Insurance for children: Medicaid, CHIP, and the "family glitch"

The latest issue of the journal Health Affairs focuses on children's health, and one of the major topics is health insurance for children. A look at the Kaiser Family Foundation's coverage statistics shows that in 2013, 49% of children ages 0 - 18 had employer-sponsored coverage, 39% were covered by Medicaid or another public program, 5% had other private coverage, and 8% were uninsured. There are three main ways US children get health insurance coverage:

Medicaid: The federal government pays a portion of healthcare costs for Medicaid beneficiaries, and in exchange requires that states extend coverage to certain populations, including children living below the poverty level. (In 2014, the FPL is $11,670 for a one-person household, $23,850 for a household of four.) KFF reports on the state income cutoffs for 2014, which include:

  • Ages 0 - 1: All states cover children ages 0 - 1 whose family incomes are at or below 144% of the FPL; seven states and the District of Columbia set the limit at various points above 300% FPL. Utah has the lowest limit, at 144% FPL; five other states have it below 150%; Iowa's limit is the highest, at 380%.
  • Ages 1 - 5: All states cover children ages 1 - 5 whose family incomes are at or below 138% FPL; five states and DC set the limit at various points above 300% FPL. Oregon has a limit of 138% FPL, while 15 other states have limits below 150%; Hawaii's limit is 359%.
  • Ages 6 - 18: All states cover children ages 6 - 18 whose family incomes are at or below 138% FPL (with 17 states using that as the limit); four states and DC set the limit at various points above 300% FPL, including Hawaii at 359%.

CHIP: The Children's Health Insurance Program, which Congress established with 1997 legislation and reauthorized with a 2009 law, allows states to use federal funding to provide or purchase coverage for children whose family incomes are above the Medicaid eligibility limits but still too low to afford private insurance. Unlike federal Medicaid funding, which is available for as many eligible beneficiaries enroll in the program, federal CHIP funds come in fixed amounts, and states can cap the number of CHIP beneficiaries. CHIP coverage also does not need to include all of the benefits specified for Medicaid-covered children, and allows beneficiaries to be charged for premiums and cost-sharing (although these charges are still lower than those in most private plans). Income cutoffs for CHIP coverage range from 175% FPL in North Dakota to 405% FPL in New York.

Private coverage: Families can get coverage through an employer-sponsored plan, or they can buy coverage from an exchange (marketplace). Those who are eligible for subsidies under the Affordable Care Act can get financial assistance with premiums for exchange-purchased plans. The basic rule is that people with household incomes between 100% and 400% FPL are eligible for premium subsidies. However, there are important exceptions. If an employee is offered employer-sponsored coverage and that coverage qualifies as affordable, that employee's family is not eligible for subsidies. The determination of an "affordable" plan -- one whose premiums cost no more than 9.5% of the person's income -- is based on what is affordable for the employee as an individual, not what is affordable for the employee's family. NPR's John Ydstie recently offered an illustration of how this rule can leave lower-income families without affordable insurance options:

Suzanne Shugart and her family face a similar situation in McPherson, Kan. Her husband works for a cabinetmaker, earning around $32,000 a year. He can get health insurance through his employer for a little more than $50 a month, just for himself.

That's also affordable coverage, according to Obamacare rules, so Shugart's family isn't eligible for subsidies in the online marketplace. But the employer's family coverage is too expensive for them, says Shugart.

"If he were to increase it to a family plan, which would include me, it goes up to about $380 a month, which is nearly our mortgage payment," Shugart says.

She and her husband can't afford that, she says. Luckily, their children qualify for insurance through a state plan.

"That's how we've lived for the last eight years," Shugart says. "He has insurance through work and the kids have state insurance, and I just live on hope and a prayer that nothing bad will happen."

If Shugart's family could get subsidized coverage on the Obamacare exchange, the premium for a benchmark plan would be a little more than $200 a month, making coverage for her much more affordable.

CHIP doesn't necessarily fill the gap in such situations, explain Sara Rosenbaum of the George Washington University Milken Institute School of Public Health (where I also work) and Genevieve M. Kenney of Urban Institute's Health Policy Center in the latest issue of Health Affairs:

As a result, workers whose own coverage meets the affordability threshold are barred from securing premium subsidies for their children, no matter how out of reach dependent coverage might be in relation to family income. This problem, termed the “family glitch,” deprives families of help, potentially leaving millions of children without access to affordable insurance in the absence of CHIP. But CHIP alone is no panacea for the family glitch. CHIP covers more than eight million children at some point each year. However, half of the states set income eligibility standards at less than 255 percent of poverty. In these states, children caught in the glitch but with household incomes higher than their state’s relatively low CHIP upper income threshold yet nonetheless below the premium tax credit threshold of 400 percent of poverty cannot receive tax subsidies. Because of the family glitch, children in these states are at increased risk of lacking a pathway to affordable coverage.

Over the past few decades, Congress has been able to reach bipartisan agreement about the need to improve health-insurance coverage for children. Might they act to fix the "family glitch"? John Ydstie talked to the Urban Institute's Linda Blumberg, who was not optimistic:

Blumberg says it's likely that in a more amenable political environment, the family glitch would be fixed, with Congress adding more focus on the affordability of family coverage.

"But I think that because of the political volatility around this law, there was never an opportunity to sit down and say, 'OK, let's make a policy change here that takes this into account,' " she says.

Blumberg says Democrats have been hesitant to open debate on the law at all, because of fear it would be eviscerated during the legislative process. With the Republican takeover in Congress, the chance of eliminating the family glitch seems unlikely to improve anytime soon.

An 8% uninsurance rate for children is lower than it used to be and better than the 19% rate for adults ages 19 - 64, but it's still shameful.

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