Few Leave Private Insurance for SCHIP by Choice

December 14, 2007

"The mass exodus from private insurance that some anticipated with this program has not occurred"

Only seven percent of new enrollees in New York’s Child Health Plus dropped private health insurance to join Child Health Plus instead.

The issue of parents switching their children from private health insurance to the federally-funded State Children’s Health Insurance Program (SCHIP) has been hotly debated throughout the federal program’s decade-long history. (The program was due for reauthorization this year, but no compromise between the legislative and executive branches has been reached.) A new study published online today in the journal Health Services Research shows those fears of “crowd out” are largely unrealized in New York’s Child Health Plus SCHIP program.

“The mass exodus from private insurance that some anticipated with this program has not occurred,” said Laura Shone, DrPH, MSW, an assistant professor of Pediatrics at the University of Rochester Medical Center’s Golisano Children’s Hospital at Strong and author of the study.

Crowd out refers to the percent of all enrollees who drop private coverage to enroll in a public program instead, meaning that public funds support health coverage for individuals who could have private insurance elsewhere. For example, 70 percent of participants in Medicare prescription drug plans dropped their private drug coverage when the federal program began. However, Shone’s study shows that most children in New York who lost private insurance did not have other options. Instead, most children lost private insurance when a parent lost or changed jobs, got married or divorced or the family moved.

Some states require children to complete an uninsured waiting period if they recently lost private insurance. At the time of the study in 2000, 37 states had waiting periods between three and nine months in order to deter families from switching to SCHIP from private insurance. New York never had a waiting period because they have consistently monitored crowd-out through the application form, and it has always been less than eight percent.

“If crowd-out was a large problem, we would likely see it in New York where children in families earning up to 250 percent of poverty who had private insurance can enroll with no waiting period,” Shone said. “But even in New York, we aren’t seeing many parents choosing SCHIP over private health insurance.”

The federal government could require New York to implement waiting periods under two types of circumstances. Waiting periods could be required if crowd-out increases above the agreed-on limit of eight percent for three months or more. Waiting periods could also be required if New York receives approval to increase the income limits for SCHIP. If a waiting period were instituted in New York for all children who switched from private insurance, without exemptions, 75 percent of the children affected could be remain uninsured for circumstances that were not preventable. Only one quarter of the children who had private insurance shortly before SCHIP – 7.1 percent of all enrollees – chose to drop it to enroll in SCHIP instead.

The purpose of the study was to identify possible disparities in who might be affected by a waiting period if one was implemented in New York. “We wanted to find out if children with chronic illness would be disproportionately affected, since care is so critical to keeping them healthy,” Shone said.

The highest rate of crowd-out was among children who were white or above the lowest income tier, whose parents’ education went beyond high school, were working full-time and whose mothers were U.S.-born. Shone said this makes sense because those groups are more likely to have private insurance in the first place. The study did not find any disparities by health status. Shone said that, although children who met criteria for crowd-out were not sicker than other enrollees, they were also not healthier. Roughly 15 percent of children had asthma or another chronic illness.

“It is always dangerous for a child to be uninsured, and waiting periods could lead to delays in needed care,” Shone said. “I don’t think we should put children’s health at risk for circumstances they have no control over.

“It is becoming a lot harder to obtain or keep private insurance than people understand if they have always had coverage at work. Costs to firms and employees are rising.  Some employers have raised prices so high that employees cannot afford them, and other employers have stopped offering health insurance altogether. Individual plans are very costly (over $12,000 per year for a family of four), and as anyone who has applied for one can tell you, they either exclude the health care you need as ‘pre-existing conditions’ or reject your application altogether.”

Funding for the study was provided by Department of Health and Human Services, Agency for Healthcare Research and Quality, David and Lucile Packard Foundation and the  Health Resources and Services Administration .

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Heather Hare
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