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REPORT

A Community Expands Access To Health Care: The Case Of Access Health In Michigan

Abstract

 
Access Health, a Michigan-based "three-share plan," is viewed as a successful community-based approach to expanding health benefits in the workplace. It was the stimulus for recently proposed legislation to federally fund similar plans nationally. The program evolved with the support of the W.K. Kellogg Foundation. Its sustained viability is attributable in part to the creative use of a state statute to draw down federal Medicaid disproportionate-share hospital (DSH) funds. Although it faces obstacles common to programs of its type, the program’s greatest financial vulnerability rests on the uncertain continued availability of the monies it uses to subsidize the program.

Although employment is the largest source of health insurance, employers generally regard health benefits as a voluntary compensation arrangement, and the availability and nature of this benefit vary as a function of business priorities. Federal and state public programs are aimed at those farthest from the reach of employment-based health coverage: the elderly, the disabled, and poor families. The uninsured are stuck in the middle of this yawning gap between private and public sources of access to care. In the absence of employment-based or broad government-based solutions, it may behoove us to consider the seeds of change taking root in local public/private initiatives.

This report tells the story of Access Health in Muskegon, Michigan. Access Health is generally regarded as a successful community-based approach to expanding health care coverage to uninsured workers at small firms. It was the stimulus for proposed legislation to federally fund related programs in all fifty states.³ Access Health is a "three-share plan": Employers and employees each pay 30 percent of the cost of the program, and the community pays the remainder.

Here we discuss the origins of Access Health and the vision of its sponsor, the W.K. Kellogg Foundation; identify key issues in the plan’s evolution; and describe the program today. With support from the Kellogg Foundation, we conducted extensive interviews in Muskegon and Lansing, Michigan; examined board minutes; reviewed relevant literature; and had numerous follow-up conversations with program staff. This all took place between summer 2003 and spring 2004.

Origins Of Access Health

Top Origins Of Access Health Access Health Evolves Access Health Today Lessons Learned Is Access Health Sustainable? NOTES

 
Access Health would not have evolved—certainly not when or how it did—were it not for the support of the Kellogg Foundation. In 1994 Kellogg launched its Comprehensive Community Health Models (CCHM) Initiative, a partnership with foundations in three Michigan communities, with the objective of improving the public’s health care by developing "alternative, comprehensive, high quality, and affordable health services models and [in-forming]...policymakers of project results."⁴ At least some Muskegon stakeholders believed that Kellogg considered existing health care systems wasteful and inefficient—the result of compounding irrational responses to fierce market competition. Kellogg designed the CCHM Initiative to initiate change from within. The aim was to encourage all major stakeholders in a community—consumers, providers, and payers—to redirect the flow of resources to broaden coverage and increase health care quality by creating a more efficient and effective health care system. To many, this approach appeared both logical and feasible.

A CCHM planning grant enabled local leaders in conjunction with the Community Foundation of Muskegon County to establish the Muskegon Community Health Project (MCHP). The MCHP faced major obstacles from the start. Its charge was to involve all major stakeholders—who came to the table with different levels of knowledge about the local health care system and sometimes divergent interests—and to achieve through collaboration a common vision for change. Adding to this challenge was the need to reconcile the Kellogg/CCHM vision of a "rational" local health care system with the interests of some MCHP board members, who were predisposed to defend the status quo. It was only after many months of debate and discussion among board members, project leadership, consultants, and Kellogg staff—and a jolt from the town newspaper—that a common vision emerged.⁵ A vision for "rationalizing the local health system" did not mean establishing some form of single-payer system, a unified board to control the supply of health care services, or a certificate-of-need mechanism to reduce surplus capacity in Muskegon’s hospitals. The common vision began to form around the goal of extending health insurance to the uninsured.

Access Health Evolves

Top Origins Of Access Health Access Health Evolves Access Health Today Lessons Learned Is Access Health Sustainable? NOTES

 
Before the governing board settled on a common vision, the MCHP established several workgroups to engage in tactical planning. Of critical importance for the development of Access Health, early in 1997 a workgroup on the uninsured began meeting to develop an affordable product to expand coverage. The group tackled numerous issues and problems and (with board approval) ultimately developed a benefit package, participation rules and eligibility criteria, provider panels, and, most importantly, a means to finance Access Health.

Physician participation. Almost all Muskegon physicians agreed to participate in Access Health. Respected doctors from the community were active workgroup members and had a great deal of impact on decisions about two main concerns of Muskegon physicians: too much competition and too little compensation. Competition was addressed by the decision that Access Health would cover only services provided inside the county, thereby channeling patients only to providers within the county. Also, after years of unsatisfactory experiences with managed care organizations, physicians were pleased with the board’s decision to pay for Access Health services on a (negotiated) fee-for-service basis.

Funding the community share. One of the biggest challenges was (and continues to be) funding the community share of the program. A number of options were considered before an agreement was reached with the state that provides access to Michigan’s Medicaid disproportionate-share hospital (DSH) funds (which include a state share and a federal match). For reasons described below, this source of funding may not be generalizable to other communities or even sustainable over the long term for Muskegon. However, it has been a critical element in the program’s success to date.

Nationally, the Medicaid DSH program provides the single largest public subsidy to help pay for hospitals’ uncompensated care costs. However, since the early 1990s there has been considerable controversy over how states fund their programs and how DSH funds are allocated within states.⁶

Michigan’s Medicaid plan creates several DSH funding pools: to provide mental health services, to support safety-net hospitals, to support the Detroit Medical Center, and to provide "special DSH hospital payments." The latter pool is reserved for counties that pay the state’s DSH share. By prior agreement with the state, Muskegon County includes employers’ contributions to Access Health in its "intergovernmental transfer" (IGT) to the state. The state, in turn, certifies the IGT as a DSH payment to Muskegon’s two hospitals in order to generate a federal match.⁷

By virtue of an indigent care agreement (ICA) between each of Muskegon’s two hospitals and Access Health, the state’s allocation of Medicaid DSH money (the original IGT plus the federal match) flows to Muskegon’s hospitals and then to Access Health. In this way the federal match is used to pay the community’s contribution to Access Health.

The statutory authority for ICAs rests in state law 260—the Municipalities Health Facilities Act (MHFA)—which enables counties that run hospitals to establish arrangements with local nonprofits that provide care for the uninsured and thus help relieve hospitals’ uncompensated care burden. The MHFA is a double bonanza for Access Health because it also provides that the oversight authority for nonprofit entities that operate under it rests with the state treasurer rather than the insurance commissioner. As a result, the state does not treat Access Health as health insurance, so it is not subject to state benefit mandates or solvency requirements.⁸

Access Health Today

Top Origins Of Access Health Access Health Evolves Access Health Today Lessons Learned Is Access Health Sustainable? NOTES

 
Access Health began in 1999. By the end of 2004 it was serving more than 420 employers and 1,150 employees and dependents.⁹ Access Health collected $2.5 million in premiums in 2004 from all three sources of funding.

Eligibility and other requirements. Employers must meet four criteria to offer Access Health. (1) The firm must be headquartered in Muskegon County. Although the program is intended for (and typically serves only) small and medium-size firms, there is no upper limit on the size of eligible firms.¹⁰ (2) Existing employers are eligible if they have not offered health benefits for at least twelve months (thus discouraging firms from dropping existing coverage), whereas new employers are eligible after being in operation for thirteen weeks. (3) Sole proprietors are not eligible. (4) The median wage of eligible workers in a firm may not exceed $11.50 per hour. Employers must meet other requirements as well. If the employer offers dependent coverage to one eligible worker, it must be offered to all eligible workers. The employer must pay 30 percent of the cost of employee-only coverage. Employers cannot offer Access Health to retirees, seasonal or temporary workers, or temporarily laid-off workers.

Employees must also meet a number of eligibility criteria. They must work at least 15.5 hours per week over a thirteen-week period; they must be employed thirteen weeks before becoming eligible; and they must be uninsured and not eligible for public programs.

Access Health members must select a primary care physician (PCP). Members who already have a PCP are required to have an office visit within one year. Those who do not have a PCP or are selecting a new one must schedule an office visit within six months.

Benefits. Access Health covers a wide array of health care services but also has a number of benefit exclusions. Inpatient and outpatient services are covered, as are primary care and preventive services, emergency room care, and prescription drugs. However, services are to be provided only within Muskegon County, and a number of major services and types of injuries are not covered: routine dental, vision, and hearing exams; injuries as a result of an automobile accident; and treatment for organ transplants and certain treatments for burns.¹¹ Also, the Access Health benefit guidebook says, members who do not follow recommended treatments or make lifestyle changes to improve health may be denied coverage for certain health care services—a radical departure from traditional health benefits.¹²

In most respects, the cost-sharing aspect of Access Health is similar to many employment-based plans, but it differs in a few other respects. Notably, Access Health does not have an overall out-of-pocket maximum but instead ties out-of-pocket maximums to specific treatments, illnesses, or episodes of care.

Premiums. The Access Health benefit package was designed to keep the employee share of the premium below $50 per month. In 2004 the employee share was $46 per month for employee-only coverage, an average annual increase of 3 percent since 1999.¹³ Employers are required to pay the same amount as employees, although they are also allowed to pay part or all of the employee share, which some do. The community share was $60.26 per member per month in 2004.

The cost to cover a spouse is the same as the cost of covering an employee.¹⁴ The cost for covering each child is lower than the cost per adult. Employees and employers each paid $29.29 per month in 2004 for children, with a community share of $39. Otherwise, costs do not vary by age, sex, health status, or geographic region within Muskegon County.

Impact on employers. At the time of our study, the MCHP and the Access Health boards believed that participating employers would benefit from less turnover and higher productivity. However, the boards also understood that high unemployment at the time made it difficult to convince employers of the business case for providing health coverage. They also understood that some employers were hesitant to offer Access Health in particular because they were concerned that if the program failed, they would then be obligated to offer a commercial product at a much higher price. We learned that some employers saw the BlueCross BlueShield (BCBS) product offered by the Muskegon Chamber of Commerce as the only other option available to small businesses in the county. The BCBS/Chamber plan cost $400 per month for employee-only coverage and nearly $1,000 per month for families in 2003.

We interviewed a variety of businesses to understand how they decided to offer Access Health and whether offering it has affected their businesses. We interviewed owners of a child care center, a landscaping company, three restaurants, a woodworking company, and a company that provides services to the developmentally disabled. All were motivated to offer Access Health for three main reasons. They thought that offering it had a positive impact on recruitment, retention, and ultimately the overall success of their businesses. Some even reported that if premiums were to double, they would continue to offer it.

We also interviewed a manufacturer with nearly fifty employees that did not offer health benefits. The company competed in a highly competitive industry and was suffering from the slow economy. We learned that although some employees expressed an interest in health benefits, the employer was not particularly concerned about recruitment and retention and did not think that offering health benefits would have a positive impact on the business.

Financial solvency. Access Health’s board monitors the program’s finances and other components to ensure that it remains fiscally viable. Because Access Health operates under the authority of the state treasurer instead of under the Michigan Office of Financial and Insurance Services, it does not need to meet state solvency requirements.

Early in the evolution of Access Health, the board was very concerned that one or two large claims could bankrupt the program. In addition to start-up funding of $125,000 from Michigan’s funds from the tobacco Master Settlement Agreement and a $132,000 loan that was repaid by the MCHP, Access Health has received $900,000 in total through two direct federal appropriations to fund a reserve pool to address the issue of solvency. Furthermore, because Access Health grew out of the larger MCHP planning process, funded by Kellogg’s CCHM initiative, some of this funding could also be counted as start-up funding. However, it is not possible to determine the exact amount contributed by the planning grant because the MCHP was simultaneously pursuing other initiatives.

Access Health believes that enrollment is now high enough that the operating margins can provide enough revenue to address solvency issues related to unexpectedly high claims costs. However, were the program to become insolvent, plan members would be responsible for any unpaid claims, and providers would be at risk for uncompensated care.

Lessons Learned

Top Origins Of Access Health Access Health Evolves Access Health Today Lessons Learned Is Access Health Sustainable? NOTES

 
Our analysis of the emergence of Access Health and the program’s experience since 1999 paints neither a rosy nor a bleak picture, and certainly not a simple one. We believe that the program should be considered a success for two simple reasons. First, despite the barriers it faced, it continues to provide coverage to working members of the Muskegon community who otherwise would almost certainly not be covered. Second, Access Health has attracted the interest of federal policymakers as well as community organizers and politicians in other states. Critical to the emergence of Access Health was the perseverance of the MCHP director, who formed a talented work-group on the uninsured that created the program’s blueprint when the governing board was absorbed with disagreements and internal conflict about its own mission and vision. Obstacles arose when various ideas for changing the status quo conflicted with key stakeholders’ interests. Nevertheless, the MCHP board labored hard, even as the bonds that held it together were greatly strained. Yet it ultimately achieved a common vision, once fears were aired, orientations modified, expectations revised, and trust earned. The importance of establishing a common vision among key stakeholders cannot be overemphasized.

Other communities with similar goals may face different barriers, but at least some obstacles can be anticipated. Board directors and project leaders would be wise to build flexibility and conflict resolution processes into their planning and implementation. For any community interested in increasing access to health care coverage, it also would be wise to emphasize the importance of adequate startup funding and strong leadership. In the case of Access Health, there is little doubt that without initial funding from the Kellogg Foundation, resources necessary for planning, coordinating, designing, and establishing community buy-in would have been lacking.

The local, state, and federal political connections established by MCHP leaders were instrumental to obtaining sufficient funding, especially for the community share. Importantly, Access Health also benefited from a state law and implementation strategy that allowed the program to (1) avoid state regulation as an insurance product, which freed it from having to comply with state benefit mandates and capitalization requirements; (2) access tobacco settlement funds for program start-up; and (3) access funding through federal appropriations for program sustainability. Together, these accomplishments enabled the MCHP to create a benefit package that has kept the cost of participation low while still being an attractive product.

Is Access Health Sustainable?

Top Origins Of Access Health Access Health Evolves Access Health Today Lessons Learned Is Access Health Sustainable? NOTES

 
Access Health faces challenges that could threaten its future. Certainly, the same factors that drive up the cost of providing health benefits generally affect Access Health as well. However, to date, the program has managed to keep cost increases below the average trend.

Access Health is under continuous pressure to sustain revenues to fund the community share. The threats are real but uncertain at this time. Increasingly, the federal government is scrutinizing a variety of mechanisms used by some states to obtain federal matching funds. For example, through federal law enacted in 2000 and regulation in 2001, some states were prohibited (after a phase-out period) from exploiting upper payment limits (UPLs) used to claim an excessive federal match. Although Michigan was granted a five-year transition period, we have no evidence to suggest that Access Health has benefited from UPL financing schemes.

More generally, the full range of states’ methods of drawing down federal matching funds through IGTs is attracting congressional scrutiny.¹⁵ It thus appears that Access Health’s greatest financial vulnerability rests on the uncertain continued availability of the DSH money it uses to fund the community share.

Editor's Notes

 
Paul Fronstin (fronstin{at}ebri.org) is senior research associate and director of the Health Research and Education Program at the Employee Benefit Research Institute (EBRI) in Washington, D.C. Jason Lee is director of research and policy at the National Institute for Health Care Management (NIHCM) in Washington, D.C.

This study was supported by W.K. Kellogg Foundation Grant no. P0104648.

NOTES

Top Origins Of Access Health Access Health Evolves Access Health Today Lessons Learned Is Access Health Sustainable? NOTES

 

1. P. Fronstin, "Sources of Health Insurance and Characteristics of the Uninsured: Analysis of the March 2004 Current Population Survey," EBRI Issue Brief no. 276 (Washington: Employee Benefit Research Institute, December 2004).
2. Institute of Medicine, Insuring America’s Health: Principles and Recommendations (Washington: National Academies Press, 2004).
3. See 108th Cong., 2d sess., S. 2544; and 109th Cong., 1st sess., S. 16.
4. See description of grant to Community Foundation of Muskegon County, www.wkkf.org/Knowledgebase/Grants/GrantDetail.aspx?ID=P0025984 (14 February 2005).
5. The local newspaper published a detailed and carefully researched article and concluded that the MCHP had consumed a large sum of money without producing any concrete benefits. See L. Moore, "Questions Plaguing Health Project," Muskegon Chronicle, 26 October 1997.
6. T.A. Coughlin, L. Ku, and J. Kim, "Reforming the Medicaid Disproportionate Share Hospital Program," Health Care Financing Review, 22, no. 2 (2000): 137–157.[Medline]
7. For more detail, see P. Fronstin and J. Lee, The Muskegon Access Health Plan: Aligning Employer, Worker, and Community Interests to Create a Three-Share Health Plan, report submitted to the W.K. Kellogg Foundation, Grant no. P0104648 (Washington: EBRI, 2004); and B. Bruen et al., The Medicaid DSH Program and Providing Health Care Services to the Uninsured: A Look at Five Programs, report to the U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation, Contract no. HHS-100-97-0010, Task Order 12 (Washington: Urban Institute, 2001).
8. Michigan counties that receive funds from the special DSH hospital payment pool must also agree to accept a fixed dollar amount to run the State Medical Program (SMP) locally. (SMP is a health care program for the medically indigent, defined as people who earn less than $250 per month and are not eligible for Medicaid.)
9. Enrollment has clearly suffered from the weak economy in western Michigan. Unemployment increased from about 4.5 percent in the late 1990s to 9 percent in 2003. As a result, many businesses do not think that it is necessary to offer health benefits to attract and retain workers. The MCHP initially estimated that Muskegon County had about 17,000 uninsured residents. Access Health has at most been able to cover about 7 percent of that estimate. In fact, it is likely that Access Health is covering somewhat less than 7 percent of the uninsured, if the uninsured increased as a result of the weak economy. Local coverage initiatives, such as Access Health, often face severe funding challenges and therefore should not be expected to cover a large share of the population, and instead should be viewed as incremental programs.
10. Initially, employers with more than twenty employees were not eligible for Access Health. This ceiling was removed to meet enrollment targets.
11. It is members’ responsibility to notify their auto insurers that they do not have medical coverage for injuries caused by auto accidents and to carry adequate medical coverage on their auto policies.
12. This provision is supposed to be enforced through case management. In only a couple of cases have benefits been denied when members chose not to attend smoking cessation classes or otherwise actively participate in their treatment.
13. During this period, national premiums increased at an average annual rate of 10.4 percent. Access Health premiums rose at a lower rate because of a more restrictive benefit package, increased cost sharing, and case management practices.
14. Employers are not required to pay their share for dependent coverage, but those that offer it always do.
15. See K.G. Allen, director, Health Care—Medicaid and Private Health Insurance Issues, Government Accountability Office, "Medicaid: Intergovernmental Transfers Have Facilitated State Financing Schemes," testimony before the Subcommittee on Health, House Committee on Energy and Commerce, 18 March 2004, www.gao.gov/new.items/d04574t.pdf (18 March 2005); and House Committee on Energy and Commerce, "Barton Seeks Medicaid Documents from Hospitals," energycommerce.house.gov/108/News/01112005_1421.htm (16 February 2005).

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