HD48 - State Children's Health Insurance Program (SCHIP) Buy-In Programs


Executive Summary:
The 2006 Appropriations Act directed the Department of Medical Assistance Services to review existing State Children’s Health Insurance Program (SCHIP) Buy-In programs operating in other states, make recommendations on developing such a program for Virginia and report findings by October 1, 2006.

SCHIP Buy-In programs allow families with incomes in excess of a state’s SCHIP eligibility limit (200% FPL in Virginia) to purchase health insurance for their children through the state’s SCHIP program (FAMIS in Virginia). Families are usually responsible for paying for all or most of the cost the state incurs for operating the program. While no federal SCHIP money is available to cover the cost, state dollars can be used to subsidize Buy-In programs.

This report provides detailed information on the eight currently existing SCHIP programs operating in other states. While there are similarities among the programs, states have designed them to reach different target populations, implemented various strategies to control program size and differ in whether or not they provide a direct state subsidy to keep costs low for participating families.

In surveying these states and examining available research, it is clear that Buy-In programs are subject to “adverse selection” whereby healthy people are less likely to purchase the insurance than are people who are sick. Research also shows that if monthly premiums are set above what families consider affordable (generally 3% - 5% of income), the number of participants will be low and limited to those with greater medical needs. If the premium amount is then based solely on the costs of the buy-in population the resulting premiums are likely to be too high to be attractive to families with healthy children. If however, premiums are based on a blended rate, combining the SCHIP and Buy-in group, then premiums can be kept at more affordable levels. However, while the per member per month (PMPM) cost for the buy-in group will be therefore be reduced, the PMPM for the FAMIS population will increase slightly, causing a need for increased federal and state funds.

If a FAMIS Buy-In program were to be budget neutral for the Commonwealth, this additional cost for the FAMIS program, as well as Buy-In administrative costs would have to be borne by families through the monthly premium. These additional charges could again make the premiums unattractive for lower income families with healthy children.

Lastly, related issues such as the reauthorization of SCHIP in 2007 and the Family Opportunity Act are discussed as having bearing on the feasibility of a SCHIP Buy-In program at this time in Virginia. Options of delaying a decision, implementing a small or limited program with some degree of state subsidy or implementing a larger scale program to help reduce the number of Virginia children without health insurance are presented.