Tuesday 16 July 2013

Can a Child Health Insurance Tax Credit Serve as an Effective Substitute for SCHIP Expansion?

library Can a Child Health Insurance Tax Credit Serve as an Effective Substitute for SCHIP Expansion? Linda J. Blumberg, Genevieve M. Kenney

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As the State Children's Health Insurance Program (SCHIP) has come up for reauthorization, the coverage of children with incomes above 200 percent of the federal poverty level (FPL) has become a contentious issue. Proposals have surfaced that would subsidizing the purchase of health insurance for children between 200 and 300 percent of the FPL using tax credits and the private insurance market, as an alternative to allowing states to continue enrolling these children in SCHIP coverage. This analysis compares the family financial burdens of covering children under SCHIP and under a refundable tax credit providing a $1400 per child subsidy.

As the State Children’s Health Insurance Program (SCHIP) has come up for reauthorization, the coverage of children with incomes above 200 percent of the federal poverty level (FPL) has become a contentious issue (Hederman 2007; Herrick and Baumann 2007). Today, Senator Mel Martinez proposed providing refundable tax credits to families with incomes between 200 and 300 percent of the FPL (Wall Street Journal 2007). Under the proposal, families would receive a credit of $1,400 per child that could be used to purchase health insurance policies in the private market. A variant on this approach has been recently proposed by the Heritage Foundation (Butler and Owcharenko 2007).

In contrast, the conference bill, H.R. 976, which the House and Senate passed earlier this year and the president vetoed, would allow states to continue enrolling children with incomes between 200 and 300 percent of the FPL in SCHIP coverage. Coverage through SCHIP under the conference bill, consistent with current program guidelines, would provide benefits to enrollees that are equivalent to benchmark plans in each state, such as comprehensive employer-based plans, and would limit family cost-sharing requirements. The Congressional Budget Office (CBO) projects that the bill would result in 3.8 million children gaining coverage who would otherwise have been uninsured, some of whom would be in the 200 to 300 percent FPL income bracket (CBO 2007).

To date, an estimated 92 percent of SCHIP enrollees have family incomes below 200 percent of the FPL, according to a Congressional Research Service study from earlier this year (Peterson and Herz 2007), and almost all the rest have incomes between 200 and 300 percent of the FPL (Guyer 2007). In recent years, an increasing number of states have expanded eligibility under SCHIP in order to address growing affordability problems facing moderate-income families (Cohen-Ross, Cox, and Marks 2007; Georgetown Center for Children and Families 2007a). According to the most recent estimates available, 1.4 million children with incomes between 200 and 300 percent of the FPL are uninsured (Urban Institute tabulations of the 2007 Current Population Survey). As of May 2007, 18 states had eligibility thresholds under SCHIP that were above 200 percent of the FPL (8 between 200 and 250, 9 between 251 and 300, and 1 [New Jersey] above 300), with almost all of these families paying premiums to enroll their children.

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