State Buy-In Programs: Prospects and Challenges
Document date: November 24, 2008
Released online: November 24, 2008
The text below is an excerpt from the complete document. Read the full brief in PDF format.
State buy-in programs are designed to address coverage shortfalls among moderate- and higher-income children whose families are not eligible for Medicaid or SCHIP but who cannot afford, or do not have access to, private coverage. These programs allow families to buy their children into a comprehensive public insurance plan with low out-of-pocket cost sharing at an unsubsidized premium. As more states aim to achieve universal coverage for children, buy-in programs may be one component they consider in their plans to reach that goal. This brief explores some issues for states to consider before implementing a buy-in program.
- SCHIP buy-in programs, available in a growing number of states, provide comprehensive health
insurance options for children in families with incomes too high to qualify for government-supported
plans. Through these programs, moderate- and higher-income parents can buy their children the same
health care coverage offered through the state programs, but at a much higher premium than charged
for lower-income children.
- Take-up rates in buy-in programs appear to be low relative to the size of the uninsured population to
which they are targeted, ranging from 8 to 11 percent of eligible children in selected states. Enrollment
in private nongroup coverage among the target income group tends to be substantially higher than
enrollment in buy-in programs in the same state.
- While no definitive analysis is available on how much buy-in programs are “crowding out” private
insurance, the low enrollment levels in buy-in programs suggest that they have had little impact on
employer-sponsored insurance (ESI). In addition, since the buy-in populations largely pay for the full
costs of their coverage, there is little displacement of private dollars with public dollars.
- Premiums in buy-in programs are substantially higher than premiums charged to children in the
subsidized component of Medicaid/SCHIP. The high premiums likely contribute to the low take-up
rates observed since they constitute a large share of income for families with moderate incomes (i.e.,
families with incomes between 200 and 400 percent of the federal poverty level) and since most
families can reasonably expect their children to have spending levels substantially lower than the
- By providing greater subsidies to moderate-income families, thereby raising the minimum income
level for the unsubsidized buy-in, states will likely see greater enrollment in the buy-in program and
greater reductions in uninsurance among children.
- Adverse selection is likely to occur in buy-in programs, especially in those where premiums are high
relative to income, participation is voluntary, and the private nongroup insurance market does not have
community rating and guaranteed issue of policies. The limited information available does suggest that
there is adverse selection in buy-in programs, though more research is needed. However, to the extent
that these programs are enrolling children with higher than average health needs, the buy-ins are likely
providing high quality, comprehensive care, with low out-of-pocket cost sharing to which these
children would not have had access otherwise.
- States may be able to limit adverse selection by requiring that children be uninsured for a specified
period of time prior to enrolling. However, this approach will penalize children with private coverage
that is more costly or less comprehensive than what is available through the buy-in program.
Nongroup coverage, in particular, tends to have limited benefits and provides a lower insurance value
for the dollar due to high administrative costs. Requiring such waiting periods also may have adverse
health consequences for children.
- States could reduce premiums for buy-in programs by increasing out-of-pocket cost-sharing
requirements. Such a change could increase take-up and reduce adverse selection. However, increasing
cost sharing places a greater financial burden on those with high health care needs and may reduce
some families’ financial access to necessary care. In addition, administrative costs associated with the
buy-in may rise as mechanisms for tracking payments must be implemented.
- One option being considered is to impose a mandate on parents to cover their children, which would
likely be the most effective strategy for increasing take-up and reducing adverse selection in the buyin.
The impacts on the coverage of moderate- and higher-income uninsured children will likely depend
on how the penalties for noncompliance compare with the premiums in the buy-in program. Moreover,
before a mandate is implemented, it will be essential to consider the affordability of the buy-in
premiums and cost sharing, particularly for moderate-income families.
- Buy-in programs can stimulate greater enrollment among children already eligible for Medicaid and
SCHIP, but this will not occur automatically; it will likely require aggressive marketing and outreach.
- Many questions about buy-in programs remain unresolved. In particular, no information is publicly
available on how enrollment and take-up in buy-in programs vary by income group, how the
characteristics (e.g., demographic, health needs, etc.) and health care access of the children served by
the buy-in differ from those in other insurance groups (i.e., children with non-group coverage, children
with ESI, children with subsidized public coverage, and uninsured children), how buy-in programs
affect and are affected by the nongroup market in a particular state, and what other policies are needed
to maximize the positive spillover effects associated with offering a buy-in.
(End of excerpt. The entire brief is available in PDF format.)
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