Alliance for Health Reform Briefing on the CrowdOut and the State Childrens Health Insurance Program

1
Alliance for Health Reform Briefingon the
Crowd-Out and the State Childrens Health
Insurance Program

• Presented by
• Janet Trautwein, Executive Vice President CEO
• National Association of Health Underwriters

2
What is Crowd-Out?

• Crowd-out of Private Coverage
• Occurs when individuals who were previously
  covered by private health insurance move to
  government programs
• Is more likely as income eligibility for
  government programs is increased

3
What is Crowd-Out?

• Crowd-out of Private Funding of Health Insurance
• Occurs when individuals who were previously
  covered by private health plans (funded in part
  by their employers) leave that coverage to move
  to public programs
• Occurs when individuals do not enroll in plans
  offered and subsidized by their employers and
  enroll instead in a public program

4
What is the Impact of Crowd-Out on Private Plans

• It impacts small employers who may be unable to
  meet health plan participation requirements
• It impacts the cost of coverage for those who
  remain insured in the private plans
• It removes a large number of young and healthy
  individuals from the risk pool thus spreading the
  cost of high risk individuals across a smaller
  and older pool
• This problem is worsened when parents are also
  eligible under the S-CHIP program

5
The Impact of Premium Assistance

• Many of the children eligible for the S-CHIP
  program have at least one working parent whose
  employer offers and subsidizes health insurance
  coverage for employees and their families
• These parents are frequently already covered
  under these plans due to the large employer
  subsidy but cant afford their share of the cost
  to cover their children.

6
The Impact of Premium Assistance on Those Already
Eligible but Not Covered

• States have been unable to enroll all of the
  children already eligible for their S-CHIP
  program
• One reason for this problem is that some parents
  of already eligible children are unwilling to
  enroll their children in S-CHIP because they
  associate it with other public programs such as
  welfare

7
The Impact of Premium Assistance on Those Already
Eligible but Not Covered

• These parents would like their family to all be
  insured on the same health plan, and would enroll
  their children if it could be done through their
  employer sponsored health plan
• Premium assistance to allow S-CHIP dollars to
  subsidize employer sponsored coverage could help
  to reach these children who arent covered
  anywhere now

8
The Impact of Premium Assistance on Those Who Are
Already Covered

• Some parents whose children are already eligible
  for the S-CHIP program make great sacrifices to
  cover their children under their employer
  sponsored plan.
• These parents at some point may be faced with
  costs greater than they can absorb on their own.
• In spite of their preference for keeping the
  family insured together, they will be forced to
  move their children to coverage under the S-CHIP
  program.
• The employer dollars that previously subsidized
  the cost of the childrens coverage will be left
  on the table.

9
The Impact of Premium Assistance on Those Who Are
Already Covered

• If Congress decides to increase income
  eligibility for the S-CHIP program, many of the
  newly eligible will already be covered by
  employer sponsored plans
• A large number of those newly eligible will leave
  their employer sponsored coverage and move to the
  S-CHIP program.
• The employer dollars already subsidizing current
  coverage will be left on the table.

10
Premium Assistance and Current Law

• Congress always intended that S-CHIP dollars
  could be used to subsidize the cost of employer
  sponsored coverage for eligible children
• Unfortunately, there are so many hurdles to be
  overcome in current law when using this option
  that few states have taken advantage of it
• Current rules on cost-sharing, cost-effectiveness,
  employer contributions and benchmarks have made
  the process administratively burdensome for
  states and employers.

11
Cost-Effectiveness of Premium Assistance

• Research shows that subsidizing employer
  sponsored coverage could be significantly more
  cost-effective in many cases, even when states
  are using a secondary payer system to fill in
  benefit gaps
• This is particularly true when there is more than
  one eligible child in the family
• The public/private partnership in using premium
  assistance is fiscally responsible for federal
  and state governments and provides an affordable
  private option for eligible children.

12
Premium Assistance and Crowd-Out

• Premium assistance addresses both kinds of
  crowd-out
• It would maintain and encourage private coverage
• It would maintain and increase private funding
  (through employers) of private coverage
• It is fiscally responsible and will result in
  greater stability for the S-CHIP program
• The negative impact of crowd-out on private plans
  for those currently insured can be avoided