A Review of LifeLine Budget Estimates and Enrollment Process

A Review of LifeLine Budget Estimates and Enrollment Process GABRIEL PETEK LEGISLATIVE ANALYST APRIL 2019 Summary The California Public Utilities Commission’s (CPUC’s) LifeLine program provides free or discounted phone service to about 1.7 million households and has an annual budget of more than $350 million. The Supplemental Report of the 2018-19 Budget Act requires our office to (1) review the caseload and budget estimates for this program and make recommendations about how CPUC could improve the accuracy of its estimates and (2) assess and make recommendations about ways to improve enrollment and re-enrollment in the program. Caseload Forecasts Appear to Be Improving, but Significant Uncertainty Remains. Caseload is a primary driver of costs in the LifeLine program. In recent years, the CPUC has substantially overestimated caseload. These overestimates are primarily attributable to major structural changes to the LifeLine program. Most notably, CPUC overestimated the enrollment effects of a 2014 decision to expand the program to include discounts for wireless service. In our view, recent changes to CPUC’s forecasting methodology reflect a significant improvement. However, significant uncertainty about future caseload and costs remain, particularly related to state and federal policy changes that could affect enrollment. As a result, we recommend the Legislature continue to monitor the accuracy of CPUC’s forecasts as part of the regular budget process. Different Potential Explanations for Low Enrollment and Renewal Rates. Currently, about 40 percent of eligible households are enrolled in the program. There are several reasons why an eligible household might not enroll or renew in the program, including that the household might (1) be unaware of the program or need to renew, (2) prefer a non-LifeLine telephone plan or carrier, or (3) have difficulty completing the enrollment and/or renewal process. CPUC is currently planning to implement some changes intended to improve enrollment and renewal. However, CPUC has not conducted a large-scale study of the primary reasons why eligible households do not participate in the program. We recommend the Legislature direct CPUC to conduct a formal evaluation of the major reasons why eligible households do not enroll in the program in order to inform future decisions about potential changes that could improve enrollment. The Legislature might want to wait for the results of such an evaluation before directing CPUC to make major changes to the program, though the Legislature could consider adopting other changes that appear to be relatively low cost and that are likely to have some enrollment benefits. To help assess the merits of different options, the Legislature might want to consider directing CPUC to report on the feasibility, costs, and risks associated with implementing potential changes. For other options that are likely more costly or complicated, the Legislature could wait until the results of the study are complete to determine whether they are likely to address significant barriers to enrollment, or direct CPUC to implement them on a pilot basis. analysis full gutter AN LAO REPORT INTRODUCTION The California LifeLine program (LifeLine), supplemental report language also requires our which is administered by CPUC, provides free office to assess and make recommendations about or discounted telephone service to low-income ways to improve enrollment and re-enrollment (also households. As part of the 2018-19 budget known as renewal) in the program. package, the Legislature adopted supplemental This report responds to the supplemental report report language directing our office to review language. Specifically, we provide (1) background the LifeLine program’s budget estimates— information on the LifeLine program, (2) our specifically the caseload estimate—and make assessment and recommendations related to recommendations on how CPUC could improve CPUC’s LifeLine budget and caseload estimate, the accuracy of these estimates. In order to help and (3) our assessment of and recommendations address concerns about the number of individuals related to potential factors contributing to current enrolling and staying enrolled in LifeLine, the enrollment and renewal rates. BACKGROUND ON LIFELINE PROGRAM State Law Requires Discounted Telephone For each household enrolled in the program, Service to Low-Income Households. The CPUC generally provides telephone companies Moore Universal Service Telephone Act of (carriers) a monthly state subsidy equal to 1987 established the goal of offering basic 55 percent of the most expensive basic landline telephone service at affordable rates to the greatest service from the four largest carriers. The subsidy number of California residents. To help achieve is meant to offset the lower rate charged to the this goal, state law directs CPUC to develop the consumer. Currently, the maximum state subsidy is LifeLine program to provide basic telephone service about $15 a month. The Federal Communications at a discounted cost to low-income households. In Commission (FCC) administers the federal LifeLine order to administer this program, CPUC is required program that provides an additional monthly to establish (1) the minimum level of service a discount of about $9 to qualifying plans. Currently, telephone plan would need to provide, (2) the rates the federal and state programs are closely aligned and charges program participants would have to so most enrollees are eligible for both the federal pay for discounted service, and (3) eligibility criteria and state subsidy. to qualify to receive that service. State law also Most Enrollees Are Now in Wireless Plans. requires that rates for LifeLine enrollees be no more Historically, LifeLine has included only traditional than 50 percent of basic telephone service rates. wireline (landline) service. Chapter 381 of 2010 To qualify for California’s LifeLine program, a (AB 2213, Fuentes) gave CPUC the authority household must have income below 150 percent to allow LifeLine customers to choose between of the federal poverty level (FPL) (for example, wireline and wireless service. In January 2014, currently about $38,000 annually for a family of CPUC expanded the program to allow wireless four to qualify) or be enrolled in certain public carriers to offer LifeLine service. Wireless carrier assistance programs for low-income households, participation is voluntary, and participating wireless such as Medi-Cal or CalFresh. Roughly 90 percent plans are eligible for the same monthly subsidy of enrollees demonstrate eligibility for the LifeLine amount as for traditional landline plans. Currently, program by qualifying for certain programs about a dozen wireless carriers participate in (program-based eligibility). Each eligible household the program in California although none of the can receive one subsidized telephone line—either largest wireless carriers (such as Verizon and wireline or wireless. AT&T) participate. Participating carriers have 2 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT flexibility to determine the plans Figure 1 and prices they offer, subject to Wireless Expansion in 2014 the minimum requirements set Reversed Trend of Declining Enrollment by CPUC, such as including a Monthly LifeLine Enrollment (In Millions) minimum of 1,000 monthly voice minutes to be eligible for the entire 2.5 $15 monthly state subsidy. Most LifeLine wireless plans are free Total and include unlimited minutes 2.0 and unlimited text. Many of them also include some data. Carriers will also often provide new 1.5 Wireless customers a free or discounted phone when customers sign up. The state provides a one-time 1.0 $39 connection subsidy to a carrier for each new enrollee 0.5 or if an enrollee switches to a new carrier. The CPUC also Wireline contracts with a third-party administrator (TPA) to conduct 2013 2014 2015 2016 2017 2018 2019 many administrative tasks needed to operate the program, such as determining household eligibility and conducting the annual Figure 2 renewal process. As shown in Figure 1, Wireless Expansion in 2014 program enrollment had been Led to Significant Increase in Spending steadily declining prior to adding Universal LifeLine Telephone Service Trust wireless service in 2014. Program Administrative Committee Fund (In Millions) enrollment increased significantly after adding wireless in 2014, $500 but then leveled off in 2016 and 450 has been declining in recent 400 years. Currently, there are about 350 1.7 million total enrollees in the LifeLine program, including about 300 1.4 million wireless enrollees. 250 Annual Budget Over 200 $350 Million. As shown in 150 Figure 2, trends in program 100 costs largely follow trends in enrollment. The expansion 50 to include wireless service in 2014 resulted in a significant 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 Budgeted Proposed increase in costs. For example, 2015-16 spending for LifeLine was $345 million (from the Universal www.lao.ca.gov 3 analysis full gutter AN LAO REPORT LifeLine Telephone Service Trust Administrative subsidies to carriers (13 percent) and payments to Committee Fund)—more than twice 2012-13 the TPA (4 percent). spending. The 2018-19 budget allocated Revenues to fund LifeLine are collected from a $390 million for the LifeLine program, and the surcharge on intrastate telephone bills. (LifeLine Governor’s 2019-20 budget proposes $362 million customers are exempt from paying this surcharge for the program. The large majority of spending and other taxes and fees applied to their phone is for monthly subsidies to carriers for plan bill.) The surcharge is currently set at 4.75 percent discounts. For example, about three-quarters of the of intrastate revenue, though CPUC can adjust the 2018-19 budget is expected to go towards monthly level of the surcharge based on its projections of subsidies to carriers. Other significant program the amount of revenue needed to cover the costs costs include the one-time service connection of the program. BUDGET AND CASELOAD FORECASTING In this section, we provide our assessment of program caseload in recent budgets. Specifically, CPUC’s budget estimates, focusing specifically Figure 3 shows CPUC caseload estimates at on caseload estimates. As discussed above, different stages of the budget process compared caseload is the major factor driving overall costs to actual caseload for each of the prior two fiscal for the LifeLine program. Seventy-four percent years. The Governor’s January budget proposal for of overall costs are for monthly subsidies to 2016-17 estimated that caseload would be nearly carriers for the phone services. The total amount 3.8 million by the end 2016-17 (including 3.5 million of monthly subsidies are driven by two factors: wireless enrollees). About five months later, the (1) the amount of the subsidy and (2) caseload. In Governor’s May Revision for 2016-17 estimated recent years, the amount of the subsidy has been that caseload would be nearly 3 million. As shown relatively steady. However, as noted earlier, overall in the figure, actual program enrollment at the caseload has changed significantly from year to end of 2016-17 was only 1.8 million (1.4 million year. Other significant program costs—such as wireless)—significantly less than estimated. one-time connection subsidies and TPA costs—are Major Program Changes Have Made also driven, in part, by the number of households Accurately Forecasting Caseload Difficult . . . enrolling in the program. We attribute these recent overestimates of program caseload primarily to major changes to the LifeLine Background program that have made it difficult to accurately CPUC Develops Caseload and Spending forecast future caseload. Most notably, the Estimates as Part of Annual Budget Process. expansion to include wireless service in January As part of the annual state budget process, in 2014 substantially expanded the type of service January, CPUC releases estimates of LifeLine available to eligible populations. Such a substantial program caseload and spending for the next fiscal structural change to the program made projecting year. CPUC then provides updated estimates in caseload inherently difficult given the uncertainty the spring as part of the Governor’s May Revision. about the number of new households that would As we discuss below, CPUC has made changes in now enroll in the program specifically because recent years in how it develops these estimates. of the change. In the first few years of including wireless service, CPUC estimated caseload Estimates Appear to Be Improving, by trying to forecast the percentage of eligible but Uncertainty Remains households that would enroll in the program. For example, the Governor’s January budget Recent Enrollment Projections Have Been proposal for 2016-17 assumed that 90 percent Overstated. CPUC has substantially overestimated of the estimated 4.2 million eligible households 4 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT would enroll by the end of 2016-17. The estimated however, that enrollment has continued to decline number of eligible households was based on even after the subsidy was reinstated in December Department of Finance (DOF) estimates of the 2015. number of households with incomes less than . . . But Caseload Estimates Appear to 200 percent of the FPL—the eligibility threshold for Be Improving. CPUC recently changed its the CalFresh program. The assumed percentage methodology for forecasting LifeLine caseload of the eligible households that would enroll (also as part of the Governor’s 2018-19 May Revision. known as the “take-up rate”) was based on CPUC’s The new methodology relies on historical trends analysis of take-up rates in other programs for in new enrollments and annual renewals to project low-income households (such as Medi-Cal). Actual future caseload, rather than basing estimates on enrollment data show a take-up rate close to assumptions about future take-up rates. In our 45 percent. view, this recent methodological change reflects Other substantial programmatic changes have a significant improvement. Such a methodology also added to the difficulty forecasting caseload. was infeasible in the initial years after the program For example, after a rapid increase in enrollment, expanded to include wireless because there was CPUC eliminated the one-time connection subsidy limited historical data on wireless enrollments and in July 2015, and enrollment subsequently declined. it was unclear when enrollment might stabilize after This might have occurred because carriers received the expansion to include wireless. However, once a less funding for new enrollees and, in turn, carriers few years of historical data on program enrollment reduced their marketing and outreach. We note, were available—and enrollment stabilized somewhat over the last couple of Figure 3 years—relying on historical trends became a more feasible approach. CPUC Overestimated Caseload After Program Expanded to Include Wireless Recent enrollment data suggests that caseload forecasts (Millions of Enrollees) are improving under the new Governor's January Budget Estimate methodology. The 2018-19 4.0 May Revision Estimate May Revision estimated that Actual Caseload monthly caseload would be about 3.5 1.6 million and, so far, average monthly program enrollment in 3.0 the first few months of 2018-19 was about 1.7 million. We caution, 2.5 however, that the available monthly enrollment data upon which to evaluate the new methodology 2.0 is still limited and, thus, not sufficient to conclude that the new 1.5 methodology should be adopted as a long-term approach. 1.0 Significant Caseload and Cost Uncertainty Remains. 0.5 Although CPUC’s caseload estimates appear to be improving, several factors continue to 2016-17 2017-18 make it difficult to project future enrollment, particularly several CPUC = California Public Utilities Commission. recently adopted and proposed www.lao.ca.gov 5 analysis full gutter AN LAO REPORT programmatic changes at the federal and state budget allocations to LifeLine midyear if there are levels. For example, the FCC has adopted unexpected changes in program costs. We discuss changes that phase-out subsidies for plans that this authority in more detail in the box below. do not include broadband. There continues to be Large Fund Balance Has Accrued. As a result uncertainty about how these changes will affect of overestimating caseload and costs in recent LifeLine enrollment in California both because many years, the amount of surcharge revenue collected of these changes have not been fully implemented has exceeded program costs, and CPUC has yet and some have been challenged in court. If accrued a large balance in the Universal LifeLine fully implemented, some of the federal changes Telephone Service Trust Administrative Committee could reduce the availability of federal subsidies Fund. The Governor’s budget for 2019-20 projects for certain plans and/or reduce the number of a $482 million fund balance at the end of 2018-19, carriers participating in the program. Fewer carriers growing to $580 million by the end of 2019-20. could also lead to fewer plans being available. CPUC has not adjusted the surcharge rate that Fewer available plans—or more expensive plans— funds the program since November 2016. might make the program less attractive to certain households and, in turn, reduce the number of LAO Recommendation enrollees. Continue to Monitor Caseload Estimates. In addition to the above federal changes, future We recommend that the Legislature continue CPUC changes to the state’s LifeLine program to monitor the accuracy of CPUC’s caseload could have a significant effect on enrollment. For forecasts as part of the regular budget process. example, as discussed below, CPUC is considering Although we think CPUC’s methods for estimating a variety of changes to streamline the enrollment caseload have improved, the evidence that the and renewal process with the intent of increasing new methods will accurately forecast caseload overall program enrollment. In light of this are still somewhat preliminary. In addition, future ongoing uncertainty, similar to previous years, the changes to the program at the state and federal Governor’s proposed budget for 2019-20 includes level could have significant, yet uncertain, effects provisional language authorizing DOF to increase on caseload and costs. Our office will continue Budget Bill Language Provides Flexibility Given Caseload Uncertainty Similar to previous years, the Governor’s proposed 2019-20 budget includes language authorizing the Department of Finance to increase funding allocations to the LifeLine program beyond the amount provided in the budget to cover additional program costs based on information submitted by the California Public Utilities Commission (CPUC) on the amount of claims submitted by carriers. Any changes made pursuant to this authorization would be subject to a 30-day review period by the Joint Legislative Budget Committee. In our view, it is reasonable to provide additional flexibility to make midyear budget adjustments to cover unexpected changes in costs given the uncertainty around caseload, carrier participation, and federal actions. However, in other cases where the Legislature provides this type of budget flexibility, it often includes some limitations on the administration’s authority to maintain legislative oversight. Two common examples are: (1) a cap on the additional amount that can be allocated and (2) requiring the administration to demonstrate that certain conditions are met in order to allocate the additional funds. The Legislature might want to consider including one or both of these types of limitations in the proposed budget bill language to maintain additional fiscal oversight. For example, the Legislature could require the administration to demonstrate that the additional spending is the result of unforeseen changes in caseload, rather than decisions made by CPUC to modify or expand the program. 6 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT to review future estimates as part of our regular to fund the program. Underestimating expenditures budget analysis and provide our comments and creates a risk that surcharges do not generate recommendations to the Legislature. Accurate enough revenue to fund the program. On the other budget forecasts are important because they are hand, overestimates result in higher than necessary used to determine the appropriate surcharge used surcharges on consumers. ENROLLMENT AND RENEWAL PROCESS Background utilizes the TPA to complete the enrollment process. Nearly 80 percent of wireless customers initiate the Carriers and TPA Play Key Roles in Program enrollment process in-person through carrier “street Enrollment. Both the carriers and the TPA play teams” made up of representatives from the carrier. significant roles in customer enrollment and the The street teams usually set up temporary booths annual renewal process. For initial enrollment, in public places—such as social service agencies the typical wireline customer calls his or her and shopping centers—and offer free or discounted carrier to express interest in participating in the wireless service to potential LifeLine customers. program. The carrier then mails an application to In all enrollment pathways, the customer must the customer, who completes it and returns it in provide personal information that can be used to the mail. Wireless is typically a different process. verify identity, including address, date of birth, and Figure 4 summarizes the process by which an social security number. The customer must also eligible household can enroll in the wireless portion provide information on income eligibility, such as a of the program. In general, the customer begins copy of an identification card for a qualifying public enrollment by contacting a carrier, which then assistance program or prior year tax returns. Figure 4 Annual Renewal Relies Summary of LifeLine Wireless Enrollment Process Heavily on Mailing Documents to Consumers. About 100 days In-Person Mail/Online before the annual renewal date Customer Contacts Carrier Customer Contacts Carrier (also known as the anniversary Customer walks up to carrier store or Customer calls carrier or visits carrier walks up to carrier street team. website and submits personal information, date), the TPA mails enrollees a including address. renewal packet that includes a personal identification number Carriers Facilitate Enrollment Carrier "pre-screens" applicant by TPA Mails Application (PIN). The customer can complete collecting personal information to confirm Carrier submits information to TPA, which and return the renewal form identity and scanning supporting eligibility then sends application to customer in the documentation, then submits information mail with unique personal identification through the mail, use the PIN to third party administrator (TPA) for final number (PIN). eligibility determiniation. to renew online, or use the PIN to renew through an automated Customer Completes phone system. Unlike the and Returns Application initial enrollment, the customer Customer completes paper application and mails back with supporting self-certifies that he or she is documents, or uses PIN to complete still eligible for the program. online application. The customer does not have to resubmit documentation to demonstrate meeting income TPA Determines Eligibility requirements. Most customer TPA makes eligibility determination and notifies carrier and customer. renewals are submitted through traditional mail. www.lao.ca.gov 7 analysis full gutter AN LAO REPORT In December 2015, CPUC began giving carriers plan or carrier, or (3) has difficulty completing the the option to send text message renewal reminders enrollment and/or renewal process. We discuss to customers (with customer consent). These text each of these potential reasons in more detail messages notify the enrollee that they will receive below, as well as some steps CPUC plans to take a renewal packet in the mail. They also include a to address some these issues. PIN and links to the website where the enrollee can Eligible Households Might Be Unaware of renew. Program or Need to Renew. In some cases, Program Take-Up Rate Is About 40 Percent. eligible households might be unaware the program According to estimates from DOF, there are exists or that they need to complete an annual currently about 3.9 million households with income renewal to remain in the program. Currently, CPUC less than 200 percent of the FPL. CPUC uses this does not have a formal statewide marketing and as its estimate for the overall number of eligible outreach plan to ensure eligible customers are households because it is similar to the income level aware of the program. Instead, individual carriers of some of the other qualifying public assistance do almost all of the marketing and outreach for programs, such as CalFresh. This estimate is their own plans. Relying on carriers to conduct subject to significant uncertainty because the outreach has certain advantages for the state. As methods for determining what constitutes a private companies, carriers have a profit incentive household and how to define income varies to increase the number of households they serve between programs. However, it provides a rough and are likely to have some level of expertise in estimate of the number of households eligible for marketing their product effectively. In addition, LifeLine. With about 1.7 million current LifeLine the carriers bear all of the costs associated with enrollees, this means that about 40 percent of outreach and marketing, rather than the state. eligible households are enrolled in the program. However, the current approach might have some Furthermore, only about 25 percent of enrollees limitations as a tool to ensure strong and consistent successfully complete the annual renewal process. overall consumer awareness. Examples of these In most cases, this is because the enrollee does limitations include: not submit a renewal form. For example, only about • Lack of Coordination With Other one-third of wireless customers complete and Government Agencies or Nonprofits return renewal forms. Limits Outreach. Currently, CPUC has only The overall program take-up rate is substantially limited coordination with other government lower than some other low-income public agencies or nonprofit organizations that assistance programs. For example, the CalFresh work with income-eligible households—such take-up rate is about 70 percent. However, the as county social service agencies, certain national average LifeLine take-up rate is about health care providers, and community-based 25 percent, and California has the highest organizations (CBOs). These agencies and estimated take-up rate of any state in the country. organizations frequently can be a source of This is likely in large part because California offers information for eligible households on different the largest monthly subsidy of any state. programs and services available to them Different Potential Explanations for and are well-positioned to provide marketing and outreach materials to potential LifeLine Enrollment and Renewal Rates customers. Based on our conversations with CPUC and • Lack of Program “Branding” Could Affect various stakeholders, there are several potential Renewal Rates. Each carrier uses different reasons why an eligible household would not enroll names and branding for the LifeLine plans they or renew its enrollment in the LifeLine program. offer. Many of the plans offered do not include Such reasons could include that the household the term “LifeLine” in the name. As a result, (1) is unaware of the program or the need to renew some households that enroll through street enrollment, (2) prefers a non-LifeLine telephone teams might not know that they are enrolling 8 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT in a government-subsidized program. In turn, contact a carrier to request that a LifeLine when the customer receives annual renewal paper application be mailed to them, which information from the LifeLine program (rather includes a unique PIN that is needed to enroll than the phone carrier), he or she might not online. It can take at least a few days for this understand that the materials are needed to application to arrive, which makes the overall renew their phone service. This could be one online enrollment process more complicated factor contributing to a low renewal rate. and lengthy for enrollees. As a result, some • Inconsistent Marketing Across Geography enrollees might sign up for a non-LifeLine plan and Populations. Carriers have an incentive instead of waiting to complete the application to conduct outreach and marketing in process so that they can quickly have phone areas where they are likely to get the most service. customers (such as urban areas), but carrier • Lack of Real-Time Eligibility Verification marketing activities might be more limited in Creates Problems. All methods of enrollment rural areas of the state. Also, some program require the TPA to verify documents materials currently are available in only English demonstrating eligibility either through and Spanish. This could reduce program enrollment in a qualifying public assistance awareness among certain ethnic groups that program or by income level. In some cases, primarily speak other languages, such as obtaining and submitting such documents Asian languages. might be difficult. For example, making copies of the documents could be difficult for some Consumers Might Prefer a Different Plan households if they do not have easy access or Carrier. Even if eligible households are aware to a copier or scanner. In addition, it may of the program, they might choose not to enroll take the TPA a few days to verify eligibility. in LifeLine because they prefer a different plan This creates a delay in the process. We also or carrier. For example, each eligible household note that the current eligibility verification can receive only one discounted phone line. For process could result in some individuals wireless service, there are no family plans offered enrolling in the program even if they are through the program. As a result, some families not eligible. For example, a household can might choose to get their wireless service through qualify by submitting an identification card a different carrier that offers a family plan. In for a qualifying public assistance program. addition, as discussed above, the largest wireless However, while such a document shows carriers—such as Verizon and AT&T—do not that the household was at one time enrolled currently participate in the program. Some eligible in the program, it does not always indicate households might choose to purchase wireless whether the person is currently enrolled in the plans from the larger carriers because they prefer program. their services, even if they are more expensive than • Renewal Process Relies Heavily on Mailing a LifeLine plan. Documents to Enrollees. Nearly 60 percent Challenges in Completing Enrollment and of customers who do not renew are back Renewal Process. In some cases, the enrollment on the program within a year. One possible and renewal process might be slow, confusing, explanation for this is that the current renewal and/or burdensome for households. As a result, process is confusing or burdensome and, some eligible households might not enroll in the thus, at least part of the reason for low program or renew service. Some potential problems renewal rates. The renewal process relies with the current enrollment and renewal process heavily on mailing renewal documents to include: enrollees. As a result, customers might not be • Online Enrollment Process Overly receiving the information because they moved. Complicated. Households interested in About 6 percent of initial renewal notices enrolling in the program online must first are returned as nondeliverable. In addition, www.lao.ca.gov 9 analysis full gutter AN LAO REPORT mailing paper documents could increase statewide option to renew over the phone with the possibility that the customer loses the a representative from the TPA. This option was renewal packet, or does not notice it. As recently made available only to households located discussed above, CPUC started giving carriers in areas that were damaged by recent wildfires. the option to send text message renewal CPUC is also considering pilot programs reminders. Last year, renewal rates for carriers proposed by different stakeholders intended to that participated was about 5 percent higher increase enrollment and renewal rates. The pilot than for those carriers that did not participate. programs that CPUC is considering include: • Correctible Denials Could Be Confusing. • Changes to Encourage Participation If a potential customer initially submits an From Carriers With Greater Brand Name incomplete application or renewal form, Recognition. Boost Mobile is proposing the TPA mails the customer a “correctible a pilot whereby the state would provide a denial” packet. This packet includes a new LifeLine subsidy for plans that are already application or renewal that the customer available to the general public. Effectively, this can complete again. Currently, both the would make the program more similar to a initial documents and the correctable denial voucher program because the subsidy could packet come in pink envelopes. This could be be used for any available plan—rather than confusing for some customers if they think the only LifeLine plans that have been approved correctible denial is a duplicate. In addition, by CPUC. This could make it easier for some the customer has to complete the entire of the larger carriers to participate because application again, even if there was just one they do not have to develop separate LifeLine piece of incomplete information. As a result, plans that require CPUC approval. the customer might get frustrated and stop • Online Enrollment Option Through Carrier completing the application. Website. Some stakeholders are proposing to Lack of Evaluation to Determine Reasons create an online enrollment option whereby a for Enrollment and Renewal Rates. Since the customer can enroll through a carrier’s website expansion of LifeLine to include wireless, there without having to request a PIN. This could has not been a large-scale formal evaluation potentially streamline the enrollment process. of the reasons why eligible households do not • Outreach and Coordination With CBOs and participate in the program. Currently, CPUC relies Other Entities. For example, one proposed on call center data, certain program metrics (such pilot would involve working with a CBO in as undeliverable mail rate), and feedback from San Francisco to enhance outreach to eligible stakeholders to identify potential problems with households. Another proposal would create enrollment and renewal. CPUC is currently working a process whereby health care providers with the TPA to undertake some limited research that serve Medi-Cal populations could activities, such as customer surveys to better streamline the eligibility determination process understand potential problems with the renewal by verifying that a household has Medi-Cal process. However, CPUC reports that the survey insurance coverage. includes a relatively small sample of customers and the questions are only addressing certain aspects LAO Recommendations of the renewal process. CPUC Planning Actions to Improve Enrollment In our view, conducting a more thorough and Renewal. CPUC is currently planning to evaluation of the major reasons why eligible implement certain actions aimed at improving households do not enroll in the program would be enrollment and renewal rates. For example, CPUC valuable. As such, we recommend below directing plans to implement mandatory text message CPUC to conduct such an evaluation. The findings renewal reminders for all wireless customers in from this evaluation could inform future decisions the coming months. It also plans to implement a about what types of changes are likely to result in 10 LEGISLATIVE ANALYST’S OFFICE analysis full gutter AN LAO REPORT the most substantial improvements to enrollment. study cost $325,000. Although the scope and The Legislature might want to wait for the results of methods of the LifeLine study might be somewhat such an evaluation before directing CPUC to make different, the EDD study provides one example of major changes to the program. a study that can provide valuable insight into the Below, we also offer some potential changes reasons why eligible households might not enroll in that the Legislature could consider, even before a state program. such an evaluation is complete. To help assess Consider Directing CPUC to Develop the merits of these options, the Legislature might Statewide Marketing and Outreach Plan. We want to consider directing CPUC to report on recommend the Legislature consider directing the feasibility, costs, and risks associated with CPUC to develop a statewide marketing and implementing these and other potential changes. outreach plan to help improve overall program For those that appear relatively low cost and that awareness among eligible households. Such a plan are likely to have some enrollment benefits, the could be costly to develop and implement, so we Legislature could consider directing CPUC to recommend the Legislature wait until the results implement the changes. For other options that are of the above study are available before directing likely more costly or complicated, the Legislature CPUC to develop the plan. Any such plan should might want to wait until the results of the study incorporate information obtained from the study are complete to determine whether they are likely about specific locations or populations with lower to result in significant enrollment benefits. In some program awareness to determine where outreach cases, the Legislature might also want to consider activities can be targeted to have the most directing CPUC to pilot some potential changes so substantial effect. A marketing and outreach plan the Legislature can evaluate the effectiveness of the could also incorporate results from any of the pilots changes while limiting the overall costs and risks. that CPUC is currently considering. Such a plan As discussed above, there is a large fund balance should also be developed in consultation with the in the Universal LifeLine Telephone Service Trust existing LifeLine Advisory Committee that advises Administrative Committee Fund. This fund balance CPUC on implementation of the program, state could be used to pay for some of these one-time and local agencies administering public assistance evaluation and pilot activities. programs, and CBOs that frequently interact with Direct CPUC to Conduct Study Evaluating eligible populations. The Legislature might want Key Factors Affecting Enrollment and Renewal to direct CPUC to consider the following options Rates. We recommend the Legislature direct when developing a plan: (1) greater coordination CPUC to conduct a study to identify the primary with other state and local agencies and CBOs, reasons for eligible households not enrolling in (2) ensuring outreach and program information the program, such as lack of program awareness, provided by CPUC and carriers is consistent preferences for non-LifeLine plans, and challenges to avoid consumer confusion, and (3) ensuring completing the enrollment or renewal process. materials are available in an adequate number of This study would likely include a survey of eligible languages. households—including those that are not enrolled Direct CPUC to Report on Options to Make in the program—to better understand the primary LifeLine More Attractive to Eligible Households. reasons that many households do not enroll One method to increase enrollment might be to or renew. This information could help the state improve the type or quality of plans being offered target any future actions that are most likely to be to potential enrollees. However, in general, we effective at increasing enrollment. As an example, recommend the Legislature wait for the results the state Employment Development Department of the above study to evaluate the degree to (EDD) funded a similar study in 2015 that evaluated which the type of service being offered is a reasons for households not participating in the factor affecting enrollment before making major, state’s paid family leave program to inform future program-wide changes to the structure of the outreach efforts and programmatic changes. This program. In the meantime, we recommend the www.lao.ca.gov 11 analysis full gutter AN LAO REPORT Legislature direct CPUC to report at future budget phone with a TPA representative. In our view, these or policy committee oversight hearings on various types of changes are reasonable to implement options to make LifeLine service more attractive to before the results of the above study are complete eligible households. These options might include because they are likely relatively low cost and help such things as making more than one phone make the enrollment and renewal process easier line available to each household and/or making for consumers. There may be additional low cost changes to attract some of the larger carriers changes that the Legislature could direct CPUC to to the program. If implemented program-wide, implement. For example, the CPUC could change these types of policy changes could represent a the color or format of correctible denial envelopes significant change to the structure of the program to ensure consumers do not confuse them with and could be costly. For example, such changes the initial applications. With additional information could represent a significant departure from the about the costs of such changes, the Legislature federal LifeLine program and, thus, the state could then direct CPUC to implement changes that would need to consider whether any changes it determines are relatively simple and low cost, might increase the risk of carriers losing federal even before the results of the study are complete. subsidies which would reduce the incentive for For potential changes that are likely to be more carriers to offer LifeLine service. Therefore, for any complex or costly, the Legislature could direct such changes, the Legislature might benefit from CPUC to pilot certain changes and/or wait for the having a better understanding of the costs and results of the study to determine whether they risks of such options so it can weigh them against would address a major barrier to enrollment. These the potential benefits they would provide to eligible types of changes might include: households. It also might want to consider piloting • Enter into agreements with other state and/ any changes to limit risk and evaluate effectiveness or local agencies—such as county social before expanding the changes program-wide. services agencies—to share program eligibility The proposed Boost Mobile pilot that CPUC is information with TPA, which could then allow considering is one example of such an approach. a streamlined eligibility verification process Direct CPUC to Report on Potential Changes and better real-time information on household to Enrollment and Renewal Process. We eligibility. recommend the Legislature direct CPUC to report • Allow direct enrollment with the TPA through at future budget or policy committee hearings an updated LifeLine website without having to on the costs and feasibility of different options to contact a provider first. improve the enrollment or renewal process. As discussed earlier, CPUC is already planning to • Remove requirement for a PIN to renew. implement some changes to the enrollment and • Use correctible denial forms that only ask renewal process. For example, CPUC plans to for missing information rather than requiring implement mandatory text messaging reminders enrollee to fill out the entire application again. for renewals for customers of all wireless carriers and add a statewide option for renewing over the LAO PUBLICATIONS This report was prepared by Ross Brown and reviewed by Brian Brown. The Legislative Analyst’s Office (LAO) is a nonpartisan office that provides fiscal and policy information and advice to the Legislature. To request publications call (916) 445-4656. This report and others, as well as an e-mail subscription service, are available on the LAO’s website at www.lao.ca.gov. The LAO is located at 925 L Street, Suite 1000, Sacramento, CA 95814. 12 LEGISLATIVE ANALYST’S OFFICE