Income Eligibility Thresholds, Premium Contributions, and Children's Coverage Outcomes: A Study of CHIP Expansions

Movement toward universal coverage of children is a defining feature of Children's Health Insurance Program (CHIP) changes during the last decade. In the years leading up to the passage of the Patient Protection and Affordable Care Act (ACA) in March 2010, many states began implementing far more inclusionary CHIP programs, extending eligibility to children in families with incomes far higher than historical eligibility thresholds. Between 2002 and 2009, 13 states boosted their income eligibility threshold for CHIP to between 200 and 400 percent of the federal poverty line (FPL). Such changes have not occurred without controversy. A touchstone has been concern about the potential for and magnitude of “crowd-out”—a decrease in private insurance coverage in response to the increased availability of public coverage. Both to reduce the potential for crowd-out and as a means to ensure the financial viability of their expanded CHIP programs, most expansion states began requiring newly eligible higher income families to contribute to the premium costs of coverage. Premium contribution requirements in 2008 among states that offered coverage to families with incomes at least three times FPL ranged from $240 to more than $1,000 per year for a family with two children.1 States also implemented other precautionary measures designed to reduce crowd-out, such as waiting periods between loss of private coverage and public eligibility. A number of studies using a variety of analytic approaches, including instrumental variables (IV) estimation as well as difference-in-difference approaches, have explored the effects on coverage outcomes of public health insurance expansions, including the Medicaid expansions of the late 1980s (e.g., Cutler and Gruber 1996; Ham and Shore-Sheppard 2005; Shore-Sheppard 2008), the introduction of CHIP in 1996 (LoSasso and Buchmueller 2004; Hudson, Selden, and Banthin 2005; Bansak and Raphael 2006; Sommers et al. 2007; Gruber and Simon 2008; Dubay and Kenney 2009), and the CHIP expansions of the 2002–2009 period (Gresenz et al. 2012). A few studies have examined the effects of premium contribution requirements for CHIP on coverage outcomes for children. Using data from before 2003, Hadley et al. (2006/2007) and Kenney, Hadley, and Blavin (2006/2007) estimate the effects of premium contributions on coverage outcomes for children in families with incomes less than 300 percent of the FPL who are eligible for public insurance. Both studies find that premium contribution requirements reduce enrollment in public insurance programs, with offsetting increases in uninsurance and private insurance. However, to our knowledge, no study has explored the effects of premium contributions associated with more recent CHIP expansions to higher income children. Moreover, little is known about the interplay between income eligibility thresholds and premium contribution requirements in determining coverage outcomes, especially among higher income children. This study uses simulation techniques to understand the effects of CHIP income eligibility thresholds and premium contribution requirements on health insurance coverage outcomes among children targeted by recent CHIP expansions, which include children in families with incomes up to 400 percent of the FPL. Specifically, we examine the effects of various income eligibility threshold and premium contribution combinations on take-up of public coverage, private coverage, and overall insurance coverage rates. Our analyses are based on data from 2002 to 2009, a period during which 18 states expanded eligibility for CHIP.