As Congress debates the renewal of the State Children's Health Insurance Program (SCHIP) the Congressional Budget Office has released a paper summarizing the history and design of SCHIP, and discussing key issues that are likely to emerge as the debate moves forward. One problem that policymakers should pay careful attention to is how SCHIP has "crowded out" private insurance coverage for some parents and their children.
Although SCHIP has significantly reduced the number of uninsured children in lowincome families, the net effect on the extent of coverage is smaller than the number of children who have been enrolled in public coverage as a result of SCHIP because the increase in public coverage has been partially offset by a reduction in private coverage.
SCHIP provides an alternative source of coverage that is less expensive and that often provides a broader range of benefits than private insurance. As a result, some parents who otherwise would have enrolled their children in private coverage may prefer instead to switch their coverage to SCHIP. In addition, to the extent that SCHIP makes private coverage less important for some low income families, parents might be more inclined to take jobs that offer higher cash wages rather than health insurance.
Moreover, if employers of lowwage workers believe that SCHIP reduces the value of private health insurance in attracting employees, some might reduce their contribution to the premiums for family coverage, reduce the benefits offered, stop offering family coverage, or stop offering insurance altogether. Considerable potential thus exists for increases in SCHIP coverage to be partially offset by a reduction in private coverage.
For example, about 60 percent of the children who were eligible for the program were covered by private insurance in the year before the program was enacted. But measuring the extent to which enrollment in SCHIP has actually been offset by a reduction in private coverage is difficult. Estimates vary depending on the measure that is used. Moreover, studies have obtained widely varying estimates depending on the data sources and methods
On the basis of a review of the research literature, CBO concludes that the most reliable estimates currently available suggest that the reduction in private coverage among children is between a quarter and a half of the increase in public coverage resulting from SCHIP. In other words, for every 100 children who enroll as a result of SCHIP, there is a corresponding reduction in private coverage of between 25 and 50 children.
The available evidence, which is quite limited, suggests that the bulk of the reduction in private coverage occurs because parents choose to forgo private coverage and enroll their children in SCHIP (because of better benefits, lower costs, or some combination thereof), rather than employers deciding to drop coverage for such children. No studies have estimated the extent to which SCHIP reduces private coverage among parents, so the available estimates probably understate the total reduction in private coverage associated with the introduction of SCHIP.