The Business Case for Expanding SCHIP

 

Background/Key Facts

  • The State Children’s Health Insurance Program (SCHIP) was enacted by Congress with strong bipartisan support in 1997 to increase health insurance coverage for low-income children and is up for reauthorization this year. SCHIP is a block grant from the federal government to the states. Colorado’s SCHIP program, the Child Health Plan Plus (CHP+), includes a cost-sharing component for all but the lowest-income enrollees.
  • SCHIP is a cost-effective investment for states. Each state dollar spent on the program brings in $2 from the federal government. Indeed, the Chamber has itself noted the value of this arrangement; its 2001 white paper, “Medicaid, the Uninsured and the Impact on Your Business,” identified government programs that serve the uninsured (i.e., SCHIP and Medicaid) as cost-effective solutions for Colorado because of the availability of federal matching funds.
  • It is estimated that 180,000 children in Colorado lack health coverage. Approximately one-half of these are eligible for public programs under current criteria but are not enrolled.

 

SCHIP Works

  • Currently, approximately 50,000 children and 1,300 pregnant women are covered by CHP+ in Colorado.
  • By making coverage affordable to low-income families and pregnant mothers, SCHIP reduces the amount of uncompensated care that doctors and hospitals must provide. That, in turn, decreases the cost-shift that contributes to higher health care premiums for businesses and their employees.

 

Why Expand SCHIP?

  • More people with insurance means less cost-shifting.
    • In 2005 in Colorado, premiums for employer-sponsored family health insurance coverage cost $934 more as the result of cost-shifting to cover the cost of care for the uninsured; premiums for individual coverage cost an extra $355 for the same reason (Families USA report, based on data compiled by Dr. Kenneth Thorpe, Robert W. Woodruff Professor and Chair of the Department of Health Policy and Management, Rollins School of Public Health, Emory University).

 

  • More people with insurance means better access to preventive care and timely treatment, which in turn bring a host of social and economic benefits.
    • Covering children is an important investment in Colorado’s future. Children with health coverage are more likely to get the care they need when they need it. And, healthy children are better prepared to learn in school and succeed in life.
    • Children who receive preventive care and good medical guidance ultimately cost the state less money, because early treatment keeps manageable health problems from developing into more serious conditions.

 

  • Higher premium costs have contributed to a decline in the number of firms offering insurance as well as encouraged firms to hire part-time or contract workers or to raise eligibility requirements.

 

    • A 2006 survey by the Kaiser Family Foundation found that just 47% of firms with three to nine employees offered health insurance, but that jumped to 72% for businesses with 10 to 24 employees and 93% for those with 50 to 199 workers.

 

    • According the same study, firms with a high proportion of lower-paid workers are less likely to offer health benefits than firms with a more highly paid workforce: 42 percent of firms where at least 35 percent of workers earn $20,000 or less offer health benefits to their workers, compared with 65 percent for firms with a smaller proportion of low-wage workers.

 

  • The likelihood that a worker will accept (or “take up”) an offer of insurance at work is related to the amount that the worker must contribute toward the cost of coverage.

 

    • Faced with increasing costs, many firms increase worker cost sharing for premiums, which can put stress on family budgets – particularly for low-income workers.

 

    • In 2005, employees paid on average 16% of the single coverage premium, or $51 monthly, and 26% of the family coverage premium, or $226 monthly.

 

 

Funding SCHIP

  • In order to maintain eligibility for currently enrolled children as well as cover all children who are eligible under the current program but not enrolled, Congress needs to fund $50 billion through the SCHIP reauthorization. There is bi-partisan support for reauthorization of SCHIP at this funding level. In Colorado, almost twice as many children are eligible for public programs as are currently enrolled.
  • Fiscal prudence and Congressional will dictate that SCHIP funding be subject to “pay-as-you-go” rules, which require that the cost of increases in mandatory programs (such as SCHIP) be fully offset through entitlement reductions and/or revenue increases.
  • Ample offsets exist on both the spending and revenue sides of the budget to cover the costs of SCHIP reauthorization several times over — if there is political will to pursue them. One option Congress has looked at is reducing overpayments to Medicare HMOs; another is raising federal tobacco and/or alcohol taxes.

 

At the Denver Metro Chamber’s April 6 Health Policy Breakfast, Len Nichols stated that, by expanding insurance access through programs such as SCHIP, "It is not a question of charity. Rather it is a question of stewardship and what kind of community we want to live in as well as the economic and social costs of not covering our people."