State saves by picking up health-care tab

As a single mother of six, with four sons still at home, Roberta Reynolds once feared she couldn't afford to keep health coverage for herself with her state job at Peninsula Community Health Services in Aberdeen.

Reynolds' $39,000 annual income was low enough to get her four youngest sons covered by Medicaid, the government health plan for the poor. But Reynolds still had to buy her own coverage.

Then the state did some simple math: Medicaid was spending $320 a month for the boys. Yet it would cost only $238 a month to cover all four of them — and their mother, too — through her employer's Regence BlueShield plan. Now Medicaid repays Reynolds for that entire monthly premium to Regence, and her family is covered.

The money is "a big benefit for me," said Reynolds, 42. "Two hundred some dollars a month is my electric bill and gas bill and more groceries."

Reynolds and her sons are among 1,300 people who have switched to their employers' health plans since the state quietly began enticing Medicaid clients with offers to pay their full premiums two years ago. Medicaid officials project that in two years, the pilot program could have 5,000 people, saving the system $3 million a year.

Although some worry that the program could eventually backfire, it's part of a growing — though still piecemeal — effort by businesses, labor and government to get more people on health insurance while also reining in costs.

"There is no reason not to participate for the client," said Thuy Hua-Ly, a state Department of Social and Health Services deputy director who helps oversee the project.

"There is nothing to lose."

Potential savings

Nationally, the average total premium for family health coverage is $11,484 a year, more than some people earn in wages, according to a survey released in September by Kaiser Family Foundation and Health Research and Education Trust. Every year fewer people are covered by employers' plans, while enrollment in public health plans has been swelling and more Americans than ever are uninsured.

Some employers are increasingly requiring workers to pay higher premiums and deductibles or to take more personal responsibility for their health. Many are dropping health coverage altogether.

In turn, several states, including Washington, have unsuccessfully attempted to force large companies such as Wal-Mart to spend more on health benefits.

So a program to pay Medicaid families to buy into their employers' plans "is a good way to stretch limited public dollars and also make it more likely for people to get coverage," said Rick Curtis, president of Institute for Health Policy Solutions in Washington, D.C.

The potential savings are huge. In Pennsylvania, which has the nation's largest such subsidy program, 23,500 people are now covered, saving Medicaid $88 million a year. However, the program is mandatory for qualified families, while Washington's is not.

Under Washington's pilot project, the state, so far, is subsidizing 520 Medicaid families — a total of about 1,300 people — employed at more than 200 companies where at least one parent is eligible for health coverage. Companies include some of Northwest's best-known employers, among them Nordstrom, Costco, Amazon.com and Alaska Airlines.

Medicaid officials comb applications to find Medicare recipients who work in such jobs, focusing on large employers most likely to offer health insurance. If the employee premiums are less than Medicaid's costs for the same family, the state contacts the family and offers to reimburse their portion of the premiums.

Under the program, Medicaid pays only the employee portion of the premium, not the employer's. Typically, employees pay about a quarter of the total insurance premium, with the employer paying the rest, according to the Kaiser survey.

Washington spends an average of $173 a month per person on Medicaid. But it pays only about $76 a month in premiums to put a person on an employer's plan, plus another $16 a month for any services not covered by some employer's plans, such as vision and dental.

Hurdles for program

Even so, the effort hasn't been without hurdles.

So far, fewer than 30 percent of the eligible families contacted by Medicaid have agreed to switch. Hua-Ly thinks that's largely because many workers have to coordinate their participation with their companies' narrow open-enrollment periods for starting or changing benefits.

Hua-Ly said possible solutions might include requiring participation from families, like Pennsylvania does, along with allowing plans to waive the open-enrollment periods for Medicaid clients.

Still, some worry that the whole program could backfire. A report by the National Conference of State Legislatures three years ago warned that employers could respond to added health costs by passing the costs to workers or eliminating coverage altogether.

Perhaps because Washington's program is still small, it has not generated any such reaction.

For instance, Wal-Mart, which has been criticized for having nearly half of its employees' children either uninsured or on Medicaid, has 37 Washington workers receiving reimbursements from Medicaid to stay on company coverage.

Dan Fogleman, a Wal-Mart spokesman in Bentonville, Ark., said the company historically has borne two-thirds of the cost of premiums, but the company doesn't object to the government paying Wal-Mart workers' share. On the contrary, Wal-Mart's employee benefits are "there for people who are eligible to take advantage," Fogleman said.

Reynolds and her family have found that having insurance through her employer has made it easier to see specialists for one of her sons, who has epilepsy, and another, who has a thyroid problem.

But best of all, Reynolds says, she now has free health insurance for herself. Even a couple of hundred of dollars a month means that much more she can do for her sons.

"It's a lot of money for a single parent," she says. "If you spend it wisely, you can make it go where it needs to go."

Kyung Song: 206-464-2423 or ksong@seattletimes.com