RELEASE: May 29, 2002

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In order to preserve NJ FamilyCare for children, as the program was originally intended, Commissioner Gwendolyn L. Harris said today she will suspend new enrollment of most adults in the health insurance program and alter the benefits packages for many of the adults who remain.

Harris stressed that the approximately 93,000 children enrolled in the program will not be affected by any of the changes announced today.

Uninsured children who are eligible for the program will continue to be encouraged to apply for NJ FamilyCare, which has the most generous eligibility threshold of any children's health insurance program in the country -- 350 percent of the federal poverty level, $63,350 for a family of four.

"The core mission of the NJ Family Care program is to provide health insurance to children who have no insurance. We are meeting the commitment of that core mission by making changes designed to manage the escalating cost of the program," Harris said.

"The NJ FamilyCare program enrollment has far outpaced its funding practically from the first day it started enrolling adults," said Harris, noting that the adult portion of the program exceeded three-year enrollment projection in just nine months. "But the state is facing a budget crisis. There will be no extra money in FY 2003 to cover a deficit that clearly will result if enrollment in the program is allowed to continue unchecked.

"These deficits would destroy the program that we are trying to preserve for New Jersey's uninsured children," said Harris. "My responsibility is to protect the program so that doesn’t happen."

Launched in 1998 as NJ KidCare, the NJ FamilyCare program provides health insurance for more than 260,000 New Jersey residents, including children, parents, childless adults and about 26,000 childless adults who receive Work First NJ/General Assistance (GA). The program began enrolling adults in the fall of 2000.

Effective June 15, NJ FamilyCare will no longer accept applications from parents, although all applications received before that date will be processed. Also, some of the parents who do remain in the program will see an increase in premiums and others will see a reduction in benefits, said Harris.

With the changes, all adults enrolled in the program will have benefits comparable to the most widely-sold commercial plans. Currently, some parents have a more generous package of benefits, comparable to those provided under Medicaid.

Moreover, the state will transition all GA recipients from HMOs participating in NJ FamilyCare into a program that will provide primary care health services on a fee-for-service basis. Hospital services will be covered through the state's Charity Care system.

The decision to modify NJ FamilyCare also was prompted by concern over the state’s share of federal Children’s Health Insurance Program (CHIP) funding, which now pays 65 percent of the healthcare costs for children and their parents enrolled in the program. The health care cost for GA recipients are borne entirely by the state.

New Jersey’s CHIP allotment is finite and must be used first to pay for children before any remaining amounts can be applied to the cost of healthcare for their parents. If enrollment continues unchecked, the program is likely to run out of CHIP money for the parents in FY 2003. Currently, 93,000 children and more than 120,000 parents are enrolled, and applications are being received at the rate of 1,000 a week.

The NJ FamilyCare program is considered one of the most generous subsidized health insurance programs in the country. Besides having the highest income eligibility threshold for children of any state, New Jersey was also one of the first states to provide healthcare coverage for parents and it remains one of the few states to include uninsured, low-income adults.

Some of the most significant changes to the program will affect the state’s approximately 27,000 GA recipients. These are very low income childless adults who are not eligible to receive Medicaid. Although they previously received basic health services through local clinics, GA recipients were enrolled in HMOs through NJ FamilyCare when the program expanded to include adults in October, 2000.

GA recipients, a sometimes homeless and often transient population, have proven to have much more serious mental health and substance abuse issues than first anticipated. These problems have been very difficult to address through HMOs.

Effective June 15, GA beneficiaries will no longer be enrolled in HMOs or be able to use the HMO’s networks of doctors and other providers. Instead, they will once again be referred to local clinics, doctors and providers that accept Medicaid for their healthcare needs. In addition, their hospital bills will be referred to the state’s Charity Care pool for payment, which was the case before they were enrolled in NJ FamilyCare.

While GA recipients will no longer have access to an HMO, a special package of behavioral health and substance abuse services is being created to help address some of the most serious needs of this population.

"GA recipients have some of the most intense health needs of any group in the state of New Jersey. Many of them have serious mental health and substance abuse problems," said Harris. "They were included in NJ FamilyCare because it was thought their healthcare needs could be successfully addressed through HMOs. Instead, it was found that their circumstances are such that managed healthcare doesn't work as effectively as anticipated and the cost is prohibitive."

The total cost of the adult portion of NJ FamilyCare in Fiscal Year 2003 will be $433 million, or more than twice as much as the cost projected when the program first began accepting adults in October, 2000. The state’s share of this cost is $229 million.

Without the changes currently being proposed, costs for the adult portion of the NJ FamilyCare program would have ballooned by an additional $150 million this year.

With these changes, the total cost of the program, including children, for Fiscal Year 2003 is $562 million. The state’s share of the cost of covering children enrolled in the program is $45 million.