WASHINGTON – Experts at a recent policy briefing debated how an expansion of the State Children’s Health Program might harm the private health insurance industry.
With current SCHIP funding due to expire Sept. 30, the issue of crowd-out – the amount of private coverage displaced when public programs are expanded – is an important consideration, 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. She said the SCHIP program reduces employer-sponsored coverage by 2 percent, which 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 said. SCHIP has reduced the rate of uninsured children by about a third, increased access care among the eligible and 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 the 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,” he 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 won’t be able to afford insuring a smaller pool.
When employees shift to a subsidized government plan, she said, it could leave their employers paying for insurance that isn’t used. This problem could be solved with premium assistance provided by the government to help pay for private insurance, she added.