Federally Funded Health Insurance for Children: Could it Boomerang?

In 1998, researchers from the Economic and Social Research Institute examined whether the federally funded State Children's Health Insurance Program (CHIP) would induce employers to drop health insurance coverage of employees' children or would induce parents to switch their children from employer-sponsored to CHIP-funded coverage.

Some experts feared that, with CHIP available, many employers would drop coverage for their employees' children, thereby forcing parents to enroll those children in the new state programs funded by CHIP. Parents might also choose to enroll their children in CHIP rather than their employer's plan.

Researchers conducted focus groups with low-income workers whose children were likely to be eligible for CHIP and conducted a survey of businesses.

Key Findings

  • About 19 percent of employers surveyed said they would stop paying premiums for children's coverage if a SCHIP-style program were available, and 40 percent believed their competitors would do so.

  • Parents raised concerns about hidden costs, quality of care, social stigma and the possibility of being forced to change pediatricians.

  • The investigators recommended that states take steps to discourage such switching to CHIP, including the imposition of waiting periods and a requirement that any employer cutting benefits for employee dependents must cut them for all dependents, not just those eligible for CHIP.