Summary And Discussion

Trends in Children's Health Insurance Coverage

Employer-based coverage is decreasing more rapidly for children than for adults. Although the percentage of children without coverage remained relatively stable between 1987 and 1995, the absolute number of uninsured children increased, from 8.5 million in 1987 to 9.8 million in 1995. The percentage of uninsured children remained stable over that period primarily because increases in Medicaid enrollments offset declines in employer-based coverage.

Among Medicaid enrollees, young children (ages 0 to 5) are the largest age group (43.6 percent). This suggests that Medicaid expansions to younger children have been effective in reaching them.

Patterns of coverage differ for racial and ethnic minorities. Black and Hispanic children are more likely than white children to lack coverage. Nationally, one of every six black children and one of every four Hispanic children is uninsured. Among white children, 1 of every 10 is uninsured.

Racial and ethnic variations in coverage have important implications for outreach and enrollment strategies for new insurance programs. These strategies should be designed to reach the groups with highest rates of uninsurance, and should be culturally sensitive and culturally appropriate in order to increase the likelihood of participation.

Some Concerns About Substitution of Coverage

Evidence is fairly clear that rates of employer-based health insurance coverage for children declined from 1987 to 1995 and that rates of Medicaid enrollment increased for children over the same time period. It is less clear whether the relationship is causal—that is, whether the availability of Medicaid actually caused employers and employees to drop dependent coverage. The available evidence comes from aggregated data reported in national surveys. Because data on specific employer and employee decision making about these issues are not readily available, the survey data are subject to different interpretations.

Many policymakers are concerned that the availability of public insurance through Medicaid or SCHIP will encourage employers and employees to drop their private coverage, also called substitution or crowding-out of coverage (Chollet et al., 1997; Cutler and Gruber 1996, 1997; Dubay and Kenney, 1997). Substitution can take place in one of two ways: (1) An employer that currently provides coverage for children may stop covering dependents or may continue to offer coverage but increase the amount that employees must pay to receive dependent coverage, making it more likely that they will drop the coverage and try to replace it with public insurance; or (2) employees who are already paying a share of the cost of employer-based insurance might stop participating if, for example, they became eligible for new publicly funded programs.

Some researchers suggest that the decline in employer-based coverage is due primarily to the increases in health care costs, making employers less willing to offer coverage or more likely to shift the costs to employees, who in turn are less likely to accept the cost-sharing arrangements because of national declines in average real family incomes (Holahan et al., 1995). Others have suggested that the reductions in employer coverage may be largely attributable to the shift in jobs from the manufacturing sector to the service sector, where insurance is less likely to be offered as a benefit (Newacheck et al., 1995).

These employer trends thus may be occurring independently of expansions in Medicaid or other public programs like it. There does not appear to be any evidence that most employers are familiar with Medicaid program requirements in their states. Nor is there evidence that most people are aware of the Medicaid requirements in their states: in fact, the widespread underenrollment of eligible children in Medicaid would suggest the opposite.

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