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Abstract

This brief uses the 2005 Current Population Survey to examine national patterns of coverage among families with SCHIP eligible children.  Key findings are that: close to 2 million uninsured children are eligible for SCHIP, the majority of SCHIP enrollees could not be enrolled in an employer plan that covers their parents, and almost 40% of SCHIP enrollees lives with an uninsured parent.  This implies that federal funding will have to be increased substantially to cover the remaining eligible but uninsured children and that many children stand to lose coverage altogether if federal funds are inadequate to meet existing program needs.

Overview

The State Children's Health Insurance Program, or SCHIP, is slated for reauthorization in 2007. At stake is the level of federal funding that will be available to support the program and whether the federal funding level and allocation across states will allow states to maintain their current programs, let alone expand to cover more uninsured children who are eligible for coverage but not yet enrolled. If SCHIP is funded at the baseline level used in Congressional Budget Office (CBO) projections, there will be a shortfall in SCHIP funding between $12.7 and $14.6 billion over the next five years (Broaddus and Park 2006; Peterson 2006). In addition, the Centers for Medicare and Medicaid Services project that if the program is funded at the baseline level in CBO projections, enrollment in the program will decline by over a million children.

SCHIP was enacted in 1997 to expand health insurance coverage to low-income uninsured children. Under SCHIP, states could use enhanced federal matching dollars to expand public coverage for children beyond Medicaid eligibility levels. Because of concerns that SCHIP would substitute for—or crowd out—private coverage, the SCHIP statute precluded states from covering children enrolled in employer coverage and required that states implement mechanisms to prevent SCHIP from substituting for employer coverage. SCHIP led to coverage expansions in all states and sparked new investments in outreach and enrollment simplification aimed at increasing participation rates for children in both Medicaid and SCHIP. Since SCHIP was enacted, uninsurance rates have fallen among children, particularly low-income children, but progress appears to have stalled in recent years (Kenney and Yee forthcoming).

This brief addresses three important issues that merit attention as SCHIP faces reauthorization. The first issue is how many children remain uninsured despite being eligible for coverage under SCHIP. It appears that public programs are not reaching all the uninsured children eligible for coverage (Dubay, Holahan, and Cook 2006; Summer and Mann 2006) and that participation rates vary across different subgroups of children (Dubay, Kenney, and Haley 2002). According to one estimate from 2002, close to 3 million children were uninsured despite being eligible for SCHIP coverage (Selden, Hudson, and Banthin 2004). Understanding how many uninsured children remain eligible for SCHIP is important as it affects the amount of federal funding required to fully fund SCHIP programs to maintain current enrollment and to cover all the remaining uninsured children who qualify for the program.

The second issue is how many SCHIP enrollees have access to employer-sponsored coverage through their parents. Understanding the extent to which SCHIP enrollees have access to employer-sponsored coverage is important because it will shape what happens to the children who would lose SCHIP coverage in the event of funding shortfalls. In addition, we use information on access to employer-sponsored coverage among SCHIP enrollees to assess whether SCHIP may be substituting for employer coverage nationally, building on several state-specific studies (Allison et al. 2003; Sommers, Zuckerman, and Dubay 2005). These studies have found that most SCHIP enrollees do not have access to employer-sponsored insurance, but this statistic appears to vary from state to state.

The third issue is how many SCHIP enrollees have uninsured parents. There is growing evidence that the uninsurance problems experienced by parents can have adverse spillover effects on their children (Ku and Broaddus 2006). Understanding how often SCHIP enrollees have uninsured parents is important, since lack of coverage may affect not only the health and well-being of parents, but that of their children as well.

This brief uses the 2005 Current Population Survey (CPS) to examine national patterns of coverage for children who meet the income requirements for SCHIP coverage (a complete description of the data and methods used in this analysis is contained in the appendix). The analysis simulates eligibility for both SCHIP and Medicaid, taking into account the eligibility rules in each state and using the information available on the CPS related to the child's age, household structure, and family income. We examine the insurance coverage distribution of children who meet the income eligibility requirements for SCHIP, assessing how many remain uninsured and variation in participation rates. We also assess whether the parents of SCHIP enrollees have employer-coverage or whether they lack health insurance coverage. This analysis focuses on SCHIP, although selected estimates are also presented for Medicaid because it is such an important source of insurance coverage, particularly for low-income children.

This brief has three important implications for SCHIP as it faces reauthorization. First, federal funding will have to be increased substantially if the allotments are to include coverage for the close to 2 million uninsured children who are eligible for SCHIP but not yet enrolled. Second, many children stand to lose coverage altogether if federal funds are inadequate to meet existing program need. Finally, addressing the insurance coverage needs of low-income parents through SCHIP would likely improve the lives of both low-income children and their parents but would require a substantial expansion in the federal funding commitment to the program. The following sections present the key findings and discuss the policy implications.

Note: This report is available in its entirety in PDF Format.

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

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