIP was first conceived by the Legislature in 2007 as a replacement for the Small Employers Health Insurance Partnership, or SE-HIP, which the Legislature had created the year before. Both were designed to expand coverage in small businesses that have trouble getting affordable health insurance for their workers. SE-HIP offered vouchers to help workers pay for the insurance they had; HIP offered subsidies to both the employer and the employee for new coverage.

The Legislature expected federal help to pay for HIP subsidies. In 2009, it passed new legislation, saying it could start offering subsidies on Jan. 1, 2011, “subject to sufficient funding.” In other words, said Walter, “no federal money, no HIP.”

The agency used money from a set-up grant to look for insurance carriers that would offer health insurance in regions around the state, and lined up four. It sought and obtained approval of the plans from the Insurance Commissioner’s Office. It developed a website and public information. It held training sessions with insurance agents and brokers.

Last September, the federal government announced it would give the state up to $10 million a year for three years to subsidize enrollees. It was part of doing “everything we can to help our small businesses and their employees,” Gregoire said in announcing the grant.

But while state officials projected they’d attract 650 enrollees the first year, there was really no way to tell. “One of our biggest questions was, if we build it, will they come?” Walter said.

Not many did. One reason may have been the enrollment process for employers, which Walter described as confusing, but not difficult. An employer would have to contact a broker, choose a health plan, get a quote, fill out an application, send it to a carrier and enroll in the program. The average turnaround time was about two months.

Another reason: Insurance agents and brokers had little incentive to handle HIP plans because they received little or no commission.

HIP was beginning to attract more employers in the spring, when Congress cut the funding for the State Health Access Program, the source of the grants. In May, the program announced it would accept no more new enrollees; existing enrollees would be dropped after a year’s coverage.

Roger Stark of the Washington Policy Center, a conservative think tank, contends the problems with HIP demonstrate the pitfalls of the federal government getting involved in health care programs. The state couldn’t afford to subsidize health care premiums by itself, but once the program hinged on federal funding, “you’re kind of at the mercy of the federal government.”

Stark argues that the state and federal government have “no business” offering subsidies. Instead they should do everything possible to increase competition in the insurance market, reduce the number of benefits that are required for health insurance plans in Washington and allow employers to buy plans available in other states.

NFIB’s Connor said the state should also consider returning to something like SE-HIP, giving vouchers to low-income workers to help cover premiums for health insurance that might be offered by their employer, their spouse’s employer or even a private plan. That, he said, addresses two big problems with health insurance: affordability and portability.

Although Gregoire and other state officials predicted big things for HIP last fall when the federal grant was announced, she issued no statement when the grant was cut. Last week her office said the governor considers the shutdown of HIP “unfortunate but a good example of how federal cuts impact real people.” It also underscores the need to push ahead with the federal Health Care Act, she said through a spokesman.

Part of that law’s new requirements, which will help businesses find affordable coverage, is a health insurance exchange. The Legislature approved and she signed a bill to set up an exchange this spring.