Yesterday brought great news – as of next month, the children’s health insurance crisis in New Jersey will be officially over. All uninsured children, regardless of family income, will have access to “quality, affordable healthcare insurance”. The beauty of the state’s new plan is that a federal expansion of SCHIP was not required nor was additional funding from taxpayers necessary.

Starting in January 2008, a new program will allow parents, at any income level with uninsured children, to buy into the FamilyCare program at the same rate Horizon Blue Cross-Blue Shield charges the state.

FamilyCare is currently comprised of Medicaid and SCHIP. Medicaid offers coverage for uninsured children from families with incomes up to 200 percent above poverty ($41,300 for a family of four). SCHIP offers coverage for uninsured children whose families earn up to 350 percent above the poverty line ($72,275 for a family of four). The new FamilyCare expansion plan will be available for all uninsured children regardless of family income.

As in the past, children enrolled in Medicaid will receive coverage at no cost to their parents and those covered by SCHIP will pay monthly premiums ranging from $18.50 to $125 a month, depending upon family income. The FamilyCare expansion plan will cost parents $137 a month for one child, $274 for two children or $411 for three or more kids – the same rate the state pays for SCHIP.

Today we noticed several people trying to downplay the fact that a federal expansion of SCHIP and taxpayer subsidies weren’t required to bring access to “quality, affordable healthcare insurance” to all New Jersey children. Interestingly, the topic of cost shifting has come up.

Blue Jersey’s Juan Melli in his post, Affordable Healthcare for Kids: How It's Done, points to an article in today’s New York Times and highlights this quote:

As many as 15,000 children who currently lack insurance could enroll in the program, which will take effect on Jan. 1. In contrast to comparable efforts in other states, the program would cost New Jersey nothing because Horizon, a nonprofit company, would absorb what Karen L. Clark, president and chief operating officer of the Horizon subsidiary Horizon NJ Health, said could be up to a $1 million loss in the first year.

We also noticed Horizon’s CEO, Karen Clark, was quoted in today’s Star-Ledger:

Karen Clark, president and CEO for Horizon NJ Health, said the company is enthusiastic about the partnership, even though it expects it to be a money-loser that could cost $500,000 a year.

Of course, Horizon, like any for-profit or nonprofit insurance company, can’t pay out more in claims than it receives in premiums. If the company expects to lose $500,000 to $1,000,000 on the NJ FamilyCare expansion plan, it will raise rates on other policy holders in order to achieve an overall breakeven.

Healthcare cost shifting is something we have been trying to explain for months to Blue Jersey’s resident “political scientist”, Thurman Hart - to no avail. Perhaps he and others will get it now that “progressives” have pointed out “how it’s done”.

If Horizon expects to lose, take the high-end of the estimate, $1,000,000, insuring 15,000 children at the state SCHIP rate of $137 per month, it will lose $66.67 annually per child. This means Horizon will also lose the same amount per child for those it covers under the SCHIP program. (New Jersey’s SCHIP currently covers 113,000 children.) To make up these losses, Horizon will raise rates on its private policy holders to ensure it takes enough in premiums to pay anticipated claims.

That’s called cost shifting and it happens under every government health insurance program. This is minor, only $5.56 per month, per child, comapred to other goverment programs. (A topic for another post.) But clearly, taxpayers are better off with this expanded FamilyCare arrangement than with a federal SCHIP expansion. All uninsured children, regardless of family income, will be eligible and it won’t cost taxpayers a dime more.

If Democrats in Congress had prevailed on their SCHIP expansion plans – New Jersey’s federal and state taxpayers would had to pay for it, fewer children would have been eligible and Horizon would still be raising rates on private policy holders to make up losses.

Expanding S-CHIP: Let’s Skip the Middlemen In Washington

There’s nothing stopping states from expanding the State Children's Health Insurance Program (S-CHIP). New Jersey’s S-CHIP currently costs $480 million - $312 million from federal taxpayers and $168 million from state taxpayers. If the people of New Jersey want to extend the benefit to more citizens, all the state need do is fund it to whatever level of expansion desired.

So, why isn’t the state expanding NJ Family Care, its S-CHIP program? To fund an expansion the state would have to cut spending elsewhere in its budget or raise taxes (which is exactly the same thing the federal government will need to do to expand the program nationwide).

Given these options, Governor Jon Corzine and state legislators have decided not to fund an S-CHIP expansion, but would be thrilled to take credit for it if some other taxpayers could be found to pay for it. They’ve set their sites on federal taxpayers, who just happen to live in New Jersey.

For every tax dollar New Jerseyans send to Washington, New Jersey receives just 55 cents in return, the lowest return of the 50 states. This is to be expected because poorer states send fewer tax dollars to Washington and receive more help from the federal government. New Jersey is the first or second richest state in the nation and therefore, its citizens are taxed more heavily by the federal government and receive fewer benefits in return.

It doesn’t make financial sense for New Jerseyans to send additional tax dollars to Washington to expand a healthcare program for New Jersey - especially when 45 cents on every dollar is lost in the process. That would be a heavy price to pay merely to allow state lawmakers to take credit for extending a benefit while avoiding blame for raising taxes to pay for it.

If the goal is to double the number of people covered through NJ S-CHIP, the state will need $480 million. This can be achieved by earmarking one-half of last year’s sales tax increase to pay for expanding the program rather than using it for “property tax relief”. Or other state taxes can be increased by $480 million.

If the expansion is funded through the federal government, New Jersey taxpayers will need to send Washington an additional $696 million to receive $480 million in return. There are better ways to make healthcare insurance more affordable in New Jersey, but if we must expand NJ S-CHIP, let’s skip the middlemen in Washington.