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Concerns about Parents Dropping Employer Coverage to Enroll in SCHIP Overlook Issues of Affordability

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Document date: September 26, 2007
Released online: October 01, 2007

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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Abstract

One of the more prominent concerns in the SCHIP reauthorization debate is that many children enrolling in the program could have been insured through their parents' employers. However, concern about parents dropping employer coverage to enroll their children in SCHIP typically ignores the affordability of that coverage. We show that families' spending burden is, on average, lower under public insurance than under employer-sponsored insurance (ESI), especially for the lowest-income families. For families in which children are covered by Medicaid or SCHIP, out-of-pocket spending is, on average, 4 to 5 percent of their income. However, for families in which children have ESI for a full year, the out-of-pocket spending burden is higher, ranging from 12.9 percent of income for families below 150 percent of the federal poverty level (FPL) to 6.1 percent for families between 250-400 percent of FPL.


Introduction

One of the more prominent concerns in the SCHIP reauthorization debate is that many children enrolling in the program could have been insured through their parents' employers.However, concern about parents dropping employer coverage to enroll their children in SCHIP typically ignores the affordability of that coverage. This brief measures affordability as families' out-of-pocket spending burden.The findings suggest that families' spending burden is, on average, lower under public insurance than under employer-sponsored insurance (ESI), especially for the lowest income families.We show that families in which children are insured through ESI have an out-of-pocket spending burden that is greater than the 5 percent cap suggested in a recent directive put out by the Centers for Medicare and Medicaid Services (CMS). For families in which children are covered by Medicaid or SCHIP, out-of-pocket spending is, on average, 4 to 5 percent of their income. However, for families in which children have ESI for a full year, the out-of-pocket spending burden is higher, ranging from 12.9 percent of income for families below 150 percent of FPL to 6.1 percent for families between 250-400 percent of FPL. Families with uninsured children have lower total out-of-pocket spending than families with children on ESI, and similar total out-of-pocket spending to families with children who are publicly insured. Public insurance provides protection against high out-of-pocket costs, even as health care needs increase. Total out-of-pocket spending for low-income families who have a child with a chronic health condition is lower when their children are covered by public programs (5.5 percent) as opposed to ESI (11.2 percent).

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