Friday, February 13, 2015

No, Clinton and Frist, ACA marketplace coverage will not render CHIP unnecessary

In an otherwise eloquent plea by Hillary Clinton and former GOP Senate majority leader Bill Frist for Congress to renew funding for the Children's Health Insurance Program (CHIP), one paragraph brought me up short. It's not strictly speaking inaccurate, but it resorts to a shorthand that, in the way of 750-word op-eds, leaves a misleading impression:
Of course, the American health care landscape has changed significantly since CHIP started. Under the Affordable Care Act, many families with children are now receiving financial help to enroll in private health coverage through the new health insurance marketplace. But while it is possible that private, family-wide policies offered by employers and marketplaces may one day render CHIP unnecessary, for now substantial gaps still exist — and too many children can still fall through them.
In fact, the ACA puts the kids in CHIP in most families in which the adults qualify for private-plan premium subsidies. CHIP eligibility operates independently from adult eligibility for subsidized private plans or Medicaid under the ACA.  Every state sets its own eligibility for CHIP, ranging from 170% of the Federal Poverty Level (FPL) in North Dakota to 405% FPL in New York. The median eligibility is 255% FPL (see this Kaiser Family Foundation chart).

That encompasses most of the families eligible for premium subsidies under the ACA. Adults with household incomes up to 400% FPL are eligible for premium subsidies, but only if the unsubsidized premium costs more than 9.5% of their income. In practice, that often means that applicants in the upper reaches of eligibility get no subsidy. On the other end of the spectrum, adults are eligible for for Medicaid under the ACA if their household income is under 138% FPL -- that is, in states that have accepted the Medicaid expansion. Eligibility thresholds are much lower in states that refused the expansion.

If a family's income qualifies the children for CHIP in their state, and the parents for subsidized private coverage, they don't have the option of buying subsidized private coverage for the kids. The ACA exchanges will put the adults in a private plan and the kids in CHIP. In New York, a family of four with an income up to $97,000 that seeks coverage through the exchange will find the kids placed in CHIP (the parents may get private plans subsidies if their income is up to $95,400 -- don't ask why the threshold is a bit different). In New Mexico, the kids would be eligible if the household income is below $72,750. In North Dakota, their cutoff would be $41,225.

As Clinton and Frist suggest, a lot of kids now eligible for CHIP could theoretically be eligible for subsidized private plan coverage under the ACA if CHIP were not renewed. That would mean skimpier coverage for the kids, especially in families with incomes over 200% FPL, the cutoff for strong Cost Sharing Reduction subsidies that reduce private plan deductibles and out-of-pocket costs (weaker CSR is available from 200-250% FPL).  It would also, I would think, cost the federal government more money, as Medicaid coverage is far cheaper than private coverage (on the other hand, the federal and state government together foot the whole bill for CHIP, as opposed to an average of 72% of a private plan premium subsidized on the exchanges).

Private plan coverage under the ACA will only render CHIP "unnecessary' if the ACA's cost controls prove so effective that private-plan deductibles and out-of-pocket costs come way, way down. As of now, the cost-sharing required of many private plan holders is a national disgrace, a product of the insanely high prices we pay for medical procedures in comparison with other wealthy countries. In other words, a world in which private ACA coverage renders CHIP unnecessary is a Utopian vision.

What the ACA can't cure

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