Prospects for Reducing Uninsured Rates among Children: How Much Can Premium Assistance Programs Help?

Abstract

With the reauthorization of the State Children's Health Insurance Program (SCHIP) under consideration in early 2009, an important question is the extent to which uninsured children could be covered under employer-sponsored insurance through premium assistance programs, which use public funding under Medicaid and SCHIP to subsidize employer-sponsored insurance (ESI). New data indicate that just 4.6 percent of all Medicaid-eligible uninsured children and 15.9 percent of all SCHIP-eligible uninsured children have a parent with ESI coverage, suggesting that premium assistance programs may not make a substantial dent in the uninsured problem facing children since, as a practical matter, they would target at most only an estimated 440,000 uninsured children who are eligible for public coverage. The fact that so few uninsured children have parents with ESI coverage highlights the importance of increasing take-up in Medicaid and SCHIP among eligible children.

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Policy Implications

Premium assistance programs cannot address many of the existing coverage gaps among children since so few uninsured children have parents with employer-sponsored insurance coverage. In particular, premium assistance programs targeted at SCHIPand Medicaid-eligible children would have a limited impact on the number of uninsured children since just 4.6 percent of Medicaid-eligible and 15.9 percent of SCHIP-eligible uninsured children have a parent who is covered by ESI. Even in a scenario in which all eligible uninsured children whose parents have ESI were brought in through premium assistance programs, the number of uninsured children would decline by just 440,000.³³ Premium assistance programs could have a greater impact if states expanded public coverage to more parents since that would likely increase the likelihood that the cost-effectiveness test could be met even for the parents who do not have ESI but have an ESI offer.

Moreover, to the extent that they reduce employer and employee contributions toward employer-sponsored coverage, expanding premium assistance programs under SCHIP could lead to a substantial substitution of public for private funding for health insurance coverage given that 7 million children qualify for SCHIP on the basis of their incomes but receive coverage through a parent's employer-sponsored insurance plan. Of the children who could potentially qualify for premium assistance programs under SCHIP, the number who already have ESI coverage is more than six times the number who could potentially gain ESI, either by opting-out of direct public coverage or by a reduction in the uninsured. The administrative burdens associated with premium assistance programs, for both public programs and for employers, raise concerns as well. While policies such as waiting periods could reduce the extent to which premium assistance programs lead to reductions in private financing for health insurance coverage by limiting the enrollment of children who already have employer-sponsored coverage, such policies also raise serious equity issues.³⁴ Parents who previously paid for their children's health insurance would be denied assistance, while similarly situated parents who made a different choice would receive help.

Overall, many more uninsured children are eligible for public programs than have access to ESI through their parents. Therefore, policies to increase enrollment and retention in Medicaid and SCHIP have much greater potential than premium assistance programs to close coverage gaps among children.

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