CHIP: state program serving
4,000 uninsurable Illinoisans

The Illinois Comprehensive Health Insurance Plan (CHIP) is a microcosm of the huge dilemma of providing health insurance for those who can't get it. It covers a subset of a subset of the uninsured population in Illinois and cries for expansion. It is a three-year-old state-run insurance program with limited funds and limited enrollments for those who can afford high insurance premiums but who are turned down by regular insurance. The least-served by it are those who aren't on welfare but don't have a lot to spend on health insurance. But if CHIP were expanded, it scares some with its potential to become a black hole for state revenue.

The original intent of CHIP was to provide protection against financial catastrophe for the medically uninsurable. The uninsured are those who don't have health insurance because they can't afford it. The uninsurable are those who can afford a premium but can't get a private insurance company to sell them a policy at any price because they have some medical condition or hazardous job that makes them a high financial risk for the insurer.

The legislation that created CHIP in 1987 states that it is not intended to be a panacea or even an entitlement. It is supposed to provide access to health insurance for as many uninsurable as the CHIP budget for a given year will allow. Obviously, for the more than 7,000 who have been covered by CHIP since its inception, it has given them a level of security they never had before. But can and should CHIP be anything more?

CHIP is an insurance risk pool funded by the premiums paid by some 4,000 enrollees and by state general revenue funds. Its enrollment is capped at 4,500, but state funding places further limits on the program. In fiscal year 1992, CHIP'S budget was $35 million, with general revenue funds paying $17.8 million in medical bills not paid for by premiums. For fiscal 1993, CHIP'S general revenue funds were reduced to $17.4 million. CHIP estimates that its total spending for fiscal 1993 will be $35.7 million, of which $16.3 million will be covered by premiums and interest income. There were 4,308 enrolled in CHIP on June 26, with 1,059 on its waiting list. CHIP estimates there are from 50,000 to 145,000 more uninsurable Illinoisans who either haven't tried to access CHIP or find it impractical because of the very high CHIP premium cost or the long delay before they attain full coverage.

CHIP program administrators fully acknowledge that thousands of uninsurable Illinoisans are in limbo, unable to get insurance from anywhere including CHIP, and that access should be made easier. But with fewer state funds to help cover the medical claims at the same time health costs are rising, CHIP estimates only 4,020 can be enrolled by next June. The average stay on the waiting list will also get longer, says Richard W. Carisen, CHIP executive director. Applicants now wait about eight to 10 months for coverage, but by next June the waiting list is expected to grow to 1,526 and the waiting period for coverage may take well over one year.

Yet CHIP does work for those who are enrolled. As former assistant director for the Illinois Department of Insurance, Carlson says, "The biggest frustration I had was constituents of legislators looking for insurance. They maybe had open-heart surgery or something, and no insurance company would touch them." Carlson says CHIP has put a big dent in this problem. "There are thousands of people in Illinois whose lives have been improved because they don't have to go into personal bankruptcy or not seek medical care. It's a lot better than it was three years ago, when there was nothing. A lot of these people have never had insurance in their lives."

But some disability activists who have been in the forefront of the battle for access to health insurance in Illinois and other states see the "risk pool" concept on which CHIP is modeled as hopelessly flawed and inherently designed to exclude those who need it most. "It does nothing for those between the poverty level and the upper middle class, which is the bulk of the disabled population," says Josephine Holzer, executive director of the Council for Disability Rights in Chicago.

The average annual CHIP premium is approximately $3,750. Enrollees are from across the state: 44 percent in Cook County and collar county suburbs; 11 percent in Chicago; 12 percent in metropolitan areas downstate; and 33 percent from other downstate areas. About as many men as women are enrolled, and the median age is about 45, although 33 percent are between the ages of 55 and 64, and 17 percent are under age 25.

The political impetus that led to CHIP'S creation came in 1983 when then-Illinois Atty. Gen. Neil F. Hartigan gathered

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leaders of the disabled community to help set priorities for the disabled persons advocacy division in the Attorney General's Office. "I told them to list three things that were possible to achieve and one thing that was impossible. The impossible one was health insurance," Hartigan says.

Comprehensive Health Insurance Program: its board and offices The CHIP program has a 16-member policy board, chaired by Department of Insurance Director Stephen F. Selcke. He and two other board members serve by virtue of their state government positions. The other two are Atty. Gen. Roland W. Burris and Johanna Lund of Rockford, who is chairperson of the Illinois Health Care Cost Containment Council. She is also president of Health Care Consultants Inc. and president of the Rockford Council on Affordable Health Care. The board recently rebid the CHIP administrator contract, selecting Blue Cross/Blue Shield with expectations of saving $300,000 in fees compared to the prior administrator under contract, according to CHIP'S executive director, Richard W. Carlson. CHIP has its main office in Springfield at 400 West Monroe and a consumer services office in Chicago in the James R. Thompson Building (formerly the State of Illinois Center), 100 West Randolph. The CHIP board has nine members appointed by the governor and four members of the General Assembly. Public members: Robert L. Adier of Chicago, insurance consultant and retired president and CEO, Associated Agencies, Chicago, and past board chairman of the Jewish Federation of Chicago; Russell Aberding of Lake Bluff, consultant on benefit plan communication and preretirement planning and retired principal, Wm. M. Mercer Inc.; Howard J. Bolnick of Chicago, president, Celtic Life Insurance Company, and a fellow of the Society of Actuaries; Joan E. Cummings, M.D., of Glen Ellyn, director, Hines V.A. Hospital, and former president, Chicago Medical Society, Hines/Loyola Branch; Raymond J. DeFilippo of Bloomington, retired director of Group & Health Insurance, Country Life Insurance Company, and a registered health insurance underwriter; Richard F. Kotz of Glencoe, assistant corporate general counsel and assistant secretary. Sears, Roebuck & Company, and board member. Mental Health Association of Greater Chicago; Saul J. Morse of Springfield, an attorney who was 1985 Disabled Advocate of the Year; Deborah Oughton of Brookfield, former board member, Illinois Head Injury Association, and past director of State Mandates Office; and Bryan W. Swank of Waukegan, vice president, Swank Insurance Agency, and treasurer, Statewide Insurance Company, Legislative members: Sen. Howard W. Carroll (D-l, Chicago), chairman of the Senate Appropriations I Committee and an attorney; Rep. Robert P. Regan (R-80, Crete), minority spokesman of the House Registration and Regulation Committee and an insurance broker who operates his own agency; Rep. Nelson G. Rice Sr. (D-33, Chicago), chairman of the House Insurance Committee and an insurance agent, partner in general insurance agency. Caroline Gherardini

There was no shortage of horror stories about personal bankruptcies of people paying astronomical hospital bills for themselves or uninsurable relatives. Holzer remembers the frustration of receiving countless calls from despondent people who couldn't get coverage for what insurers called preexisting conditions. "It was used as a weapon. It was a label, and it opened the door for insurance companies to deny you anything." She remembers talking to a mother who took her child to the emergency room with a severe ear infection. The mother said the insurer refused to pay because the child had cerebral palsy.

Hartigan became convinced that lack of access to health insurance made it hard for many to get jobs or to switch jobs since they either could not afford to give up their public medical coverage or risk losing the insurance coverage they had with a present employer. The issue was not limited to Illinois nor to insurance for disabled citizens. Other large groups of so-called high risk people like farmers needed access to insurance. The most common approach by the states was to establish insurance risk pools limited to the uninsurable with the individual paying a higher premium than normally charged for insurance. In Illinois, after the individual has paid the premiums, deductibles and copayments for medical expenses, any remaining medical expenses are covered by the state. Twenty-six states now have health insurance access programs similar to CHIP, but in many other states insurance companies or hospitals are assessed fees to augment revenues received from the premium payments.

Illinois law requires that CHIP enrollees pay 135 percent of the highest premium an individual would pay for comparable coverage from a major insurer. After a deductible, 80 percent coverage is provided until a maximum out-of-pocket annual expense is reached of $2,500 per individual and $5,000 per family. After the maximums are reached, 100 percent coverage is provided by the state via CHIP. Premiums are set according to age, gender and geography. For example, a 45-year-old female in Chicago with the lowest deductible would pay $426 per month. That same female in Carbondale would pay $268. For those on Medicare, a supplemental plan is available. Premium rates have been adjusted four times since CHIP'S inception to keep up with the insurance market's comparable coverage as required by law. Current rates were effective in August. Illinois CHIP has no family rates. Individual premiums are charged for every family member enrolled. If that Chicago female is married to an uninsurable man of the same age, his premium would be an additional $367 monthly. In Carbondale, it would be $227.

The coalition that pressured for CHIP was born of the group Hartigan got together that day in 1983. CHIP legislation was signed by Gov. James R. Thompson in February 1987. Because of disputes over how and at what level the program should be funded, the first policy wasn't

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issued until May 1989.

Although Holzer was a part of the coalition, she lost her enthusiasm before the legislation was even passed as she saw it slowly being compromised away. "How it was originally envisioned was nothing like how it really was. We had to give most of it away, which was the reality if we were going to get anything passed." Holzer says the premiums are too high, and for the great majority of people with disabilities who aren't on welfare the long wait makes it unrealistic.

The long wait is especially a problem for people with AIDS, says Justin Hayford, case manager for the AIDS Legal Council of Chicago. "It makes it pretty much useless for them because they don't last that long. But I tell them to sign up for it anyway. You never know." In the last year, Hayford says, the council has handled about 300 cases involving people with AIDS and medical bills. He says none of these clients have been on CHIP. Of those with AIDS who can't get medical coverage, he says, "They go on public aid or they leave a lot of unpaid bills. No one can sue them because they don't have any money." CHIP has enrolled about 60 people with AIDS, and currently has about 40, according to CHIP director Carlson.

While no precise statistics show how many Illinoisans are medically uninsurable, CHIP estimates they may be roughly 5 to 10 percent of the 1.5 million uninsured in Illinois. That puts the potential need for CHIP as high as 145,000 above current capacity. Howard Bolnick, president of Celtic Life Insurance in Chicago and member of the board that oversees CHIP, says this gap shows, "The problem isn't access to insurance but the cost of medical care. Here are people who now can get insurance but can't afford it."

Carlson and Bolnick don't see the need for draconian backtracking. They think CHIP is flexible enough to do more to accommodate those in limbo. Bolnick sees it as a promising vehicle for developing the kind of public-private insurance partnership he says is the only answer for someday insuring everyone. "We are a private system, and we have certain limitations. Only so much can be done by enterprises that involve a risk. We haven't figured out how to make a seamless system between public and private, and that's why there's a gap. When it's all over, that's what we're going to end up with."

Bolnick thinks an additional funding source should be found in Illinois to subsidize a sliding scale to make CHIP premiums more affordable. He thinks the idea of an assessment on hospitals and health facilities, as is done elsewhere, is the most sensible approach since they share a role in creating the high cost of health care.

Carlson thinks a more reasonable premium could be made available if CHIP was amended to include a $1,500 and $2,500 deductible option in addition to the current $500 and $1,000. He is convinced a third funding source will be needed if CHIP is to be expanded. Many other states, Carlson says, assess insurance companies for excess cost for their pools but give them a corresponding tax break. He says that doesn't make sense in Illinois and wouldn't get much support because it is just a backdoor means of the state paying more. Florida, Wisconsin and Minnesota, he says, assess insurance companies but don't give them a tax break. California generates revenue through a cigarette tax. Carlson says, "The target of the assessment will object vehemently and probably will succeed in stopping it."

Massachusetts has tried a different approach to broaden its program to the uninsurable who are disabled. Bill Henning, director of the Cape Organization for the Rights of the Disabled (CORD) in Massachusetts, says the solution is to avoid risk pools completely. "It's a quick fix with no long-range solution." Henning says when CORD led the push for an insurance plan in Massachusettes, it would have no part of any discussion of risk pools. He feared high premiums, restrictions and limited enrollment would shut out the great majority of those needing it. Today Massachusetts has a program called Commonhealth, which provides comprehensive coverage for people with disabilities who are employed for at least 30 hours a month. The sliding scale means the premium for a family of two with an annual income of between $27,000 and $31,000 is $68 a month. But Commonhealth has its flaws too. It currently serves 3,000 people at a cost of $15 million, and CORD is fighting efforts by some legislators to cap enrollment to control costs. Henning admits it's not the ultimate solution. "The whole idea is to keep the thing alive until we get some kind of national health plan. But we just couldn't wait forever."

Until some greater solution is found for the nation's health care dilemma of rising medical costs and shrinking access to care including the uninsurable, Hartigan says it's important to keep CHIP growing. "There's a cost to doing things and a cost to not doing things. This isn't something for nothing. This is an investment. What happens if you can't get in? You spend all the money you've got and you go on welfare."

Carlson agrees. "It's clear that the demand is there. What it's going to take is public pressure and the realization that costs are shifted to other areas as a result of this. Ultimately, none of this is free. If we can make an argument that the state pays one way or another, we can make an argument for expanding the program."

A few months ago, I tried to access CHIP. My wife and I both fit the profile of the kind of person it is intended to serve. We both have neuromuscular disorders and use wheelchairs, and private health insurers won't come near us. What's frustrating is the denial is based on perception, not on medical history. I have never had a major surgery or illness in my life. I've never even had a cavity.

But no one will touch us so we turned to CHIP. The delays for full coverage notwithstanding, we knew CHIP would not work for us in its present form because our monthly premium would be $496. We are among those in that CHIP limbo. We're still looking, hoping there's an alternative besides public aid.

Mike Ervin is a Chicago writer.

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