Alliance for Health Reform Briefing on the Crowd-Out and the State Children’s Health Insurance Program Presented by Janet Trautwein, Executive Vice President & CEO National Association of Health Underwriters

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

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

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

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 can’t afford their share of the cost to cover their children.

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

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 aren’t covered anywhere now

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 children’s coverage will be left on the table.

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.

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.

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.

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