This post is part a Health Advocate Blog series about the importance of the Children’s Health Insurance Program (CHIP)’s to the health care system.
Unless Congress acts by the end of September, the Children’s Health Insurance Program (CHIP), which covers nearly 9 million low-income children, will expire and leave low-income parents paying the bill. Together, CHIP and Medicaid have reduced childhood uninsurance rates from 14.9 percent in 1997 – the year CHIP was enacted – to just 4.8 percent in 2015. By all accounts, CHIP is a bipartisan success story – offering efficient, high quality coverage with child-specific benefits and many of the cost protections offered under Medicaid.
CHIP is tied to Medicaid. Fourteen states run their CHIP program entirely through Medicaid, meaning that eligible children receive Medicaid’s robust child-specific services and affordability protections. Medicaid prohibits premiums or cost sharing for nearly all children under 18 to enhance timely access to care and preventive screenings for developing children.
Children covered under separate CHIP programs still benefit from substantial affordability protections. Generally, separate CHIP programs have low premiums, if any, with half the programs charging less than $10 per month for families with incomes at 201 percent FPL. Copayments and coinsurance for services also vary by state but on average are very low; enrollees pay on average about 2 percent of the total costs of the services they use. Typical copays are under $5 for an office visit and less than $10 for an emergency department visit even at higher income levels. Apart from Utah, no state currently has a deductible in CHIP, and annual out-of-pocket costs cannot exceed 5 percent of household income.
If CHIP expires, some (but not all) children may be eligible for marketplace coverage. However, cost sharing in the marketplace is much higher, even after factoring in cost sharing reductions (CSRs) mandated by the ACA for lower income enrollees. At the lowest levels of Marketplace cost sharing, enrollees will pay an average of 6 percent of the total cost of services they use, or three times the average CHIP enrollee’s share. Families with higher incomes will face much steeper out-of-pocket costs in the Marketplace. In one comparison study, the Centers for Medicare & Medicaid Services (CMS) found that, including premiums, deductibles and cost sharing, marketplace coverage would cost families an average of $969 more than CHIP per child. Another analysis found that per child out-of-pocket expenses in states with separate CHIP programs averaged $158 per year, compared to $1,073 in the Marketplace. CHIP is a better deal.
Not all CHIP enrollees can migrate to marketplace coverage because roughly half a million children would not qualify for ACA premium tax credits because a parent has access to “affordable” family coverage through an employer. Unfortunately, the federal definition of “affordable” is based on employee coverage rather than family coverage, making it hardly affordable for low wage families. For a family of four earning $30,000 per year, an employee asked to pay $240 per month just to cover herself would have an affordable offer. That would disqualify her and her whole family from marketplace tax credits and CSRs. The high cost of adding dependent and spousal coverage costs puts employer-sponsored plans way out of reach for most working families and Marketplace coverage without tax credits and CSRs would also be unaffordable. CHIP mitigates the impact of this so-called “family glitch” by covering children in many of these working families. If CHIP expires, the vast majority of these children would likely become uninsured.
CHIP’s affordability provisions encourage higher enrollment, continuous coverage and access to essential screenings and treatments that help children keep on track as they develop. When Florida increased CHIP premiums by just $5 (from $15 to $20/month) in 2003, the median length of child enrollment declined by 55 percent to 60 percent, with children in lower income families more likely to drop off coverage. Affordability protections are one of the keys to CHIP’s success.
Congress must reauthorize CHIP to maintain the gains in providing health care coverage for children. A failure to act would literally shift the responsibility to working families.