Experts at a recent policy briefing differed on the possible ill effects the private health insurance industry could face under expansion of the State Children’s Health Insurance Program.
With SCHIP expansion legislation in the hot seat and current funding due to expire Sept. 30, the issue of crowd-out - the amount private coverage is displaced when public programs are expanded - is at the forefront, said Ed Howard, executive vice-president of the Alliance for Health Reform.
Lisa Dubay, health services researcher and associate professor at the John Hopkins Bloomberg School of Public Health, said crowd-out is an inevitable byproduct of any proposal to expand coverage. According to Dubay, the SCHIP program reduces employer-sponsored coverage by 2 percent, which she noted is "a really small reduction in the base of employer-sponsored coverage."
It's important to balance the potential negative effects with the positive, Dubay added. SCHIP has reduced the rate of uninsured children by about a third, has increased access care among the eligible and has improved health status among children.
Dubay said the SCHIP expansion bills proposed by the House and Senate do not pose a crowd-out threat. "(T)he devil is in the details with these plans," she said. "What states do and how they are implemented will really determine whether or not these prevent crowd-out or increase crowd-out."
Congressional Budget Office Director Peter Orszag said CBO does not see many other policy options that would reduce the number of uninsured children by the same amount without creating more crowd-out than under the House and Senate proposals.
"Unless you are going to impose a mandate on employers, individuals, or states, you will have crowd-out," Orszag said. "The policy question at hand is whether those types of reductions are worth the cost that is involved."
In an Aug. 17 letter to state health officials, the Centers for Medicare & Medicaid Services said it would continue to protect the market from crowd-out as SCHIP expands. CMS encouraged states to impose a number of methods, including waiting periods, cost sharing and monitoring of health insurance status.
Janet Trautwein, executive vice president and CEO of the National Association of Health Underwriters said crowd-out could pose an additional problem: When the ranks of the privately-insured dwindle, some small employers are not able to afford insuring a smaller pool.
According to Trautwein, when employees shift to a subsidized government plan, this can sometimes leave their employers paying for insurance that isn’t used. A remedy for this could be premium assistance provided by the government to help pay for private insurance, she added.