The impact of CHIP premium increases on insurance outcomes among CHIP eligible children

BACKGROUND: Within the United States, public insurance premiums are used both to discourage private health policy holders from dropping coverage and to reduce state budget costs. Prior research suggests that the odds of having private coverage and being uninsured increase with increases in public insurance premiums. The aim of this paper is to test effects of Children’s Health Insurance Program (CHIP) premium increases on public insurance, private insurance, and uninsurance rates. METHODS: The fact that families just below and above a state-specific income cut-off are likely very similar in terms of observable and unobservable characteristics except the premium contribution provides a natural experiment for estimating the effect of premium increases. Using 2003 Medical Expenditure Panel Survey (MEPS) merged with CHIP premiums, we compare health insurance outcomes for CHIP eligible children as of January 2003 in states with a two-tier premium structure using a cross-sectional regression discontinuity methodology. We use difference-in-differences analysis to compare longitudinal insurance outcomes by December 2003. RESULTS: Higher CHIP premiums are associated with higher likelihood of private insurance. Disenrollment from CHIP in response to premium increases over time does not increase the uninsurance rate. CONCLUSIONS: When faced with higher CHIP premiums, private health insurance may be a preferable alternative for CHIP eligible families with higher incomes. Therefore, competition in the insurance exchanges being formed under the Affordable Care Act could enhance choice.