A Children's Health Insurance Factsheet from Families USA
October 1998

Answering the Opposition to Children’s Health Insurance

In some states, conservative forces are mounting campaigns against state Children’s Health Insurance Programs (CHIP). A review of the conservative literature reveals several key themes in these attacks, ranging from sweeping attacks against any expansion of the "welfare state" and big government, to narrower arguments that separate state plans are preferable to Medicaid expansions. Below is a list of key themes used in conservative attacks on CHIP programs, followed by some arguments advocates can use to counter the anti-CHIP arguments.1Medicaid and CHIP expansions are an expansion of the welfare state and will lead to increased dependence on government.

• Far from increasing dependence on government, helping uninsured working families provide health insurance for their children reinforces the values of work. Most uninsured children live in working families and most low-income workers are not offered employer-sponsored health insurance.
• Almost 90 percent of uninsured children live in families in which at least one parent works full-time or part-time, and over 75 percent live in families in which at least one parent works full-time.2
• Most workers earning $7 per hour or less are not offered any health insurance by their employers.3
• Expanding insurance coverage for working families helps families on welfare make the transition to work.4 CHIP state plans in Ohio and several other states identify children's health insurance as an important part of their welfare reform efforts by providing support for families working in the low-wage labor market.5

• The market isn't doing the job of getting insurance to those who need it. Despite low unemployment and economic growth in recent years, the number of uninsured children is increasing. The ten million children uninsured for 12 months or longer in 1995 grew to 11 million in 1996 with no improvement in 1997.6
• Insurance companies won't provide insurance to people who can't afford it, and the market has priced family health insurance beyond the reach of many low-income families. Since 1980, health insurance costs have increased three times faster than wages and salaries, and employees have had to pay an increasing share of the cost of health insurance (both family and employee-only).7 After all these changes, the bottom line is that low-income working families cannot afford to buy health insurance.8
• Most families with uninsured children do not have access to employer-based coverage. Forty percent work for employers who don't offer insurance and another 15 percent are not eligible for their employer's insurance.9
• The employment-based health insurance system is particularly inadequate for low-wage workers and this trend is getting worse. Ninety percent of the highest paid workers were offered employer-based coverage in 1996, an increase since 1987, but only 42 percent of the lowest paid workers were offered employer-based coverage, a 12 percent decline.10
• Any state that doesn't take full advantage of its allotment is shortchanging its citizens. Unused federal CHIP funds will be reallocated to other states that welcome the opportunity to augment the health insurance market for working families. States should use this money to provide the best quality insurance for the greatest number of children they can.

• These families may be middle class, but they can't afford to pay the entire cost of their health insurance premiums. Even at twice the poverty level ($525 per week for a family of three in 1998), families eligible for CHIP can't afford the high costs of health insurance on their own.
• For families without access to employer-subsidized insurance, the average premium cost for family coverage was $5188 per year in 1996.11 That comes to about $432 per month for just the premiums. These are not a family's only health care costs; should they actually go to the doctor, they will have copayments and need to pay for services their insurance doesn't cover, such as prescription drugs, vision care, and dental care.
• The individual market for child-only insurance varies greatly and may not be available to all children. Here, too, costs are high. The GAO found that premiums for child-only coverage ranged from $42 per month for an insurance package with a $1000 deductible to $321 per month for a plan with a $250 deductible for one child.12

• Even otherwise healthy children need regular check-ups for immunizations, preventive care, vision and hearing tests, and will sometimes experience illness and injuries. A recent study shows that insured children have better access to primary care services and that uninsured children are six times more likely to go without necessary medical care, and that this disparity may have gotten worse since 1987.13 Children need comprehensive health care in order to stay healthy and succeed in school.
• Health insurance coverage has other positive impacts on families' lives. A recent study found that health insurance coverage reduced family stress, reduced family burdens, and allowed children to get the health care they needed.14 In addition, health insurance is often required for children to participate in childhood activities like after-school sports. Access to insurance eliminated this barrier to participation. Having health insurance for their children eliminates a major worry from parents' lives.

• Parents report that the reason they don't have insurance for their children is because they can't afford to pay for it.15 Only three percent of parents said their children were uninsured because they didn't want itor or need it.
• Of the nine percent of families who do not take employer-sponsored insurance when it is offered, almost 85% declined coverage because they could not afford the employee's share of the cost.16

• Employer-based coverage has declined because of rising health costs and labor market changes, not children's health insurance. Rising health costs between 1988 and 1996 led employers to increase the employee share of premium costs, restrict coverage for part-time workers, and replace full-time workers with part-time and temporary workers (these trends have slowed in recent years).17 As a result, most low-income workers don't have employer-based insurance to lose.18
• Medicaid expansions have not led employers to drop dependent coverage. Between 1988 and 1993, families earning between 100-200% of the poverty level (too much to qualify for Medicaid) experienced a much greater decline in employer-sponsored coverage than families newly eligible for Medicaid.19
• States with experience running expanded insurance programs report no evidence of significant "crowd out" of private group insurance.20
• CHIP requires states to take steps to assure that the new program does not substitute for private coverage, and states are exploring many ways of discouraging crowd out and encouraging employer-sponsored coverage.

• There is no convincing evidence that private insurance can provide a comparable benefit package at a lower cost than Medicaid. An actuarial analysis of California's child health insurance program commissioned by the Kaiser Foundation found the Medicaid option was about 20% less expensive than a program to purchase commercial insurance.21 With more states moving to capitated managed care plans, there is even less reason to expect a significant cost difference between Medicaid and a separate CHIP program.
• A separate state CHIP program will have administrative and start-up costs that a Medicaid expansion will not incur. Medicaid administrative costs are about 4% of total Medicaid expenditures, significantly less that the administrative costs of private insurance.22
• It's true that states can offer a narrower benefit package in separate state programs than with Medicaid. However, if states scrimp on providing the kinds of benefits that kids need, they may find that they spend more on treatment of acute conditions that could have been prevented.23 In addition, if states do not provide comprehensive coverage for kids, they may find that, despite their efforts, children are suffering from illnesses that could have been prevented or treated. For example, children without dental coverage can suffer illness and miss school days as a result of untreated tooth decay.24

• Vouchers, tax credits, and MSAs may offer some financial relief for families who can already purchase health insurance already afford to purchase health insurance without help, but they are not likely to be useful tools in reducing the number of uninsured families.25
• Most voucher and tax credit proposals do not offer a large enough subsidy to enable uninsured families to purchase insurance.26 Studies show that few uninsured families will purchase insurance if the cost is more than 5 percent of family income.27 To hold family costs for poor families to this level, a credit or voucher would have to cover 80-85 percent of premium costs.28
• Further, states can provide more benefits for families at a lower price than the majority of uninsured families, who have no access to employer-sponsored insurance, could get on their own with a voucher or tax credit. Premium costs in the individual market are at least 20 percent higher than rates available to group purchasers.29
• Medical Savings Accounts are the least effective way to increase insurance coverage. MSAs are tax-preferred accounts where individuals can save money that will be used for ordinary medical expenses. Individuals purchasing such accounts back them up with catastrophic indemnity insurance policies that pick up the cost of large medical expenses.
• MSAs don't work for poor and near poor families with no surplus income to save, nor do they work for children with chronic health care needs. Even among the healthy and wealthy households for whom MSAs are designed, few have wanted to take the risk of giving up traditional insurance protection for an MSA.30
• It will be very difficult to account for public dollars invested in voucher, tax credit, and MSA approaches. CHIP, which is 65-85% federally funded, requires that the insurance purchased with public help meet minimum standards of coverage and affordability. Both the Secretary and the states must report back on how the program has worked, including the quality of the insurance provided. Vouchers, tax credits, and MSAs do not lend themselves to this kind of public accountability.
• Because CHIP targets families without insurance, it is not designed to accommodate approaches like tax credits, vouchers, or MSAs.31 These approaches are not prohibited, but must comply with the legal requirements necessary to get federal matching funds under CHIP. A state would have to devise a way to assure that 1) the health coverage purchased by families meets the minimum standards of the law, 2) families' cost-sharing does not exceed 5% of their income (or less for families under 150% of the federal poverty level), 3) children were not insured prior to application for the voucher or credit, and 4) that families with higher incomes are not being served to the detriment of families with lower incomes.

• Expanding health coverage for children does not necessarily involve expanding the role of school-based health clinics. However, the charge that school-based clinics treat children against their parents' wishes is untrue, and clinics are a good way to provide health care to children, especially in areas with a shortage of health care providers.
• Parents can choose what services they want the clinic to provide for their children, or what services they do not want their children to receive; however, fewer than 10 percent of parents limit their children's access to services at school-based clinics.32
• As of January 1998, there were over 1000 school-based health clinics across the country,33 and they continue to provide a wide variety of important services to children and adolescents, including primary health care, physical examination, injury treatment, and counseling services. By getting this care at school, students miss fewer classes and parents don't have to take time from work.34

• Providing children with the basic protection of health insurance is not a partisan issue. Over ninety percent of Americans believe children have a right to health care and almost 70% think government should be involved in providing it.35
• The federal law had broad bipartisan support in Congress. In the states, both Republicans and Democrats support expansion of children's health insurance—one year after the law's passage, all but two states have submitted plans or passed legislation to implement the new program.36

Notes on Information Sources: We collected conservative literature from a variety of sources including the Heritage Foundation, the Eagle Forum, the Texas Conservative Coalition (PO Box 2659, Austin, TX 78768), and the Institute for Health Freedom.

Notes
1 For more good answers to the opposition, see, "CHIP and Child Health: Questions and Answers," Children's Defense Fund, March 1998, www.childrensdefense.org/health_qa.html.
2 Office of Health Policy, DHHS Assistant Secretary for Planning and Evaluation, Tabulations of the March 1997 Current Population Survey, December 1997.
3 Cooper, Philllip and Barbara Schone, "More Offers, Fewer Takers for Employment-Based Health Insurance: 1987 and 1996," Health Affairs, 16(6) 1997.
4 Davidson, Gestur, "MinnesotaCare lowers the number of families on welfare while providing health care," unpublished study by Minnesota Department of Human Services. See also, Moffitt, R., and Wolfe, B., "The effect of the Medicaid program on welfare participation and labor supply," Review of Economics and Statistics Vol. 74(4) pp. 615-26, November 1992; Wolfe, B., and Hill, S., "The effect of health on the work effort of single mothers," Journal of Human Resources, Vol. 30(1), pp. 42-62 Winter 1995; Yelowitz, A., "The Medicaid notch, labor supply and welfare participation: Evidence from eligibility expansions," Quarterly Journal of Economics Vol. 110(4), pp. 909-39, November 1995.5 Tompkins, Arnold R., Director of Ohio Department of Human Services, Letter to Administrator of the Health Care Financing Administration, December 23, 1997.
6 "Children's Health Insurance, Access to Care, and Health Status: New Findings," Health Affairs Vol. 17 (127), March/April 1998; Robert Bennefield, "Health Insurance Coverage 1997", Current Population Reports, Washington, DC: Bureau of the Census, September 1998.
7 Blostin, Allan, and Jordan N. Pfuntner, "Brief: Employee medical care contribution on the rise," Compensation and Working Conditions Online, Washington, DC: Bureau of Labor Statistics, Spring 1998, Volume 3(1).
8 Even if an employer offers insurance and pays half the cost of family coverage, a poor family would have to contribute 16 percent of gross income toward premium costs, on average, and an additional 4 percent of income to cover deductibles (Gabel, Jon, Kelly Hunt and Jen Kim, "The Financial Burden of Self-Paid health insurance on the Poor and Near-Poor," KPMG Peat Marwick LLP, November 1997).
9 Rechovsky, James D., and Peter J. Cunningham, "Issue Brief: CHIPing Away at the Problem of Uninsured Children," Center for Studying Health System Change, August 1998.
10 O'Brien, Ellen and Judith Feder, "How Well Does the Employment-based Health Insurance System Work for Low-Income Families?" The Kaiser Commision on Medicaid and the Uninsured, September 1998.
11 Gabel, op.cit.
12 U.S. General Accounting Office, "Health Insurance for Children: Private Individual Coverage Available, but Choices Can Be Limited and Costs Vary," GAO/HEHS-98-201.
13 Newacheck, Paul W., Jeffrey J. Stoddard, Dana Hughes, and Michelle Pearl, "Health Insurance and Access to Primary Care for Children," New England Journal of Medicine, Vol. 338(8), pp. 513-519.14 Lave, Judith, et. al., "Impact of a Children's Health Insurance Program on Newly Enrolled Children," Journal of the American Medical Association, June 10, 1998, Vol. 279(22), pp. 1820-1825.15 Newacheck, op. cit.16 Reschovsky, op. cit.17 O'Brien, op.cit.18 Cooper, op.cit.; Rechovsky, op.cit; O'Brien, op.cit.19 O'Brien, op.cit.20 Families USA, What is Crowd Out and Why Should Children's Health Advocates Care? Washington DC, December 1997 21 Trapnell, Gordon, R., FSA, Actuarial Research Corporation, "Estimated Cost of a Child Health Program in California," Kaiser Family Foundation Report, September 10, 1997, www.kff.org.22 Children's Defense Fund, "Percentage of Total Medicaid Costs Spent for Administrative Expenses, Fiscal Year 1996," An Advocate's Tool Kit for the State Children's Health Insurance Program, 1998; Thorpe, Kenneth, "Inside the Black Box of Administrative Costs," Health Affairs, Summer 1992.23 Ireys, Henry T., et. al., "Expenditures for Care of Children With Chronic Illnesses Enrolled in the Washington State Medicaid Program, Fiscal Year 1993," Pediatrics, August 1997, Vol. 100(2), pp. 197-204.24 Children's Dental Health Project, "Dental Care in CHIP," Washington, DC, October 1998.25 For more information about MSAs, see: "Winners and Losers Under Medical Savings Accounts," Policy and Research Report, The Urban Institute, Summer-Fall 1996, www.urban.org/periodicl/26_2/prr26_2f.htm; Moon, Marilyn, Len Nichols, Susan Wall, "Medical Savings Accounts: A Policy Analysis," The Urban Institute, March 1996.26 "CHIP Critical Issues #3: Vouchers," North Carolina Health Access Coalition, www.ncchild.org/guidehe.htm.27 Ku, Leighton and Teresa Coughlin, "The Use of Sliding Scale Premiums in Subsidized Insurance Programs, Urban Institute, March 1997, www.urban.org/entitlements/premium.htm. See also, Families USA, A Guide To Cost-Sharing and Low-Income People, Washington D.C., October 1997.28 Gabel, op. cit.29 Gabel, op. cit.30 (Tax returns were filed for only 41,668 of 600,000 available MSAs in 1997.) Internal Revenue Service, Announcement #98-88, October 1998.31 U.S. Library of Congress, Congressional Research Service, "Health Insurance For Children: Legislation in the 105th Congress," CRS Report 97-385, by Beth Fuchs, Jean Hearne, Bob Lyke, and Patrick Bucknell, August 1, 1997.32 School-Based Adolescent Health Care Program, "The Answer is at School: Bringing Health Care to Our Students," Washington, DC: Making the Grade, 1993. www.gwu.edu/~mtg/pub/papers/school/answer.html.33 U.S. General Accounting Office, "School-Based Health Centers," GAO/HEHS-95-35; See generally, Making the Grade, "School-Based Health Centers," The George Washington University, www.gwu.edu/~mtg.34 U.S. General Accounting Office, op.cit.35 Survey Research Center, University of Maryland College Park, "National Survey of Americans' View on Children's Health Care," Harvard University/ Robert Wood Johnson Foundation/ University of Maryland, November 1997.36 Health Care Financing Administration, Children's Health Insurance Program, www.hcfa.gov/init/children.htm.