Table 3:
Analysis of Potential Annual State-Level Budget Savings from New Premiums in Arizona and Kentucky
| Arizona | Kentucky | |
|---|---|---|
| Scenario 1. Direct savings | ||
| Premiums collected | $ 344,603 | $ 507,634 |
| Administrative costs | $ (36,225) | $ (92,435) |
| Estimated savings (spending) | $ 308,378 | $ 415,199 |
| Scenario 2. Includes enrollment changes in Premium-Paying SCHIP only* | ||
| Direct savings | $ 308,378 | $ 415,199 |
| Decreased spending from Premium-Paying SCHIP enrollment | $ 370,781 | $ 885,740 |
| Potential estimated savings (spending)* | $ 679,159 | $ 1,300,939 |
| Scenario 3. Includes enrollment changes in Premium-Paying SCHIP and other programs* | ||
| Direct savings | $ 308,378 | $ 415,199 |
| Decreased spending from premium-paying SCHIP enrollment | $ 370,781 | $ 885,740 |
| Increased spending from enrollment increases in other public programs | $ (583,823) | $ (996,836) |
| Potential estimated savings (spending)* | $ 95,336 | $ 304,103 |
Notes: (1) The data for the cost per recipient only include the average capitation rate per recipient in Arizona and the average claim cost per recipient in Kentucky. The data do not include additional administrative costs for claims or capitation payment processing. Therefore, the savings from decreased State Children's Health Insurance Program (SCHIP) enrollment and increased spending because of increased enrollment in other public programs may be underestimated. (2) This analysis excludes potential changes in state spending due to increases in the number of uninsured children and changes in administrative costs due to possible changes in churning in and out of public coverage.
The estimates of budget savings in Scenario 2 and Scenario 3 depend in large part on our time-series estimates of enrollment changes presented in Table 2. These time-series enrollment changes are estimated with such imprecision (lacking statistical significance at conventional levels in some cases) that they should not be treated as definitive, but rather suggestive of what may possibly happen as a result of the introduction of a premium. These estimates also are imprecise because no hard evidence is available to estimate the cost of covering children in these different categories.
Sources: (1) Financial data on premium collections and average recipient costs. State Fiscal Year 2005 and 2006 in Arizona and State Fiscal Year 2005 in Kentucky. (2) Tabulations of monthly administrative enrollment data from Arizona and Kentucky, 2001–2005.