Understand Crowd-Out Implications
Health services researchers indicate that crowd-out may produce some benefits
as well, such as:
- Low-income children gaining access to health insurance that is more
comprehensive (e.g., includes coverage of preventive care) than the private
coverage that their families could otherwise afford.
- Low-income families who have been paying a substantial portion of the cost for private
insurance coverage obtaining financial relief through subsidized
coverage.
- Employers who have historically provided health insurance coverage to their low wage
employees may incur lower health insurance costs.
There is a concern however regarding the
negative implications of SCHIP and the potential that in order to save money, employers
with low-wage employees could potentially stop offering dependent coverage and encourage
their employees to enroll their children in SCHIP; or that parents who are currently
contributing significantly toward family coverage may drop that coverage in order to take
advantage of the lower out-of-pocket cost of the SCHIP plan.
Other researchers have raised questions as to whether these are necessarily negative
effects of SCHIP. Linda Bilheimer, Deputy Assistant Director for Health at the
Congressional Budget Office and a presenter at the July/September 1998 ULP SCHIP Workshops,
pointed out the need to consider several factors which present crowd-out and its
implications for SCHIP in a broader context.
Stability of Health Insurance Coverage
- The family income of children in the SCHIP target population fluctuates frequently, thus
affecting the types of insurance coverage for which they are eligible.
- Although these children may be uninsured at the time they enroll in SCHIP, their parents
periodically become eligible for private insurance again, and SCHIP displaces private
coverage during those periods.
- If the child remains enrolled in SCHIP throughout these fluctuating periods, SCHIP has
been successful in providing a stable continuous source of coverage for children that
would have otherwise ricocheted in and out of coverage. Presumably, one of the goals
of the SCHIP program is to ensure stability of coverage for children in low-income
families.
Effect of SCHIP on Health Insurance Market Dynamics
Dr. Bilheimer suggested that in the long term some displacement of private insurance by
SCHIP is inevitable by virtue of the labor market adjusting to the availability of the
Federal subsidized insurance.
- As new firms form and existing firms restructure, especially in the highly changeable
small employer market, they now have the option of offering workers higher wages instead
of providing family health insurance coverage.
- Employees may feel that it is in their best interest to seek employment at a place where
they earn a higher wage and have their children covered in some way other than
employer-sponsored coverage.
- Over time SCHIP will provide subsidies for low-income families, enabling them to take
advantage of such higher wages, and the availability of SCHIP will alter the dynamic of the
marketplace.
Related
Questions
Give me an example
Give me an overall context
Show me some lessons
learned
What else does this lead to?
Who presented this material?
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Crowd-Out 
