HFP—Caseload Likely Understated For Current and Budget Year

The Governor’s budget proposes a General Fund increase for HFP of $6.4 million, or 1.6 percent, over revised current–year spending levels. The caseload is projected to grow from the revised estimate of about 906,000 enrollees in the current year to about 942,000 enrollees in the budget year.

Budget Plan Probably Overestimates Impact of Premium Increase. Chapter 758, Statutes of 2008 (AB 1183, Committee on Budget) increased the premiums that certain subscribers to HFP pay in order to reduce state costs. The premium increase went into effect on February 1, 2009. The increase is likely to have some impact on enrollment, but our analysis indicates that the caseload projections may overstate this impact. For example, in the budget year, MRMIB estimates a 7 percent decrease in caseload among the 69 percent of total subscribers affected by the premium increases.

We are concerned that the caseload estimate may overstate the impact of the premium increases for the following reasons:

• Based on information provided by MRMIB, the estimated reduction is based on the premium increases proposed by the Governor for the 2008–09 budget, not on the smaller premium increases that were actually implemented by Chapter 758. The administration’s premium increase(s) would have been significantly larger than the $2 to $3 per month increases for subscribers that were enacted.
• Analysis of the impact of premium increases on caseload in other states suggests that the effect of the California premium increases would likely be smaller than MRMIB projects.
• The HFP subscribers have the option of enrolling in a health plan designated as the “community provider plan” in each county. They receive a $3 discount on their monthly premiums if they do so. Although one–third of subscribers are already enrolled in community provider plans, subscribers who are not could choose to reduce their premiums by transitioning to these discounted plans. To the extent this occurred, it could further blunt the impact of the premium increases on caseload.

Effect of Rising Unemployment on Caseload Not Considered. The caseload estimate does not take into account the potential for increased enrollment due to a high and growing unemployment rate. The Kaiser Family Foundation recently estimated that for every 1 percent increase in the unemployment rate, the percentage of children enrolled in either Medicaid or SCHIP would rise 0.78 percent. California’s unemployment rate was under 5 percent as recently as 2006, but it is projected to reach 9.5 percent or higher in 2010. While we do not have a specific estimate of how rising unemployment will impact HFP at this time, we believe that it could lead to significant increases in caseload that have not yet been taken into account.

Conclusion. Based on the factors above, we believe that caseload for the current and budget years may be understated. However, at this time we are not recommending any specific adjustment. At the time of the May Revision, additional data on the effects of the premium increase, state economic conditions, and HFP caseload trends will be available, and we will update our recommendation based on information available at that time.