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entitled 'Health Insurance: States' Protections and Programs Benefit 
Some Unemployed Individuals' which was released on November 27, 2002.



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Report to Congressional Requesters:



United States General Accounting Office:



GAO:



October 2002:



States’ Protections and Programs Benefit Some Unemployed Individuals:



GAO Highlights:



Highlights of GAO-03-191, a report to the Ranking Minority Member, 

Senate 

Committee on Finance and Senator Gordon Smith:



HEALTH INSURANCE:



States’ Protections and Programs Benefit Some Unemployed Individuals:



Why GAO did this Study:



In March 2001, the longest economic expansion in United States history 

ended, 

and the country entered a recession, signified in part by a significant 

increase 

in unemployment.  Because rising unemployment can adversely affect 

individuals’ 

health insurance status, GAO was asked to review the policies of six 

states with 

significant recent increases in unemployment to (1) identify 
protections 

in place

that assist unemployed individuals in maintaining or obtaining health 

insurance 

coverage and (2) assess the extent to which unemployed individuals and 

their families 

can rely on Medicaid and the State Children’s Health Insurance Program 

(SCHIP) as a 

source of health insurance.



The six states reviewed had in place a variety of protections, 

established prior to the 

economic downturn, to assist unemployed individuals in maintaining 

health insurance coverage  

State-mandated continuation coverage, which required small businesses 

to extend their group 

health coverage to former employees and their families who choose to 

pay for it. Guaranteed 

conversion, which required insurers to allow eligible individuals to 

convert their group 

coverage to individual health insurance policies.Guaranteed issue, 
which 

required insurers to 

offer coverage to those who did not have access to group coverage or 

public insurance.

High-risk pools, state-created associations that offered comprehensive

health insurance 

benefits to individuals with acute or chronic health conditions. 

However, individuals generally

bore the full cost of the premiums, which was usually higher than 

their premium cost under 

employer-sponsored plans.  For individuals who relied on unemployment 

benefits as their principal 

income, premiums absorbed a significant share of the benefit.



Unemployed workers were less likely than their children to be eligible 

for coverage under state 

Medicaid or SCHIP programs because adult eligibility thresholds were 

less generous than those for 

children.  Coverage of adults was limited in four of the six states, 

as average unemployment 

benefits were at least twice the amount of income allowed for Medicaid 

eligibility.  Colorado, 

Oregon, and Utah have received recent federal approval to expand 

Medicaid and SCHIP coverage for 

certain low-income adults.  While New Jersey had a similar expansion of 

coverage in 2001, it 

suspended new enrollment for adults in June 2002 due to budgetary 

constraints.We incorporated 

technical comments provided by representatives from states’ insurance 

departments, high-risk 

pools, and Medicaid programs, as appropriate. We did not obtain 

comments from the Department 

of Health and Human Services because we did not assess its role 

in these programs.



[See PDF for Image]



[End of Figure]



To view the full report, including the scope

and methodology, click on the link above.

For more information, contact 

Kathryn G. Allen (202) 512-7114



Health Insurance for Unemployed:



GAO-03-191:



Contents:



Letter1:



Results in Brief:



Background:



Various State Protections Offer Assistance, but Unemployed Individuals 

Generally Bear the Full Premium Cost:



Eligibility for Medicaid and SCHIP Programs Is Limited for Unemployed 

Adults Despite Expansions in Some States:



Concluding Observations:



State Comments:



Appendix I: HIPAA Group-to-Individual Portability in Six 

States:



Related GAO Products:



Tables:



Table 1: Insurance Status of Nonelderly Adults, by Employment Level, 

Firm Size, and Industry, 2001:



Table 2: Changes in Unemployment by State, March 2001 to March 2002:



Table 3: Percentage Change in Employment for Selected Industries for 

Six States, March 2001 to March 2002:



Table 4: Unemployment Benefits in Six States, First Quarter 2002:



Table 5: State Protections That Facilitate Access to Health Insurance 

Coverage for the Unemployed in Six Selected States:



Table 6: State Continuation Coverage Requirements and Benefits:



Table 7: Selected Characteristics of the Standard Guaranteed Issue 

Plans Covering Hospital and Medical Services in New Jersey, September 

2002:



Table 8: Selected Characteristics of High-Risk Pools in Three States, 

June 2002:



Table 9: Receipt of Unemployment Benefits Often Made Parents Ineligible 

for Medicaid:



Table 10: Asset Exclusions for Parents under Medicaid in Six States:



Table 11: Medicaid and SCHIP Family Income Eligibility Limits and Asset 

Tests for Children’s Eligibility in Six States, 2002:



Table 12: Eligibility Levels for Childless Adults and Parents Applying 

for Medicaid, 2002:



Table 13: Approaches to Group-to-Individual Portability in Six States:



Figures:



Figure 1: Source of Health Insurance Coverage of Nonelderly Adults and 

Children, 2001:



Figure 2: States’ Shares of Nonelderly Residents Who Are Uninsured 

Compared to U.S. Average, March 2002:



Abbreviations:



COBRA Consolidated Omnibus Budget Reconciliation Act of 1985:



CPS Current Population Survey:



HHSDepartment of Health and Human Services:



HIPAA Health Insurance Portability and Accountability Act of 1996:



HMO health maintenance organization:



MEPS Medical Expenditures Panel Survey:



PPO preferred provider organization:



SCHIP State Children’s Health Insurance Program:



United States General Accounting Office:



Washington, DC 20548:



October 25, 2002:



The Honorable Charles E. Grassley

Ranking Minority Member

Committee on Finance

United States Senate:



The Honorable Gordon Smith

United States Senate:



In March 2001, the longest economic expansion in United States history 

ended, and the country entered a recession, as indicated by a 

significant decline in overall business activity, including employment, 

over several months.[Footnote 1] From March 2001 to March 2002, the 

national unemployment rate increased from 4.3 percent to 5.7 percent--

or from 6.1 to 8.1 million unemployed individuals--the highest 

unemployment rate in more than 6 years.[Footnote 2] Since about two-

thirds of nonelderly Americans obtain their health insurance coverage 

through an employer, individuals who become unemployed face not only a 

loss of income, but also potentially the loss of employer-subsidized 

health insurance. Although the number of people without health 

insurance increases as the unemployment rate increases, the rates of 

increase are not the same because a sizable number of workers (25 

percent) do not have health insurance through their employers. Workers 

less likely to receive insurance include those who work in industries 

where employment is cyclical in nature, such as agriculture or 

construction; when they lose their jobs, their health insurance status 

is unaffected.



Federal laws provide some protections to help newly unemployed 

individuals maintain health insurance coverage by allowing them to 

purchase coverage under their former employer’s group health plan or to 

obtain coverage through the individual insurance market. Because states 

regulate many aspects of health insurance, they may also require 

additional protections for unemployed workers. Two federal-state health 

financing programs for certain low-income individuals--Medicaid and the 

State Children’s Health Insurance Program (SCHIP)--may also be a source 

of health insurance coverage for unemployed individuals or their 

families.



In light of the recent rise in unemployment and its relationship to 

health insurance coverage, you asked us to review selected states with 

significant recent increases in unemployment to (1) identify what 

protections states have to assist unemployed individuals in maintaining 

or obtaining health insurance coverage and (2) assess the extent to 

which unemployed individuals and their families can rely on these 

states’ Medicaid and SCHIP programs as a source of health insurance 

coverage.



To examine these issues, we analyzed national and state employment data 

from the Bureau of Labor Statistics and data on the uninsured from the 

2002 Current Population Survey (CPS) Annual Demographic 

Supplement.[Footnote 3] Also, we reviewed six states (Colorado, New 

Jersey, North Carolina, Ohio, Oregon and Utah) that had above-average 

increases in unemployment from March 2001 to March 2002. We also 

contacted representatives from states’ insurance and labor departments 

and Medicaid programs and obtained statutory, regulatory and other 

information on state protections and programs that assist unemployed 

individuals in maintaining or obtaining health insurance coverage. We 

conducted our work from May 2002 through October 2002 in accordance 

with generally accepted government auditing standards.



Results in Brief:



The six states we reviewed had established various protections prior to 

the economic downturn to assist individuals in maintaining or obtaining 

health insurance coverage. These protections benefit individuals who 

have lost their jobs in maintaining coverage under their former 

employer’s group plan or in obtaining individual health insurance. They 

included: requiring small businesses to extend their group health 

coverage to former employees and their families if the former employees 

pay for it; requiring insurers to allow individuals to convert group 

coverage into individual coverage; and establishing high-risk pools 

that offer comprehensive health insurance benefits to individuals with 

acute or chronic health conditions. However, because states generally 

did not provide subsidies and the individual thus bore the full cost of 

the premium under the state protections, unemployed persons generally 

had to pay more for coverage than they would as participants in an 

employer-sponsored plan. For those relying on unemployment benefits as 

their principal income, the premium costs under these various 

protections would absorb a significant share. For example, the premiums 

for the high-risk pool in one state nearly equaled the entire average 

unemployment benefit. The six states we reviewed did not have data on 

the number of individuals who lost their health insurance during the 

current economic downturn and therefore could not quantify the number 

who might benefit from these protections. A few states quantified the 

number of persons who actually used certain protections. For example, 

states tracked participation in high-risk pools and found increased 

enrollment from March 2001 to March 2002. However, increased 

participation could not be attributed solely to increases in the number 

of unemployed because other conditions, such as insurers leaving the 

market in the state, may have also had an effect.



Unemployed individuals who look to states’ Medicaid and SCHIP programs 

for health insurance coverage for themselves and their families may 

find their eligibility limited. Unemployed workers were less likely 

than their children to be eligible for coverage under Medicaid or SCHIP 

because adult eligibility thresholds were less generous than those for 

children. In four of the six states we reviewed, average unemployment 

benefits were at least twice the amount of income allowed for Medicaid 

eligibility. Two states with lower income eligibility for adults--Utah 

and Colorado--have received federal approval to expand Medicaid and 

SCHIP coverage for some adults who would otherwise be ineligible for 

public coverage--a potential benefit for some unemployed individuals. 

In addition, Oregon also recently received federal approval for program 

expansions. In the wake of recent fiscal pressures resulting from the 

economic downturn, however, New Jersey recently suspended new 

enrollment for adults for its Medicaid and SCHIP programs due to 

budgetary constraints. In addition, some states’ efforts to expand 

coverage for uninsured adults, in part by providing adult coverage with 

funds intended for children, has raised significant federal fiscal and 

legal issues.



Representatives from these states’ insurance departments, high-risk 

pools, and Medicaid programs provided technical comments on a draft of 

this report, which we incorporated as appropriate. We did not obtain 

comments from the Department of Health and Human Services (HHS) because 

we did not assess HHS’s role or performance with respect to protections 

or programs that may benefit unemployed individuals.



Background:



Employer-sponsored coverage is the predominant source of health 

insurance in the United States. In 2001, 67 percent of all nonelderly 

adults (over 118 million) and 64 percent of all children (46 million) 

obtained health insurance through an employer (see fig. 1). Nearly all 

large firms and almost half of smaller firms offer health insurance 

coverage for their employees.[Footnote 4] Federal tax laws provide 

incentives for employers to pay some or all of the premiums because 

their contributions are tax deductible as a business expense; the 

employer-paid portion of the premiums is also not considered taxable 

income for employees. Although the share of the premiums paid by 

employers varies with the size of the firm and the type of health plan, 

firms pay an average of more than 80 percent of the premiums for single 

coverage and more than 75 percent for family coverage.[Footnote 5] 

Also, for many individuals, the premiums for employment-based insurance 

are lower than those in the private market for comparable individual 

coverage.



Figure 1: Source of Health Insurance Coverage of Nonelderly Adults and 

Children, 2001:



[See PDF for Image]



Note: Due to rounding, percentages may not add to 100 percent.



[A] Includes Medicare and military health insurance coverage.



Source: GAO Analysis of the 2002 Current Population Survey Annual 

Demographic Supplement.



[End of Figure]



Medicaid and SCHIP:



Low-income individuals without access to employer-based insurance 

coverage may qualify for Medicaid or SCHIP. These public insurance 

financing programs covered over 40 million low-income people at a cost 

of about $232 billion in federal and state expenditures in 2001.



Established in 1965, Medicaid is a joint federal-state entitlement 

program that finances health care coverage for certain low-income 

individuals. Medicaid eligibility is based in part on family income and 

assets. States set their own eligibility criteria within broad federal 

guidelines. For example, states vary in the kind and amount of income 

they exclude from consideration when determining eligibility. 

Similarly, while some states set a ceiling on the value of assets--such 

as cars, savings accounts, or retirement income--that individuals may 

have available to them in order to be deemed eligible for Medicaid, 

other states have no asset test for eligibility. To the extent that 

asset tests are present in a state’s Medicaid program, individuals 

would need to “spend down” or dispose of their assets to become 

eligible for Medicaid.



More than half of the individuals enrolled in Medicaid are children. 

Federal law requires states to provide Medicaid coverage to children 

age 5 and under if their family income is at or below 133 percent of 

the federal poverty level and to children age 6 to 19 in families with 

incomes at or below the federal poverty.[Footnote 6] Most states have 

received federal approval to set income eligibility thresholds that 

expand their Medicaid programs beyond the minimum federal statutory 

levels for children.



Medicaid eligibility for nondisabled adults is more limited. Federal 

law requires states to provide Medicaid coverage to pregnant women up 

to 133 percent of the federal poverty level, and mandatory eligibility 

for parents is linked to the Medicaid family coverage category 

established in the 1996 federal welfare reform law.[Footnote 7] At a 

minimum, federal law requires states to offer Medicaid coverage to 

parents in families that meet the income and other eligibility rules 

that the state had in place on July 16, 1996, for determining 

eligibility for welfare assistance. Nationwide, considerable variation 

in Medicaid eligibility thresholds for parents exists. For example, 

Alabama covers parents whose family income is up to 13 percent of the 

federal poverty level. At the other end of the spectrum, Minnesota 

covers parents with family incomes up to 275 percent of the federal 

poverty level. The Medicaid statute does not generally provide for 

mandatory or optional coverage of nondisabled childless adults. 

However, some states have received federal approval to expand their 

Medicaid programs to include coverage for some of them.[Footnote 8]



In 1997, the Congress created SCHIP to provide health coverage to 

children living in families whose incomes exceed the eligibility limits 

for Medicaid. While SCHIP is generally targeted to children in families 

with incomes at or below 200 percent of the federal poverty level, each 

state may set its own income eligibility limits, within certain 

guidelines.[Footnote 9] As of January 2002, states’ upper income 

eligibility threshold for SCHIP ranged from 133 to 350 percent of the 

federal poverty level. Unlike Medicaid, which entitles all those 

eligible to coverage, SCHIP has a statutory funding limit of $40 

billion over 10 years (fiscal years 1998 through 2007). Under SCHIP, 

states can cover the entire family--including parents or custodians of 

eligible children--if it is cost-effective to do so, meaning that the 

expense of covering both adults and children in a family does not 

exceed the cost of covering just the children. Similar to Medicaid, 

states can obtain federal approval of SCHIP expansions through a 

section 1115 waiver.



Characteristics of Uninsured Individuals:



While more than 85 percent of Americans obtain health insurance 

coverage from the private insurance market or public programs, 40.9 

million nonelderly Americans (16.5 percent) had no health insurance in 

2001. Approximately 75 percent of the uninsured nonelderly adults had 

jobs. Individuals working part time, for small firms, or in certain 

industries, such as agriculture or construction, were more likely to be 

uninsured (see table 1). Young adults, minorities, and low-income 

persons were also more likely to be uninsured.[Footnote 10] The 

percentage of uninsured is generally higher in the South and West and 

lower in the Midwest and Northeast (see fig. 2). Texas had the highest 

uninsured rate of nonelderly Americans (25.9 percent) of any state in 

2001, while Iowa had the lowest (8.7 percent).



Table 1: Insurance Status of Nonelderly Adults, by Employment Level, 

Firm Size, and Industry, 2001:



Employment characteristic: By employment level; Percentage uninsured: 

[Empty].



Employment characteristic: By employment level; Part-time; Percentage 
uninsured: 24.0.



Employment characteristic: By employment level; Full-time; Percentage 
uninsured: 13.8.



Employment characteristic: By firm size; Percentage uninsured: [Empty].



Employment characteristic: By firm size; Fewer than 10 employees; 
Percentage 

uninsured: 30.3.



Employment characteristic: By firm size; 10 to 24 employees; Percentage 
uninsured: 

25.7.



Employment characteristic: By firm size; 25 to 99 employees; Percentage 
uninsured: 

18.9.



Employment characteristic: By firm size; 100 or more employees; 
Percentage uninsured: 

10.9.



Employment characteristic: By industry; Percentage uninsured: [Empty].



Employment characteristic: By industry; Agriculture, forestry and 
fishing; 

Percentage uninsured: 38.2.



Employment characteristic: By industry; Construction; Percentage 
uninsured: 31.9.



Employment characteristic: By industry; Trade; Percentage uninsured: 
23.9.



Employment characteristic: By industry; Services; Percentage 
uninsured: 15.0.



Employment characteristic: By industry; Mining; Percentage uninsured: 
12.9.



Employment characteristic: By industry; Transportation and public 
utilities; 

Percentage uninsured: 12.7.



Employment characteristic: By industry; Manufacturing; Percentage 
uninsured: 11.8.



Employment characteristic: By industry; Finance, insurance and real 
estate; 

Percentage uninsured: 9.2.



Employment characteristic: By industry; Government; Percentage 
uninsured: 4.3.





Source: GAO analysis of the 2002 Current Population Survey Annual 

Demographic Supplement.



[End of table]



Figure 2: States’ Shares of Nonelderly Residents Who Are Uninsured 

Compared to U.S. Average, March 2002:



[See PDF for Image]



Source: GAO Analysis of the 2002 Current Population Survey Annual 

Demographic Supplement.



[End of Figure]



Changes in Employment:



From March 2001 to March 2002, the national unemployment rate increased 

1.4 percentage points, from 4.3 percent to 5.7 percent, with nine 

states experiencing above-average increases. The largest percentage 

point increases occurred in Colorado (2.6), Oregon (2.5), and Utah 

(2.0) (see table 2).



Table 2: Changes in Unemployment by State, March 2001 to March 2002:



Change: 2.6; State: Colorado.



Change: 2.5; State: Oregon.



Change: 2.0; State: Utah.



Change: 1.9‘; State: Ohio.



Change: 1.8; State: Arizona, New Jersey.



Change: 1.7; State: California, North Carolina.



Change: 1.6; State: New York.



Change: 1.5; State: Maryland, New Mexico, Tennessee, Texas.



Change: 1.4; State: United States, Virginia.



Change: 1.3; State: Florida, Mississippi, Wisconsin.



Change: 1.2; State: Massachusetts, Michigan.



Change: 1.1; State: Nevada, Pennsylvania.



Change: 1.0; State: Alabama, New Hampshire, Indiana.



Change: 0.9; State: Georgia, Illinois, South Carolina, Washington, West 

Virginia.



Change: 0.8; State: Idaho, Minnesota.



Change: 0.7; State: Connecticut, Missouri.



Change: 0.6; State: Maine, Nebraska, Oklahoma, Vermont.



Change: 0.4; State: Hawaii, North Dakota.



Change: 0.3; State: Arkansas, District of Columbia, Iowa, Kentucky.



Change: 0.2; State: Kansas, South Dakota, Wyoming.



Change: 0.1; State: Delaware.



Change: 0.0; State: Alaska, Montana.



Change: -0.2; State: Louisiana.



Change: -0.5; State: Rhode Island.





Source: U.S. Bureau of Labor Statistics data.



[End of table]



Across the six states we reviewed--Colorado, New Jersey, North 

Carolina, Ohio, Oregon and Utah--the greatest unemployment increases 

were generally seen in manufacturing, construction, and transportation 

and public utilities (see table 3).



Table 3: Percentage Change in Employment for Selected Industries for 

Six States, March 2001 to March 2002:



Industry: Construction; Colorado: -5.2; New Jersey: 2.2; North 

Carolina: -3.6; Ohio: -3.2; Oregon: -10.1; Utah: -8.2.



Industry: Finance, insurance and real estate; Colorado: -1.0; New 

Jersey: 2.6; North Carolina: -0.8; Ohio: 0.0; Oregon: 1.0; Utah: 0.7.



Industry: Government; Colorado: 3.9; New Jersey: 2.0; North Carolina: 

1.4; Ohio: 1.4; Oregon: 0.8; Utah: 1.4.



Industry: Manufacturing; Colorado: -8.8; New Jersey: -6.3; North 

Carolina: -6.4; Ohio: -4.1; Oregon: -7.5; Utah: -6.8.



Industry: Mining; Colorado: 8.9; New Jersey: 0.0; North Carolina: 2.6; 

Ohio: -3.1; Oregon: -11.1; Utah: -5.0.



Industry: Services; Colorado: -3.3; New Jersey: 0.3; North Carolina: 

0.7; Ohio: 0.0; Oregon: -0.9; Utah: 1.4.



Industry: Trade; Colorado: -1.3; New Jersey: 0.0; North Carolina: -0.6; 

Ohio: -1.1; Oregon: -1.3; Utah: -1.5.



Industry: Transportation and public utilities; Colorado: -7.0; New 

Jersey: -3.7; North Carolina: -1.4; Ohio: -2.2; Oregon: -3.5; Utah: -

3.3.



Source: U. S. Bureau of Labor Statistics data.



[End of table]



Unemployed individuals may be eligible for financial assistance through 

the Unemployment Insurance Program, a federal-state partnership 

designed to partially replace the lost earnings of individuals who 

become unemployed through no fault of their own.[Footnote 11] While 

program requirements vary by state, individuals eligible for 

unemployment insurance generally (1) have worked for a specified period 

in a job covered by the program, 

(2) left the job involuntarily, and (3) are available, able to work, 

and actively seeking employment. Most states provide a maximum of 26 

weeks of benefits, although benefits in some states have been extended 

for an additional 13 weeks in times of high unemployment.[Footnote 12] 

Benefits are generally based on a percentage of an individual’s 

earnings over the prior year, up to a maximum amount. The national 

average weekly unemployment benefit was $254 in the first quarter of 

2002, with benefits lasting an average of nearly 15 weeks. In the six 

states we reviewed, the weekly unemployment benefit ranged from $253.80 

in Ohio to $327.15 in New Jersey (see table 4).



Table 4: Unemployment Benefits in Six States, First Quarter 2002:



State: Colorado; Average weekly benefit amount (in dollars): 311.62; 

Average duration 

(in weeks): 13.0.



State: New Jersey; Average weekly benefit amount (in dollars): 327.15; 

Average duration 

(in weeks): 17.2.



State: North Carolina; Average weekly benefit amount (in dollars): 

256.24; Average duration 

(in weeks): 11.4.



State: Ohio; Average weekly benefit amount (in dollars): 253.80; 

Average duration 

(in weeks): 14.4.



State: Oregon; Average weekly benefit amount (in dollars): 261.99; 

Average duration 

(in weeks): 15.3.



State: Utah; Average weekly benefit amount (in dollars): 275.28; 

Average duration 

(in weeks): 12.7.



State: United States; Average weekly benefit amount (in dollars): 

254.00; Average duration 

(in weeks): 14.7.





Source: U.S. Department of Labor.



[End of table]



Federal Protections:



Although many aspects of health insurance, including premiums, are 

regulated at the state level,[Footnote 13] two federal laws--the 

Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)[Footnote 

14] and the Health Insurance Portability and Accountability Act of 1996 

(HIPAA)[Footnote 15]--established requirements designed to help 

certain individuals maintain health coverage after loss of employment.



COBRA provided that firms with 20 or more employees offer former 

employees and their dependents the opportunity to continue their group 

coverage for at least 18 months.[Footnote 16] To qualify for COBRA 

benefits, former employees must have been covered by the employer’s 

plan the day before they stopped working at the firm. Former employees 

are eligible only for the health plan coverage that they received while 

employed. COBRA coverage is not available if the former employer 

discontinues health benefits to all employees, as in a company closure.



While employers must allow COBRA-eligible former employees to continue 

receiving coverage under the employer’s group health plan, the employer 

does not have to pay for it. The former employee can be required to pay 

the full cost of the group health premium plus 2 percent, which is 

designed to cover the employer’s administrative cost of keeping the 

former employee in the plan.[Footnote 17] Based on data from a 2002 

survey of employers, the average cost of COBRA coverage is 

approximately $260 a month for an individual and $676 a month for a 

family.[Footnote 18] Based on a survey of a national sample of 1,001 

nonelderly adults, a recent study estimated that because of the cost of 

COBRA continuation coverage, “only 23 percent of employed, insured 

adults would be very likely to participate in the COBRA program if they 

lost their jobs.”[Footnote 19]



Unlike COBRA, which provided the opportunity for individuals losing 

their jobs to continue their private group health insurance, HIPAA 

provisions guarantee certain individuals losing group coverage the 

right to purchase coverage in the individual market.[Footnote 20] HIPAA 

provides guaranteed access to health coverage for individuals who, 

among other criteria, had at least 18 months of coverage without a 

break of more than 63 days and with the most recent coverage being 

under a group health plan. HIPAA stipulates that states must either 

require health insurers to make certain of their policies available to 

qualifying individuals or use an “alternative mechanism” to offer them 

coverage. An example of an alternative mechanism is a state-sponsored 

high-risk pool, which offers comprehensive insurance coverage to 

individuals with preexisting health conditions who are otherwise unable 

to obtain coverage in the individual market or who may be able to 

obtain coverage only at a prohibitive cost. (Appendix I describes how 

the six states that we reviewed guarantee access to coverage under 

HIPAA.) As with COBRA, individuals bear the full cost of individual 

coverage received under HIPAA. Since HIPAA provides for coverage in the 

individual insurance market, in which premiums are generally based on 

the characteristics of the individual applicant, this coverage is 

likely to be more costly for many applicants for a similar level of 

coverage than premiums for groups, where risk is spread over all 

members of the group. The differences will be smaller in some states 

that have imposed restrictions on how much insurers can vary premiums 

based on an individual’s characteristics.



Various State Protections Offer Assistance, but Unemployed Individuals 

Generally Bear the Full Premium Cost:



The six states we reviewed had instituted various protections that 

might assist individuals who have lost their jobs in maintaining or 

obtaining health insurance. Unemployed individuals, however, generally 

bore the full cost of the premium. States did not have data on the 

number of individuals who lost their health insurance during the 

economic decline and thus, who could benefit from these protections, 

but did have data on the number of individuals using some of the 

protections.



States’ Protections Generally Allow Unemployed Individuals to Purchase 

Insurance at Full Cost:



The six states we reviewed had in place a variety of protections, which 

were established prior to the economic downturn. Unemployed 

individuals, however, were generally responsible for bearing the full 

costs of purchasing health insurance. Key protections to assist 

unemployed individuals in maintaining health insurance coverage 

included:



* State-mandated continuation coverage, through which states require 

small businesses to extend their group health coverage to former 

employees and their families if the former employees pay for it;



* Guaranteed conversion, through which states require insurers to give 

eligible individuals the ability to convert their group coverage to an 

individual health insurance policy;



* Guaranteed issue, through which states require insurers to offer 

coverage to individuals who do not have access to group coverage or 

public insurance; and:



* High-risk pools, in which states create associations that offer 

comprehensive health insurance benefits to individuals with acute or 

chronic health conditions.



Table 5 indicates the extent to which the six states we reviewed had 

adopted such protections.



Table 5: State Protections That Facilitate Access to Health Insurance 

Coverage for the Unemployed in Six Selected States:



State: Colorado; State-mandated continuation coverage: ¸; State-

mandated guaranteed conversion: ¸; State-mandated guaranteed issue: 

[Empty]; High-risk pool: ¸.



State: New Jersey; State-mandated continuation coverage: ¸; State-

mandated guaranteed conversion: [Empty]; State-mandated guaranteed 

issue: ¸; High-risk pool: [Empty].



State: North Carolina; State-mandated continuation coverage: ¸; State-

mandated guaranteed conversion: ¸; State-mandated guaranteed issue: 

[Empty]; High-risk pool: [Empty].



State: Ohio; State-mandated continuation coverage: ¸; State-mandated 

guaranteed conversion: ¸; State-mandated guaranteed issue: ¸; High-risk 

pool: [Empty].



State: Oregon; State-mandated continuation coverage: ¸; State-mandated 

guaranteed conversion: [A]; State-mandated guaranteed issue: [Empty]; 

High-risk pool: ¸.



State: Utah; State-mandated continuation coverage: ¸; State-mandated 

guaranteed conversion: ¸; State-mandated guaranteed issue: [B]; High-

risk pool: ¸.



State: Total; State-mandated continuation coverage: 6; State-mandated 

guaranteed conversion: 4; State-mandated guaranteed issue: 2; High-risk 

pool: 3.



[A] Oregon requires insurers to offer either a low-cost or prevailing 

benefit plan to eligible individuals leaving that insurers’ group 

coverage. To be eligible, individuals must, among other criteria, be 

state residents, have at least 6 months of prior group coverage, and 

not be eligible for Medicare or Medicaid.



[B] Utah does not have a guaranteed issue law, but residents who do not 

meet the medical criteria for the state’s high-risk pool are guaranteed 

access to a policy from the private insurance company that had declined 

them coverage.



Source: State information, October 2002.



[End of table]



Of the six states we reviewed, only Oregon assisted lower income 

unemployed individuals in paying for the cost of premium coverage. 

Previously funded solely with state resources, the program was unable 

to expand enrollment for nearly 3 years and had a significant waiting 

list due to budget constraints. However, in October 2002, Oregon 

received approval to expand this program using federal funds.[Footnote 

21]



State-Mandated Continuation Coverage:



Each of the six states that we reviewed had a health care coverage 

continuation law, which applied to employers with fewer than 20 

employees and thus were not subject to COBRA requirements. While the 

states required that employers make health insurance coverage available 

to eligible individuals, the employers were not required to pay for 

this coverage. In New Jersey, North Carolina and Utah, eligible 

individuals can be required to pay up to 102 percent of the cost of the 

premium charged under their former employer’s plan (the full cost of 

the group health premium plus a 2 percent fee to cover the employer’s 

administrative costs) (see table 6). In the other three states, 

individuals may be required to pay up to the full cost of the premium, 

but no administrative fee may be added. Like COBRA, the state health 

care coverage continuation laws did not apply to companies that 

terminate coverage, such as when going out of business. Nationally, 

premiums for state continuation coverage averaged approximately $260 a 

month for an individual and $676 a month for a family in 2001, which 

equals 24 to 61 percent of the average unemployment benefit.[Footnote 

22]



Table 6: State Continuation Coverage Requirements and Benefits:



State: Colorado; Maximum premium (expressed as a percentage of group 

rate): 100; Prior continuous coverage requirement

(in months): 6; Maximum required length of coverage

(in months): 18.



State: New Jersey; Maximum premium (expressed as a percentage of group 

rate): 102; Prior continuous coverage requirement

(in months): a; Maximum required length of coverage

(in months): 12.



State: North Carolina; Maximum premium (expressed as a percentage of 

group rate): 102; Prior continuous coverage requirement

(in months): 3; Maximum required length of coverage

(in months): 18.



State: Ohio; Maximum premium (expressed as a percentage of group rate): 

100; Prior continuous coverage requirement

(in months): 3; Maximum required length of coverage

(in months): 6.



State: Oregon; Maximum premium (expressed as a percentage of group 

rate): 100; Prior continuous coverage requirement

(in months): 3; Maximum required length of coverage

(in months): 6.



State: Utah; Maximum premium (expressed as a percentage of group rate): 

102; Prior continuous coverage requirement

(in months): 6; Maximum required length of coverage

(in months): 6.



[A] Individuals must have been covered by employer-sponsored insurance 
on 

their last day of employment.



Source: State continuation coverage laws, as of October 2002.



[End of table]



Eligibility for, and the length of required coverage under, states’ 

continuation coverage laws were often more limited than under COBRA. 

While under COBRA individuals must only be insured the day before they 

stop working, five of the six states that we reviewed had more 

stringent requirements. They required individuals to have been 

continuously insured for the 3 to 6 months immediately prior to the 

separation from their job. New Jersey, Ohio, Oregon, and Utah required 

employers to offer a year or less of continuation coverage, compared to 

18 months under COBRA and in Colorado and North Carolina.



State-Mandated Guaranteed Conversion:



Once individuals exhaust their COBRA or state health care continuation 

coverage, they may become eligible to convert to an individual policy. 

Although the HIPAA provisions require states to ensure that eligible 

individuals can move from group to individual health insurance 

coverage, state guaranteed conversion is specific to an insurer. Four 

of the six states we reviewed (Colorado, North Carolina, Ohio, and 

Utah) required insurers to provide individual policies to eligible 

individuals previously covered under a group policy sold by their 

company. To be eligible for guaranteed conversion, individuals had to 

have been continuously insured by the group health plan, or its 

predecessor, for 3 to 12 months (depending on the state) prior to their 

application for conversion--requirements that are less stringent than 

the 18 months of prior continuous coverage under HIPAA.[Footnote 23] 

State laws on guaranteed conversion contained no maximum length of 

required coverage; as with other individual health insurance policies, 

beneficiaries could renew the policies as long as they agreed to 

continue paying the premiums and did not commit fraud. Individuals were 

responsible for the conversion plan premiums, which could generally be 

based on the demographic and health characteristics of the individual. 

Thus, individual coverage under conversion policies--for which 

individuals pay the full premium--was generally more expensive than 

group coverage especially for higher-risk individuals.



State-Mandated Guaranteed Issue:



Of the six states we reviewed, New Jersey and Ohio had “guaranteed 

issue,” which required insurers to offer coverage to all individuals in 

the state who were not eligible for group coverage or public insurance 

programs, if they were willing to pay for it. According to Ohio 

statute, insurers in that state could charge an individual up to 2.5 

times the rate charged to another individual with a similar 

policy.[Footnote 24] In New Jersey, insurers were required to charge 

each applicant the same price for five standard plans, but monthly 

premiums varied by insurer.[Footnote 25] For a policy issued by a 

health maintenance organization (HMO) in New Jersey, with a $30 

copayment per visit to the doctor, monthly premiums for single coverage 

ranged from $324 to more than $394, depending on the insurer, while 

premiums for the other standard health plans were more 

expensive.[Footnote 26] (A comparison of the five standard plans is in 

table 7.) In the four states we reviewed that did not have guaranteed 

issue laws, insurance companies could choose not to offer coverage to 

individual applicants and have few or no restrictions on what they 

could charge individuals based on their health status, age, or other 

factors.



Table 7: Selected Characteristics of the Standard Guaranteed Issue 

Plans Covering Hospital and Medical Services in New Jersey, September 

2002:



Indemnity/PPO: Plan A[B]: Individuals’ share of provider covered 

charges: 50%; Indemnity/PPO: Plan B: Individuals’ share of provider 

covered charges: 40%[C]; Indemnity/PPO: Plan C: Individuals’ share of 

provider covered charges: 30%; Indemnity/PPO: Plan D: Individuals’ 

share of provider covered charges: 20%; HMO: Individuals’ share of 

provider covered charges: Copayment 

per visit[D]; Individuals’ share of provider covered charges: [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible); 

Indemnity/PPO: Plan A[B]: $5,000[E]; Indemnity/PPO: Plan B: $3,000[E]; 

Indemnity/PPO: Plan C: $2,500[E]; Indemnity/PPO: Plan D: $2,000[E]; 

HMO: f; [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: Range 

in monthly premiums for single coverage across carrier[G]; Indemnity/

PPO: Plan A[B]: [Empty]; Indemnity/PPO: Plan B: [Empty]; Indemnity/PPO: 

Plan C: [Empty]; Indemnity/PPO: Plan D: [Empty]; HMO: [Empty]; [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Deductible; Type of plan[A]: Individuals’ share of provider covered 

charges: Individuals’ maximum out of pocket cost (above their 

deductible): Range in monthly premiums for single coverage across 

carrier[G]: [Empty]; Indemnity/PPO: Plan A[B]: [Empty]; Indemnity/PPO: 

Plan B: [Empty]; Indemnity/PPO: Plan C: [Empty]; Indemnity/PPO: Plan D: 

[Empty]; HMO: [Empty]; [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: : $500; 

Indemnity/PPO: Plan A[B]: : Not offered; Indemnity/PPO: Plan B: : Not 

offered; Indemnity/PPO: Plan C: : Not offered; Indemnity/PPO: Plan D: : 

$1,200 - $8,127; HMO: : h; : [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: : $1,000; 

Indemnity/PPO: Plan A[B]: : $434 - $2,150; Indemnity/PPO: Plan B: : 

$480 - $2,457; Indemnity/PPO: Plan C: : $381 - $3,071; Indemnity/PPO: 

Plan D: : $423 - $4,914; HMO: : h; : [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: : $2,500; 

Indemnity/PPO: Plan A[B]: : $348 - $1,843; Indemnity/PPO: Plan B: : 

$409 - $2,150; Indemnity/PPO: Plan C: : $309 - $2,457; Indemnity/PPO: 

Plan D: : Not offered; HMO: : h; : [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: : $5,000; 

Indemnity/PPO: Plan A[B]: : $237 - $416; Indemnity/PPO: Plan B: : Not 

offered; Indemnity/PPO: Plan C: : Not offered; Indemnity/PPO: Plan D: : 

Not offered; HMO: : h; : [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: : $10,000; 

Indemnity/PPO: Plan A[B]: : $153 - $311; Indemnity/PPO: Plan B: : Not 

offered; Indemnity/PPO: Plan C: : Not offered; Indemnity/PPO: Plan D: : 

Not offered; HMO: : h; : [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Copayment; Type of plan[A]: Individuals’ share of provider covered 

charges: Individuals’ maximum out of pocket cost (above their 

deductible): Range in monthly premiums for single coverage across 

carrier[G]: $500: $1,000: $2,500: $5,000: $10,000: [Empty]; Indemnity/

PPO: Plan A[B]: [Empty]; Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not 

offered: $480 - $2,457: $409 - $2,150: Not offered: Not offered: 

[Empty]; Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - 

$2,457: $409 - $2,150: Not offered: Not offered: [Empty]; Indemnity/

PPO: Plan C: 30%: $2,500[E]: Not offered: $381 - $3,071: $309 - $2,457: 

Not offered: Not offered: [Empty]; HMO: [Empty].



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: $500: 

$1,000: $2,500: $5,000: $10,000: : $10; Indemnity/PPO: Plan A[B]: : h; 

Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457: 

$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B: 

40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not 

offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not 

offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h; 

HMO: : $487 - $727.



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: $500: 

$1,000: $2,500: $5,000: $10,000: : $15; Indemnity/PPO: Plan A[B]: : h; 

Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457: 

$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B: 

40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not 

offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not 

offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h; 

HMO: : $462 - $512.



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: $500: 

$1,000: $2,500: $5,000: $10,000: : $20; Indemnity/PPO: Plan A[B]: : h; 

Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457: 

$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B: 

40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not 

offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not 

offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h; 

HMO: : $379 - $463.



Type of plan[A]: Individuals’ share of provider covered charges: 

Individuals’ maximum out of pocket cost (above their deductible): Range 

in monthly premiums for single coverage across carrier[G]: $500: 

$1,000: $2,500: $5,000: $10,000: : $30; Indemnity/PPO: Plan A[B]: : h; 

Indemnity/PPO: Plan B: 40%[C]: $3,000[E]: Not offered: $480 - $2,457: 

$409 - $2,150: Not offered: Not offered: : h; Indemnity/PPO: Plan B: 

40%[C]: $3,000[E]: Not offered: $480 - $2,457: $409 - $2,150: Not 

offered: Not offered: : h; Indemnity/PPO: Plan C: 30%: $2,500[E]: Not 

offered: $381 - $3,071: $309 - $2,457: Not offered: Not offered: : h; 

HMO: : $324 - $394.





Note: Plans A through D, and the HMO plan, represent standard insurance 

packages defined by the state, which were available from multiple 

insurers.



[A] New Jersey’s standard guaranteed issue included three different 

types of health plans: (1) indemnity plans, which allowed individuals 

to choose any physician or hospital for care, (2) PPOs, which paid for 

a greater portion of care received from a selected panel of doctors and 

hospitals typically reimbursed on a fee-for-service basis, and (3) 

HMOs, which were prospectively paid a fixed monthly fee per patient to 

provide or arrange for most health services and, in turn, pay providers 

either retrospectively for each service delivered on a fee-for-service 

basis or through prospective capitation payment arrangements.



[B] The state refers to this plan as Plan A/50.



[C] Beneficiaries must pay an additional $200 per day hospital charge 

for each of the first 5 days of hospitalization, up to a maximum of 

$2,000 per person each year.



[D] HMOs offered copayment options of $10, $15, $20 and $30 for 

physician and outpatient services. Other copayments applied to 

inpatient hospitalizations, emergency room visits, and maternity care. 

Also, prescription drugs could be covered subject to either a 50 

percent coinsurance or a $15 copayment, at the option of the carrier.



[E] Under the PPO options, insurers paid 100 percent of charges after 

total covered charges, paid by either the individual or the insurer, 

reaches $10,000.



[F] Plan did not have a maximum out-of-pocket cost.



[G] All individuals, regardless of age or health status, paid the same 

premium.



[H] Plan did not have this type of deductible or copayment for 

policyholders.



Source: State information.



[End of table]



High-Risk Pools:



Three of the states we reviewed (Colorado, Oregon, and Utah) have 

established high-risk pools that served individuals with acute and 

chronic conditions.[Footnote 27] The high-risk pools in these three 

states began operation in the early 1990s and also served individuals 

eligible for coverage under HIPAA (see table 8). High-risk pools are 

subsidized. Because enrollees often have major health problems, medical 

claims costs are high and would exceed unsubsidized premiums collected 

from their enrollees. Oregon’s risk pool was subsidized by a fee 

assessed on insurers based on the number of people they cover. Utah 

subsidized the operation of its high-risk pool with state funds. 

Colorado used a combination of these approaches.



High-risk pool premiums are higher than standard premiums for 

individual insurance paid by healthy applicants although not 

necessarily higher than a high-risk individual would be charged in the 

individual market if coverage were available. State high-risk pool laws 

generally capped premiums at 125 to 200 percent of comparable standard 

commercial coverage rates. Premiums varied based on factors such as 

age, geographic location, type of health plan, and deductible. One 

state, Colorado, provided a 20 percent premium discount to certain low-

income individuals. Across the three states we reviewed that had high-

risk pools, undiscounted premiums for nonelderly adults ranged from 

less than 10 percent to close to 100 percent of the average 

unemployment benefit in the state.



Table 8: Selected Characteristics of High-Risk Pools in Three States, 

June 2002:



State: Colorado; (1991); Medical eligibility requirements: * State 

residents for at least 6 months who; * were denied coverage because of 

a medical condition;; * were accepted for coverage, but with a premium 

higher than that under the high-risk pool;; * were accepted for 

coverage, but with a pre-existing condition exclusion of greater than 6 

months; OR; * have one of 30 acute or chronic medical conditions but 

were not necessarily denied coverage.; Number enrolled[A]: 3,886; 

[Empty]; Premium limits: 150 percent of the standard individual rate; 

Factors used to determine premiums for an individual: * Age; * Gender; 

* Smoking status; * County; * Deductible amount ($300 to $5,000); Range 

of individual monthly premiums: $75 - $1,283[B].



State: Oregon; (1990); Medical eligibility requirements: * Individuals 

who were denied individual health insurance coverage within the last 6 

months because of their health condition.; Number enrolled[A]: 8,762; 

[Empty]; Premium limits: 125 percent of the prevailing market rate for 

an individual policy; Factors used to determine premiums for an 

individual: * Age; * Geographic location; * Type of health plan[C]; 

Range of individual monthly premiums: $118 - $661.



State: Utah; (1991); Medical eligibility requirements: State residents 

for at least 12 months or dependent children 25 years of age or younger 

of such individuals, who; * meet the high-risk pool’s health 

underwriting criteria established under Utah statute,[D]; * apply for 

coverage not more than 63 days after being denied coverage by a private 

individual insurer, AND; * pay the established premium. 

OR; * Individuals who terminated similar coverage from another state’s 

high-risk pool within the previous 63 days because they were no longer 

a resident of that state and who pay premiums for the entire coverage 

period in Utah.[E]; Number enrolled[A]: 2,061; [Empty]; Premium limits: 

Generally set at 150 percent of the prevailing premium level for the 

five largest small employer insurers in the state offering comparable 

coverage; Factors used to determine premiums for an individual: * Age; 

* Deductible amount ($500 to $2,500); Range of individual monthly 

premiums: $152 - $471.





AEnrollment figures represent the total enrollment in the high-risk 

pool and thus include individuals who qualify either because of medical 

reasons or through HIPAA.



[B] Reflects the premiums for individuals between the ages of 20 and 

64. Premiums are lower for children and higher for individuals over age 

65. Individuals with household incomes of $32,500 or less, and with 

liquid assets of $50,000 or less, can qualify for a 20 percent premium 

discount.



[C] Premiums in Oregon vary by health plan. Enrollees have a choice of 

four health plans: a traditional indemnity plan, a PPO, HMO, or low 

cost/limited benefit plan.



[D] Under the state’s criteria, points were assigned to various medical 

conditions based on the expected medical claims or complications for 

that condition. Individuals with conditions that have points totaling 

above a specified level were eligible for the high-risk pool.



[E] Under certain circumstances, individuals would be ineligible for 

the high-risk pool. For example, individuals eligible for other public 

programs that provide medical care were not eligible for the high-risk 

pool.



Source: GAO analysis of state information.



[End of table]



States Lack Data on Current Numbers of Uninsured; Knowledge of 

Beneficiaries’ Use of State Protections Varies:



Although Ohio, Oregon, and Utah collected data on the number of 

uninsured residents, none of the states that we reviewed had data 

sufficiently current to determine how many of their residents had lost 

health insurance during the recent economic decline. States’ knowledge 

of any changes in the numbers of individuals benefiting from the 

different states’ protections varied by option and the state, with data 

most often available for the three states’ high-risk pools. None of the 

states we reviewed tracked how many of its residents obtained health 

coverage through state-mandated continuation coverage. Of the four 

states that required insurers to offer conversion plans, only Utah 

tracked the number of policies issued but it did not have data current 

enough to determine whether usage increased during the current economic 

decline. New Jersey tracked the number of individuals receiving 

individual health coverage through its five standard plans. Enrollment 

in these standard plans declined in the past year, which a state 

representative attributed to the rising cost of coverage.[Footnote 28]



Each of the three states we reviewed that had high-risk pools tracked 

enrollment in their pools. From March 2001 to March 2002, enrollment in 

high-risk pools increased by 47 percent in Colorado, almost 23 percent 

in Oregon, and 37 percent in Utah. But it is not clear how much of the 

increased participation came from the ranks of the unemployed. For 

example, a Colorado official said a large portion of the increased 

enrollment in the state’s high-risk pool was likely due to insurers 

leaving the individual and small group health insurance market in the 

state. Therefore, it is difficult to determine how much of the increase 

included those dropped from individual or nonemployer-based group 

coverage and how much included the newly unemployed.



Eligibility for Medicaid and SCHIP Programs Is Limited for Unemployed 

Adults Despite Expansions in Some States:



Given the cost of maintaining coverage under their former employers’ 

health insurance plan or obtaining alternative coverage, unemployed 

individuals may look to states’ Medicaid and SCHIP programs for 

coverage for themselves and their families. Unemployed adults, however, 

are less likely to qualify for these programs than their children due, 

in part, to less generous eligibility levels set for adults than for 

children. Colorado, Oregon, and Utah have recently received federal 

approval for waivers to expand eligibility for adults in Medicaid and 

SCHIP, which may increase coverage for unemployed individuals. In the 

wake of recent fiscal pressures resulting from the economic downturn, 

however, New Jersey has suspended its Medicaid and SCHIP coverage 

expansion for new applicants. Efforts by some states to expand Medicaid 

and SCHIP coverage for uninsured adults have raised significant federal 

fiscal and legal issues, at times providing adult coverage with funds 

intended for children.



Unemployed Adults Are Less Likely Than Children to Qualify for Medicaid 

and SCHIP Coverage:



As unemployed adults seek health insurance, they will likely find it 

more difficult to secure coverage under Medicaid or SCHIP for 

themselves than for their children. Under Medicaid, the majority of 

states had set eligibility levels for nondisabled adults that were less 

generous than those for children.



In the six states we reviewed, Medicaid’s maximum income eligibility 

levels for non-disabled adults were lower than the levels for 

children.[Footnote 29] In Colorado, New Jersey, North Carolina, and 

Utah, the maximum income levels for coverage for these adults were 

under 50 percent of the federal poverty level.[Footnote 30] In 

contrast, Medicaid and SCHIP coverage for children ranged from those in 

families with incomes up to 170 percent of the federal poverty level to 

those in families with incomes up to 350 percent of the federal poverty 

level (in Oregon and New Jersey, respectively).[Footnote 31]



In four of six states, adults eligible for unemployment benefits might 

not have qualified for Medicaid because the average of their 

unemployment benefits would have been at least twice as much income as 

allowed for Medicaid eligibility. In the remaining two states--Ohio and 

Oregon--adults that received the average unemployment benefit would 

have met the income eligibility requirements for Medicaid in those 

states (see 

table 9).



Table 9: Receipt of Unemployment Benefits Often Made Parents Ineligible 

for Medicaid:



State: Colorado; Average monthly unemployment benefit

(in dollars): 1,350; Monthly Medicaid income eligibility level for 

parents[A[(IN DOLLARS)] rs): 421; Income within Medicaid eligibility 

levels: No.



State: New Jersey; Average monthly unemployment benefit

(in dollars): 1,418; Monthly Medicaid income eligibility level for 

parents[A[(IN DOLLARS)] rs): 443; Income within Medicaid eligibility 

levels: No.



State: North Carolina; Average monthly unemployment benefit

(in dollars): 1,110; Monthly Medicaid income eligibility level for 

parents[A[(IN DOLLARS)] rs): 544; Income within Medicaid eligibility 

levels: No.



State: Ohio; Average monthly unemployment benefit

(in dollars): 1,100; Monthly Medicaid income eligibility level for 

parents[A[(IN DOLLARS)] rs): 1,252; Income within Medicaid eligibility 

levels: Yes[B].



State: Oregon; Average monthly unemployment benefit

(in dollars): 1,135; Monthly Medicaid income eligibility level for 

parents[A[(IN DOLLARS)] rs): 1,252[C]; Income within Medicaid 

eligibility levels: Yes[B].



State: Utah; Average monthly unemployment benefit

(in dollars): 1,193; Monthly Medicaid income eligibility level for 

parents[A[(IN DOLLARS)] rs): 583[D]; Income within Medicaid eligibility 

levels: No.





AMedicaid income eligibility levels for parents are based on a family 

of three.



[B] To qualify for Medicaid, an individual would also need to meet 

asset test and other eligibility requirements.



[C] On October 15, 2002, Oregon received federal approval to expand 

Medicaid and SCHIP coverage for adults, including parents, up to 185 

percent of the federal poverty level, or $2,316 per month for a family 

of three. The state plans to implement this expansion in increments 

beginning November 1, 2002.



[D] In Utah, some adults with incomes above this eligibility level may 

qualify for Medicaid under another eligibility category that limits 

benefits to primary and preventive care.



Sources: State and U.S. Bureau of Labor Statistics data, 2002.



[End of table]



In Colorado, North Carolina, Oregon, and Utah, Medicaid coverage for 

unemployed adults was more restricted than it was for children because 

adults’ accumulated assets could have made them ineligible for coverage 

even after their unemployment benefits run out. The amount of assets 

allowed and the types of assets included for eligibility purposes 

varied by state (see table 10). For purposes of determining whether 

individuals reached or exceeded their asset limit, North Carolina 

included the cash value of life insurance, checking and savings 

accounts, and other investments, but excluded the value of an 

applicant’s primary residence and vehicle. Utah required that families 

with children over age 6 have assets below $3,000 (with allowances for 

an additional $25 in assets for each additional family member) but 

excluded the value of one home and of one vehicle, up to $15,200.



Table 10: Asset Exclusions for Parents under Medicaid in Six States:



State: Colorado; Asset limit: $2,000; [Empty]; Treatment of home: 

Excluded; Treatment of vehicle: Value of one vehicle excluded.



State: New Jersey; Asset limit: None; [Empty]; Treatment of home: N/A; 

Treatment of vehicle: N/A.



State: North Carolina; Asset limit: $3,000; [Empty]; Treatment of home: 

Excluded; Treatment of vehicle: Value of one vehicle excluded per adult 

age 18 or older.



State: Ohio; Asset limit: None; [Empty]; Treatment of home: N/A; 

Treatment of vehicle: N/A.



State: Oregon; Asset limit: $2,000; [Empty]; Treatment of home: 

Excluded; Treatment of vehicle: Value of vehicles excluded.



State: Utah; Asset limit: $2,000 -$3,000; [Empty]; Treatment of home: 

Home occupied or being purchased by the applicant is excluded; 

Treatment of vehicle: Value of one vehicle excluded (up to $15,200); OR 

$1,500 of the value of any vehicle.



Source: State information, October 2002.



[End of table]



In contrast, most states nationwide have eliminated family asset tests 

in determining Medicaid and SCHIP eligibility for children. As of 

January 2002, 44 states had eliminated family asset tests for all 

children in families with incomes at or below the poverty level and two 

other states dropped it for certain categories of children. Among the 

six states we reviewed, four states did not have asset tests for 

children in Medicaid, while five states did not have asset tests for 

children in SCHIP (see table 11).



Table 11: Medicaid and SCHIP Family Income Eligibility Limits and Asset 

Tests for Children’s Eligibility in Six States, 2002:



State: Colorado; Upper income eligibility 

(as percentage of federal poverty level)[A]: 185; Family asset test 

applies to 

children’s eligibility for:: Medicaid: Yes; Family asset test applies 

to 

children’s eligibility for:: SCHIP: No.



State: New Jersey; Upper income eligibility 

(as percentage of federal poverty level)[A]: 350; Family asset test 

applies to 

children’s eligibility for:: Medicaid: No; Family asset test applies to 

children’s eligibility for:: SCHIP: No.



State: North Carolina; Upper income eligibility 

(as percentage of federal poverty level)[A]: 200; Family asset test 

applies to 

children’s eligibility for:: Medicaid: No; Family asset test applies to 

children’s eligibility for:: SCHIP: No.



State: Ohio; Upper income eligibility 

(as percentage of federal poverty level)[A]: 200; Family asset test 

applies to 

children’s eligibility for:: Medicaid: No; Family asset test applies to 

children’s eligibility for:: SCHIP: No.



State: Oregon; Upper income eligibility 

(as percentage of federal poverty level)[A]: 170[B]; Family asset test 

applies to 

children’s eligibility for:: Medicaid: No; Family asset test applies to 

children’s eligibility for:: SCHIP: Yes.



State: Utah; Upper income eligibility 

(as percentage of federal poverty level)[A]: 200; Family asset test 

applies to 

children’s eligibility for:: Medicaid: Yes[C]; Family asset test 

applies to 

children’s eligibility for:: SCHIP: No.





AMedicaid eligibility can vary by the child’s age. For example, 

Colorado covers infants and children up to age 5 in families with 

incomes up to 133 percent of the federal poverty level and children age 

6 to 19 in families with incomes up to 100 percent of the federal 

poverty level. SCHIP eligibility would begin above these levels and end 

for children in families earning up to 185 percent of the federal 

poverty level.



[B] Oregon received federal approval to expand Medicaid and SCHIP 

coverage for children up to 185 percent of the federal poverty level, 

which it plans to implement on February 1, 2003.



[C] State counts family assets for eligible children age 6 and older.



Source: State information.



[End of table]



Among unemployed adults, childless adults often had more difficulty 

qualifying for Medicaid than parents. The Medicaid programs in 

Colorado, North Carolina, and Ohio did not cover any nondisabled 

childless adults. In New Jersey, childless adults faced a lower 

Medicaid income eligibility level than parents did. Oregon and Utah 

covered a small number of childless adults, all of whom earned less 

than 150 percent of the federal poverty level (see table 12).



Table 12: Eligibility Levels for Childless Adults and Parents Applying 

for Medicaid, 2002:



State: Colorado; Income level below which coverage is granted 

(expressed as percentage of federal poverty level)[A]: Childless 

adults: No coverage; Income level below which coverage is granted 

(expressed as percentage of federal poverty level)[A]: Parents: 34.



State: New Jersey; Income level below which coverage is granted 

(expressed as percentage of federal poverty level)[A]: Childless 

adults: 19; Income level below which coverage is granted (expressed as 

percentage of federal poverty level)[A]: Parents: 35[B].



State: North Carolina; Income level below which coverage is granted 

(expressed as percentage of federal poverty level)[A]: Childless 

adults: No coverage; Income level below which coverage is granted 

(expressed as percentage of federal poverty level)[A]: Parents: 43.



State: Ohio; Income level below which coverage is granted (expressed as 

percentage of federal poverty level)[A]: Childless adults: No coverage; 

Income level below which coverage is granted (expressed as percentage 

of federal poverty level)[A]: Parents: 100.



State: Oregon; Income level below which coverage is granted (expressed 

as percentage of federal poverty level)[A]: Childless adults: 100[C]; 

Income level below which coverage is granted (expressed as percentage 

of federal poverty level)[A]: Parents: 100[C].



State: Utah; Income level below which coverage is granted (expressed as 

percentage of federal poverty level)[A]: Childless adults: [B]; Income 

level below which coverage is granted (expressed as percentage of 

federal poverty level)[A]: Parents: 47[B].



[A] Income eligibility levels for childless adults are based on the 

individual, while the levels for parents are based on a family of 

three.



[B] Income eligibility does not reflect state’s coverage expansions 

under federally-approved waivers because eligibility was either no 

longer available to new applicants (New Jersey) or provided a more 

limited benefit with additional cost sharing (Utah).



[C] Oregon received federal approval to expand Medicaid and SCHIP 

coverage for adults up to 185 percent of the federal poverty level. The 

state plans to implement this expansion in increments beginning 

November 1, 2002.



Source: State information.



[End of table]



States’ Expansions Can Offer Coverage for Unemployed Individuals, but 

Some Raise Fiscal and Legal Issues:



Some states have received approval from the federal government to 

expand Medicaid and SCHIP coverage for parents and childless adults, 

including recently unemployed individuals. Of the states we reviewed, 

Utah recently received a section 1115 waiver to expand Medicaid 

coverage to certain parents and childless adults for a benefit package 

limited to primary care and preventive services. Utah’s waiver is 

estimated to cover an additional 16,000 parents with family incomes 

under 150 percent of the federal poverty level and 9,000 childless 

adults with incomes under 150 percent of the federal poverty level. The 

expansion, implemented on July 1, 2002, is funded by enrollment fees 

and cost sharing by participants and savings from increased cost 

sharing and new limits on some optional services, such as mental health 

services, vision screening and physical therapy, for certain groups of 

currently eligible adults. On September 27, 2002, Colorado received 

approval to cover pregnant women with family income between 134 and 185 

percent of the federal poverty level using SCHIP funds. Oregon also 

received approval on October 15, 2002, for a section 1115 waiver to 

expand insurance coverage for adults and children up to 185 percent of 

the federal poverty level using Medicaid and SCHIP funds. Oregon 

expects to cover an additional 60,000 individuals, but plans to phase 

in implementation of this expansion. On November 1, 2002, the state 

plans to expand its premium assistance program by paying between 50 and 

95 percent of premiums for eligible individuals with incomes up to 185 

percent of the federal poverty level, using both Medicaid and SCHIP 

funds.[Footnote 32] On February 1, 2003, Oregon plans to expand 

Medicaid and SCHIP eligibility to pregnant women and children with 

incomes up to 185 percent of the federal poverty level, and to other 

eligible individuals, including parents and childless adults, with 

incomes up to 110 percent of the federal poverty level. Further 

eligibility expansions may occur each quarter depending upon the 

availability of state funding.



A state that has used a waiver to expand Medicaid and SCHIP coverage 

may be prompted by shortfalls in its budget to limit these expansions. 

Of the states we reviewed, in January 2001, New Jersey expanded 

Medicaid and SCHIP coverage for parents earning up to 200 percent of 

the federal poverty level. In June 2002, however, New Jersey suspended 

new enrollment of adults in this program, increased the premiums and 

reduced the benefits for those already covered under the 

expansion.[Footnote 33] New Jersey’s program had exceeded the state’s 

3-year enrollment projection in 9 months.



Section 1115 waivers to expand insurance coverage under Medicaid and 

SCHIP can extend coverage to adults who would not otherwise qualify and 

who would have difficulty obtaining coverage elsewhere. However, we 

reported earlier that some waivers are inconsistent with the goals of 

the Medicaid and SCHIP programs and may compromise their fiscal 

integrity.[Footnote 34] For example, in approving Utah’s expansion, we 

concluded that HHS did not adequately ensure that the waiver would be 

budget neutral as required for approval. We estimated that Utah’s 

waiver, if fully implemented, could cost the state and federal 

governments $59 million more than without the waiver. We found that the 

state’s projection of what it would have spent without the waiver 

inappropriately included the estimated cost of services for a new group 

of people who were not being covered under the state’s existing 

Medicaid program. Although we did not review Colorado and Oregon’s 

waiver applications in our earlier report, we raised a broader legal 

issue about states’ use of SCHIP funds to cover adults without 

children, which Oregon’s recently approved expansion will do. In our 

earlier report, we found that HHS had approved an Arizona waiver 

proposal that would, among other things, use unspent SCHIP funding to 

cover adults without children, despite SCHIP’s statutory objective to 

expand health care coverage to low-income children. In our view, HHS’s 

approval of the waiver to cover childless adults is not consistent with 

this objective, and is not authorized. Consequently, we recommended 

that the Secretary of Health and Human Services not approve any more 

waivers that would use SCHIP funds for childless adults.[Footnote 35] 

In addition, we suggested that the Congress amend the Social Security 

Act to specify that SCHIP funds are not available to provide health 

insurance for childless adults.



Concluding Observations:



Health insurance for the majority of Americans who rely on employer-

based coverage could be threatened upon job loss. Federal and state 

laws provide some protections that are aimed at helping individuals 

maintain or obtain health insurance coverage in such circumstances. The 

protections offered, however, are not without limitations as 

individuals may find that bearing the full cost of the premiums--with 

no employer or state subsidies--may be beyond their financial means. 

While those who cannot afford health insurance may look to Medicaid or 

SCHIP for assistance, coverage for adults is hampered by limited income 

eligibility and other requirements, such as asset tests, that are 

likely to reduce the number of adults that can qualify for coverage. 

Some states have made recent efforts to use the flexibility available 

to them under Medicaid and SCHIP to expand their programs to help cover 

increased numbers of uninsured adults. Tighter budgets, however, are 

beginning to constrain some states’ ability to sustain insurance 

coverage expansions initiated during stronger economic times. Thus, 

despite program expansions, coverage under Medicaid and SCHIP may not 

be available to unemployed adults, while other state coverage options 

may be too costly for these individuals.



State Comments:



We provided a draft of this report for technical review to 

representatives of insurance departments, high-risk pools, and Medicaid 

programs in the six states we reviewed. Each of the states provided 

technical comments, which we incorporated as appropriate.



In addition, in its comments, Utah disagreed with our statement--based 

on findings in an earlier report--that HHS did not adequately ensure 

that the state’s section 1115 waiver met the budget neutrality test. 

The state contends that its waiver is budget neutral and is consistent 

with long-standing HHS budget neutrality practices. Since 1995, we have 

expressed concern that HHS’s methods for assessing budget neutrality 

allow the inclusion of certain costs that inappropriately inflate cost 

estimates and result in the federal government being at risk to spend 

more than it would have had the waivers not been approved.[Footnote 36] 

We believe that continued use of these methods is inconsistent with the 

long-standing requirement for section 1115 waivers to be budget neutral 

and inappropriately places the federal government at risk of increased 

cost for the Medicaid and SCHIP programs.



We did not obtain comments from HHS on this report because we did not 

evaluate HHS’ role or performance with respect to protections or 

programs that may benefit unemployed individuals.



As agreed with your offices, unless you publicly announce its contents 

earlier, we will plan no further distribution of this report until 30 

days after its date. At that time we will send copies to other 

interested congressional committees and other parties. We also will 

make copies available to others upon request. In addition, the report 

will be available at no charge on the GAO Web site at http:// 

www.gao.gov.



If you or members of your staff have any questions regarding this 

report, please contact me on (202) 512-7114 or Carolyn Yocom on (202) 

512-4931. Other major contributors to this report include JoAnn 

Martinez-Shriver, Michael Rose, and Michelle Rosenberg.



Kathryn G. Allen

Director, Health Care--Medicaid

and Private Health Insurance Issues:

Signed by Kathryn G. Allen:



[End of section]



Appendix I: HIPAA Group-to-Individual Portability in Six States:



HIPAA provides guaranteed access to coverage--”portability” from group 

to individual coverage--to eligible individuals who, among other 

criteria, had at least 18 months of coverage without a break of more 

than 63 days. Recognizing that many states had already passed reforms 

that could be modified to meet or exceed these requirements, HIPAA gave 

states the flexibility to implement this provision by using either the 

federal fallback or an alternative mechanism.



Under the federal fallback approach, insurers must offer eligible 

individuals guaranteed access to coverage in one of three ways. HIPAA 

specified that a carrier must offer eligible individuals (1) all of its 

individual market plans, (2) only its two most popular plans, or (3) 

two representative plans--a lower-level and a higher-level coverage 

option--that are subject to a risk spreading or financial subsidization 

mechanism.[Footnote 37] According to a 2002 report, 11 states opted for 

the federal fallback approach.[Footnote 38]



Under an alternative mechanism, states may design their own approach to 

guarantee coverage to eligible individuals as long as certain minimum 

requirements are met. Essentially, the approach chosen must ensure that 

eligible individuals have guaranteed access to coverage with a choice 

of at least two different coverage options. For example, one possible 

alternative mechanism is a state high-risk pool.



As shown in table 13 only one of the six states we reviewed relied on 

the federal fallback approach to ensure group-to-individual 

portability. The remaining states either relied on their high-risk 

pool, another alternative mechanism, or both.



Table 13: Approaches to Group-to-Individual Portability in Six States:



State: Colorado; Federal fallback approach: [Empty]; State alternative 

mechanism approach: High-risk pool: X; State alternative mechanism 

approach: Other: [Empty].



State: New Jersey; Federal fallback approach: [Empty]; State 

alternative mechanism approach: High-risk pool: [Empty]; State 

alternative mechanism approach: Other: X[A].



State: North Carolina; Federal fallback approach: X; State alternative 

mechanism approach: High-risk pool: [Empty]; State alternative 

mechanism approach: Other: [Empty].



State: Ohio; Federal fallback approach: [Empty]; State alternative 

mechanism approach: High-risk pool: [Empty]; State alternative 

mechanism approach: Other: X[B].



State: Oregon; Federal fallback approach: [Empty]; State alternative 

mechanism approach: High-risk pool: X; State alternative mechanism 

approach: Other: X[C].



State: Utah; Federal fallback approach: [Empty]; State alternative 

mechanism approach: High-risk pool: X; State alternative mechanism 

approach: Other: X[D].





ANew Jersey provided group-to-individual portability through its 

individual market guaranteed issue law.



[B] Ohio used a combination of its guaranteed issue law and guaranteed 

conversion to provide group-to-individual portability.



[C] Oregon provided group-to-individual portability by requiring 

insurers to offer eligible individuals, who were previously covered by 

their group health plan, a choice between a low-cost and a prevailing 

benefit plan. Although similar to the federal fallback approach, the 

state characterized this as an alternative mechanism.



[D] Utah used its high-risk pool to provide group-to-individual 

portability for individuals eligible for HIPAA who were deemed 

uninsurable. HIPAA-eligible individuals who did not meet the high-risk 

pool’s health underwriting criteria were guaranteed coverage in the 

private individual market.



Source: State information, October 2002.



[End of table]



[End of section]



Related GAO Products:



Medicaid and SCHIP: Recent HHS Approvals of Demonstration Waiver 

Projects Raise Concerns, GAO-02-817. Washington, D.C.: July 12, 2002.



Health Insurance: Characteristics and Trends in the Uninsured 

Population, GAO-01-507T. Washington, D.C.: March 13, 2001.



Health Insurance Standards: New Federal Law Creates Challenges for 

Consumers, Insurers, Regulators, GAO/HEHS-98-67. Washington, D.C.: 

February 25, 1998.



Medicaid Section 1115 Waivers: Flexible Approach to Approving 

Demonstrations Could Increase Federal Costs, GAO/HEHS-96-44. 

Washington, D.C.: November 8, 1995.



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FOOTNOTES



[1] See The Business-Cycle Peak of March 2001, National Bureau of 

Economic Research (Nov. 26, 2001). The National Bureau of Economic 

Research identifies recessions on the basis of several indicators, 

including employment, sales in the manufacturing and trade sectors, and 

industrial production. 



[2] The U.S. Bureau of Labor Statistics characterizes individuals as 

unemployed if they are at least 16 years of age, do not have a job, 

have actively looked for work in the prior 4 weeks, and are currently 

available for work. Persons who were waiting to be recalled to a job 

from which they had been laid off need not have been looking for work 

to be classified as unemployed. Persons who have lost a job and are not 

looking for work are not counted as unemployed.



[3] Our national review included the District of Columbia, which we 

referred to as a state for purposes of this report. 



[4] According to the 2000 Medical Expenditures Panel Survey (MEPS), 59 

percent of all firms offer health insurance coverage, with 97 percent 

of firms with more than 50 employees and 47 percent of firms with fewer 

than 50 employees offering coverage. 



[5] According to the 2000 MEPS data, firms with fewer than 50 employees 

paid an average of 85 percent of the premiums for single coverage and 

72 percent for family coverage. Larger firms (with 50 or more 

employees), paid an average of 82 percent of the premiums for single 

coverage and 77 percent for family coverage. 



[6] For 2002, the federal poverty level is $8,860 a year for a single 

individual and $15,020 for a family of three. Medicaid eligibility is 

mandatory for all children born after September 30, 1983, whose family 

incomes are less than or equal to the federal poverty level. See 42 

U.S.C. § 1396a(a)(10)(A)(i)(VII), (l)(1)(D) and (l)(2)(C) (2000).



[7] The Personal Responsibility and Work Opportunity Reconciliation Act 

of 1996, Pub. L. No. 104-193, 110 Stat. 2105.



[8] Under section 1115 of the Social Security Act, the Secretary of 

Health and Human Services can waive many of the statutory requirements 

in the case of experimental, pilot, or demonstration projects that are 

likely to promote Medicaid’s objectives. See 42 U.S.C. § 1315 (2000). 

Use of this authority allows states to provide services or cover 

individuals not normally eligible for Medicaid and SCHIP and to receive 

federal funds under these programs for services and populations not 

otherwise eligible. To receive approval for waivers, states must show 

that expansions of coverage should not result in the federal government 

spending more money in the state than would have been spent in the 

absence of the waiver. We have reported that section 1115 waivers 

approved for several states were not budget neutral. See Medicaid 

Section 1115 Waivers: Flexible Approach to Approving Demonstrations 

Could Increase Federal Costs, GAO/HEHS-96-44 (Washington, D.C.: Nov. 8, 

1995) and Medicaid and SCHIP: Recent HHS Approvals of Demonstration 

Waiver Projects Raise Concerns, GAO-02-817 (Washington, D.C.: July 12, 

2002).



[9] SCHIP allows a state to expand eligibility up to 50 percentage 

points above its Medicaid income eligibility standard in 1997. As with 

the Medicaid program, SCHIP allows states to set their own income and 

asset eligibility criteria. 42 U.S.C. § 1397jj(b)(1)(B)(ii) (2000).



[10] See U.S. General Accounting Office, Health Insurance: 

Characteristics and Trends in the Uninsured Population, GAO-01-507T 

(Washington, D.C.: Mar. 13, 2001).



[11] Established in 1935 by the Social Security Act, the Unemployment 

Insurance Program is funded through federal and state taxes levied on 

employers. 



[12] On March 9, 2002, the President signed the Temporary Extended 

Unemployment Compensation Act of 2002, which provides eligible 

individuals with up to 13 weeks of federally financed extended 

unemployment benefits. Pub. L. No. 107-147, Tit. II. 116 Stat. 21, 26.



[13] While all states have enacted laws that require insurers to 

provide certain health care benefits, certain types of health insurance 

plans are exempt from these requirements. The Employee Retirement 

Income Security Act of 1974 generally preempts states from regulating 

employers that assume the risk for, or “self-fund,” their employees’ 

health benefits.



[14] Pub. L. No. 99-272, 100 Stat. 83, 222 (1986).



[15] Pub. L. No. 104-191, 110 Stat. 1937, 1939.



[16] Under certain circumstances unrelated to job loss, such as the 

case of a covered employee’s death, spouses and dependent children are 

able to continue group coverage under COBRA for up to 36 months. 



[17] The Trade Act of 2002, Pub. L. No. 107-210, enacted on August 6, 

2002, gives eligible individuals an immediate 65 percent refundable tax 

credit for certain health insurance coverage, including COBRA coverage. 

The credit, which takes effect in November 2002, is for workers who 

lose their job as a result of trade agreements and for retirees age 55 

to 64 who lack health care benefits and whose former employer’s pension 

plan was taken over by the Pension Benefit Guaranty Corporation. The 

Congressional Budget Office estimated that this legislation would 

increase the number of workers eligible for coverage by about 50 

percent, to nearly 200,000 annually; the refundable portion of this 

credit is estimated to cost the federal government $1.6 billion over 

fiscal years 2003 through 2012. 



[18] Costs were calculated based on 102 percent of average monthly 

premiums for employer-sponsored health plans. See The Kaiser Family 

Foundation and Health Research and Educational Trust, Employer Health 

Benefits: 2002 Annual Survey (Menlo Park, Calif.: 2002). 



[19] Jennifer N. Edwards, Michelle M. Doty and Cathy Shoen, The Erosion 

of Employer-Based Health Coverage and the Threat to Workers’ Health 

Care: Findings from The Commonwealth Fund 2002 Workplace Health 

Insurance Survey (New York, N.Y.: 

August 2002).



[20] HIPAA also provides protections for individuals changing jobs and 

obtaining other coverage by setting group market limitations on 

preexisting conditions, exclusion periods, previous coverage credit 

requirements, and prohibitions on exclusions based on health status.



[21] Begun in 1998 as a state-funded program, Oregon’s premium 

assistance program paid from 70 to 95 percent of the health insurance 

premiums for individuals with incomes below 170 percent of the federal 

poverty level. The program had over 3,300 enrollees and a waiting list 

of more than 29,000 as of June 2002. With the newly approved federal 

waiver, the program will pay from 50 to 95 percent of health insurance 

premiums for individuals with incomes up to 185 percent of the federal 

poverty level. Expanded eligibility for premium assistance is scheduled 

to begin on November 1, 2002. The state expects enrollment in the 

program to increase by approximately 25,000 people, with enrollment to 

be limited based on the availability of state funding. 



[22] Costs were calculated based on 102 percent of average monthly 

premiums for employer-sponsored health plans. Actual costs of state 

continuation coverage may be higher or lower depending on the 

characteristics of the firm or health insurance policy. See The Kaiser 

Family Foundation and Health Research and Educational Trust, Employers 

Health Benefits: 2002 Annual Survey (Menlo Park, Calif.: 2002).



[23] HIPAA does allow individuals to have a break in coverage of 63 

days or less and still remain eligible.



[24] For individuals eligible for HIPAA, Ohio statute limits the rate 

to twice the midpoint rate charged any other individual with a policy 

with similar copayments and deductibles. For individuals not eligible 

for HIPAA, Ohio statute limits the rate to 2.5 times the highest rate 

charged to any other individual with a policy with similar copayments 

and deductibles. 



[25] Although New Jersey did not regulate premium rates, insurers were 

required to pay at least 75 cents in benefits for every dollar received 

in premiums or refund a portion of the premiums.



[26] The four remaining standard plans can either be indemnity plans or 

preferred provider organizations (PPO). The indemnity plans allow 

individuals to choose any physician or hospital for care, while the 

PPOs pay for a greater portion of care received from a selected panel 

of doctors and hospitals typically reimbursed on a fee-for-service 

basis.



[27] Nationally, 30 states have high-risk pools. See Communicating for 

Agriculture & the Self-Employed, Comprehensive Health Insurance for 

High-Risk Individuals: A State-by-State Analysis. (Fergus Falls, Minn.: 

2002).



[28] The number of individuals covered by standard plans in New Jersey 

declined by almost 14,000, from 97,790 individuals in the first quarter 

of 2001 to 83,896 people in the first quarter of 2002.



[29] However, on October 15, 2002, Oregon received federal approval to 

expand Medicaid and SCHIP eligibility for children and adults in 

families with incomes up to 185 percent of the federal poverty level. 

Increased eligibility levels for most adults will be phased in over 

time while eligibility for children and pregnant women is scheduled to 

be increased to 185 percent of the federal poverty level on February 1, 

2003. 



[30] While income eligibility levels for adults in New Jersey is 

currently under 50 percent of the federal poverty level, adults already 

enrolled in Medicaid may have higher incomes due to increased 

eligibility levels established by the state in the past. 



[31] Upon implementation of Oregon’s expansion, which is expected to 

begin on February 1, 2003, Medicaid and SCHIP coverage for children 

will increase from 170 percent of the federal poverty level to 185 

percent of the federal poverty level. 



[32] Prior to the approved waiver, the Oregon premium assistance 

program used state-only funding that paid from 70 to 95 percent of the 

health insurance premiums for approximately 3,700 individuals with 

incomes below 170 percent of the federal poverty level. Due to budget 

constraints, however, new enrollment in the state-only premium 

assistance program was limited for 3 years, and had a waiting list of 

more than 29,000 people. Under the waiver, the state is limiting 

enrollment due to the availability of state funding and estimates that 

an additional 25,000 people will be covered. 



[33] A recent study indicates that many states plan to decrease 

Medicaid spending in various ways, including limits on enrollment and 

retrenchment from program expansions. See Victoria Wachino, Kaiser 

Commission on Medicaid and the Uninsured, State Budgets Under Stress: 

How are States Planning to Reduce The Growth in Medicaid Costs? 

Preliminary Results based on the Kaiser Commission on Medicaid and the 

Uninsured 50-State Survey (Washington, D.C.: July 30, 2002).



[34] See U.S. General Accounting Office, Medicaid and SCHIP: Recent HHS 

Approvals of Demonstration Waiver Projects Raise Concerns, GAO-02-817 

(Washington, D.C.: July 12, 2002). 



[35] HHS does not concur with our position that the spending of SCHIP 

funds is not authorized for childless adults. Subsequent to our 

recommendation, the Secretary approved New Mexico’s and Oregon’s waiver 

requests, on August 23, 2002, and October 15, 2002, respectively. Both 

states intend to use SCHIP funds to cover childless adults. 



[36] For a more detailed discussion of this issue, see GAO-02-817, 

pages 19-20, 34-35. 



[37] See U.S. General Accounting Office, Health Insurance Standards: 

New Federal Law Creates Challenges for Consumers, Insurers, Regulators, 

GAO/HEHS-98-67 (Washington, D.C.: Feb. 25, 1998).



[38] See Communicating for Agriculture & the Self-Employed, 

Comprehensive Health Insurance for High-Risk Individuals: A State-by-

State Analysis. (Fergus Falls, Minn.: 2002).



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