Kids' health insurance program faces crucial test this year

If you write about children’s health or health policy more generally, there’s one topic that will be very hard to avoid this year: the Children’s Health Insurance Program (CHIP).

That’s because it’s on the chopping block: The program’s funding will expire in September 2015 unless Congress renews it. With that deadline looming, children’s health advocates have been ardently making the case for Congressional action, arguing that the program fills a crucial need for low-income kids who may otherwise be left without insurance or underinsured.

Those same advocates point to Arizona – the state pulled the plug on its CHIP program last year – as a early indicator for what might happen across the country should children lose their public benefits and turn to subsidized marketplace plans, which typically have less generous benefits and higher cost-sharing levels.

CHIP’s origins date back to 1997’s Balanced Budget Act, when it was designed to extend coverage to kids in low-income families whose incomes where too high to qualify for Medicaid. The program, which now covers an estimated 5.7 million children, is widely credited with helping drive down the percentage of uninsured children over the past two decades, even as the rate of uninsured adults has climbed. The uninsured rate for children dropped to 7 percent by 2012 from 14 percent in 1997.

But in the wake of the Affordable Care Act, many states have expanded Medicaid programs, and federal premium subsidies make exchange plans more affordable for lower-income families. Why then do we still need CHIP? Hasn’t the ACA rendered the program redundant?

Not quite. CHIP supporters point out that typical marketplace plans don’t match the more generous benefits of CHIP programs. Aaron E. Carroll, a professor of pediatrics at Indiana University School of Medicine, explained some key coverage differences between CHIP and marketplace plans in a recent New York Times column:

CHIP plans have an actuarial value of greater than 90 percent, making them much more generous than A.C.A. silver benchmark plans, with an actuarial value of 70 percent, meaning the plan covers 70 percent of health care costs. The increased cost-sharing families might encounter by moving to private plans might leave even more children underinsured. Deductibles, co-pays, coinsurance and even premiums are usually much lower in CHIP plans than in exchange plans.

A report prepared last year for the Robert Wood Johnson Foundation similarly found that when CHIP enrollees transitioned to marketplace plans, they often faced “a substantial increase in estimated out of pockets costs at the point of care.” Those increases could mean parents avoid getting children needed care or even avoid seeking coverage altogether.

“Simply put, if kids are to be no worse off, marketplace coverage must rise to CHIP’s standards,” wrote Sean Miskell, a researcher at Georgetown’s Center for Children and Families.

But there’s another important reason some families might not be able to access marketplace coverage — the Affordable Care Act’s oft-derided “family glitch.” The glitch prohibits a family from accessing premium subsidies on exchange plans if the family has access to “affordable” coverage from their employer. The hitch? The definition of affordability is based on individual coverage, usually much cheaper than family coverage. That means a family might not be able to afford its family plan at work, but it’s still denied exchange subsidies because the law only looks at the cost of the employer’s individual plan in deciding whether a family has access to affordable coverage. The glitch would be an easy legislative fix — in a less sclerotic Congress.

In Arizona, an estimated 14,000 kids lost health coverage when the state’s CHIP program ended last year. Many of those children would be eligible for subsidies on the federal exchange, but Georgetown University researchers say those plans will on average cost families more and deliver less. (While more than 37,000 children were enrolled in Arizona’s CHIP program when it ended, more than 26,000 were absorbed into the state’s Medicaid program. It’s not known how many of the remaining 14,000 obtained marketplace coverage.)

Despite Congressional gridlock, there is bipartisan support for CHIP. The Washington Post reported that Sen. Orrin Hatch (R-Utah), one of the program’s original backers, has said that extending the program is a top priority, and more than three dozen governors announced support for such a move last month.

Speaking in Ohio earlier this week, Democratic Senator Sherrod Brown tried to explain what the demise of CHIP would mean for his state:

This means for Ohio alone next year a loss of $47 million. That means thousands of children that are now getting health insurance will not get health insurance. Providing health insurance for low-income children is not only the right thing to do, it’s the smart thing to do.

As long as marketplace plans lag well behind CHIP programs in benefits and exceed them in costs, there’s a strong case to be made for keeping the program intact — especially given the evidence pointing to the long-term health and education benefits of insured children. Those realities aren’t likely to change by September.

Photo by 10-year-old Donghyeon Lee via Korean Resource Center/Flickr.