Two complementary studies published in the August 2014 issue of Health Affairs arrived at similar conclusions regarding the cost of health care for low-income kids. Low-income children covered by Medicaid and CHIP pay significantly lower premiums than children with employer-sponsored coverage and subsequently face far fewer cost barriers to coverage and care. 

Background: Premium Tax Credits and Cost-Sharing Reductions 

Low-income children may be covered by state and federal programs (Medicaid and CHIP), marketplace exchange plans, or employer-sponsored insurance. Recent research by the Robert Wood Johnson Foundation and First Focus as well as the National Academy for State Health Policy provides evidence that CHIP’s cost sharing amounts are far less than those in qualified health plans.

The Affordable Care Act offers eligible families additional financial support to purchase private health insurance coverage. Individuals with incomes between 100%-400% of the Federal Poverty Level (FPL) are eligible to receive premium tax credits when purchasing plans through federal or state health insurance marketplaces. Those who qualify for premium tax credits may also qualify for cost-sharing reductions (CSRs) that reduce out-of-pocket spending on deductibles, co-payments, and co-insurance.

The studies summarized here found that the cost of healthcare for low-income children and families enrolled in public health insurance (CHIP/Medicaid) is significantly less than those enrolled in private health insurance (employer-sponsored insurance) which has significant implications for the future of CHIP.

CHIP Premiums and Enrollment

In Children’s Health Insurance Program Premiums Adversely Affect Enrollment, Especially Among Lower-Income Children, authors used data from the 1999-2010 Medical Expenditure Panel Surveys (MEPS) to investigate the cost of premiums for low-income children in CHIP or Medicaid in 2013[1]. The authors, unsurprisingly, found that increasing premiums for lower income families led to an increase in uninsured children.

Of the 19.7 million children eligible for Medicaid and CHIP in 2009-2010, about half (51%) faced a premium. Low-income families were far less likely to pay a premium for health insurance coverage and those families who did have premiums paid a far lower annual premium compared to higher income families.

• 22% of children with family incomes between 101%-150% FPL paid a premium and paid an average annual premium of $65.
• 59% of children and families between 151-200% FPL paid a premium and paid an average annual premium of $132 – nearly double the percent and mean for children with 101%-150% FPL.
• Premium rates and costs skyrocket for the subsequent higher income brackets of 201%-250% and above 250%, with 87% and 96% facing a premium and paying an average of $336 and $562, respectively.

Finally, the authors simulated the effects of raising annualized public premiums by $120 per child (for children eligible for Medicaid or CHIP and with family incomes above 100% of the FPL in 1999-2010). Higher public premiums led to a significant decrease in public coverage and an increase in private coverage and uninsurance, with varying degrees based on family poverty level and parental coverage offers (i.e., if parents had an offer of employer-sponsored insurance).

• For eligible children with family incomes above 150% of the FPL, an increase in premiums led to only a slight decrease in public coverage (1.6 percentage points), which was offset by a slight increase in private coverage (1.5 percentage points).
• For families with incomes 101-150% of FPL, the premiums led to four times the decrease in public coverage (6.7 percentage points) and a huge increase in uninsurance (3.3 percentage point). For this income group, the increase in uninsurance is much greater for parents who lacked offers of employer-sponsored coverage.

 CHIP and Cost-barriers

Another study, Trade-Offs Between Public And Private Coverage For Low-Income Children Have  Implications For Future Policy Debates, published in the August issue of Health Affairs used the Urban Institute’s 2013 Health Reform Monitoring Survey Child Supplement to compare access to care for low-income children in public coverage (Medicaid or CHIP) and low-income children in private coverage (employer-sponsored insurance). Here, the authors define “low-income” as children with family incomes less than 250% of the FPL.

The authors found that low-income children with public insurance had significantly fewer cost-related barriers to care than those with public insurance. Nearly one in five (19.0%) of children with private coverage had a parent report difficulty paying their child’s medical bills compared to only one in ten (9.7%) of children with public coverage. In addition, children with public coverage were significantly less likely to report not receiving needed care[2] due to affordability issues than children with private coverage.

Nearly 70% of children with Medicaid or CHIP had no out-of-pocket expenses in the last year, compared to 22% of children with employer-sponsored insurance. Furthermore, publicly insured children were less likely to have out-of-pocket expenses between $250-$499 (2.4%) and greater than $500 (4.7%) compared to privately insured children (14.3% and 28.4%, respectively).

Finally, the authors found that three fourths of publicly insured children were satisfied with their premiums (75.0%) as well as their copayments and coinsurance (73.2%) compared to only three fifths of privately insured children (59.3% and 60.2%, respectively).

Conclusion

Taken together, these studies highlight the importance of CHIP and Medicaid in providing affordable health care for low-income children and families. Without sufficient cost-sharing protections in place, low-income families will face enormous health care bills for their children’s health care or, alternatively, become uninsured. For additional information about the cost of premiums for families in CHIP, please refer to CCF’s report on Benefits and Cost Sharing in Separate CHIP Programs.