Lower-income workers employed by companies that offer health insurance are gaming the system by enrolling their kids in SCHIP instead of buying health insurance through their employers, The Wall Street Journal reports today. Because most states shift Medicaid costs to private insurers, this hurts all employers, especially small employers. The Journal’s key graphs:

Lower-income workers employed by companies that offer health insurance are gaming the system by enrolling their kids in SCHIP instead of buying health insurance through their employers, The Wall Street Journal reports today.  Because most states shift Medicaid costs to private insurers, this hurts all employers, especially small employers. The Journal’s key graphs:

The evidence is clearest in an eight-year-old program known as the State Children’s Health Insurance Program, or Schip (pronounced ess-chip), which is meant to provide health insurance to children who aren’t poor enough to qualify for Medicaid but can’t afford private insurance. Nationwide enrollment of children in Schip programs rose to 5.8 million in fiscal 2003, beginning Oct. 1, 2002, the latest figures available. That was up 9% from the previous year and up 76% from 3.3 million in fiscal 2000.

Among those putting their kids into the program is Teresa Dallas, a 46-year-old credit representative living in McDonald, Pa., who decided to put her two daughters in the state health-care plan after monthly premiums at her company rose to $338 this year from $295 and co-payments for visits to specialists jumped to $25 from $15.

The premiums alone eat away nearly a third of her $1,127 monthly earnings. She and her husband make too much money to qualify for free coverage, so she is paying $60 a month for her daughters, ages 9 and 11, to be covered under the Schip plan. “I’m not looking for a complete handout, I’m just looking for some help because I’m getting killed on my insurance,” she says.

The fact that more children depend on the government for health insurance comes at a time when Washington is seeking fixes for other social-insurance programs—President Bush has put forward a proposal to revamp Social Security and some in Congress want to find ways to overhaul Medicare. Like those programs, Schip is a significant cost, and President Bush in his budget for fiscal 2006, which begins next Oct. 1, proposed last week that Congress include Schip in a broader proposed overhaul of Medicaid.

The administration has suggested that Schip, with its capped, predictable federal spending and greater flexibility for states, would be a better model for covering certain people—especially low-income parents and children—than Medicaid. The budget contains a proposal to reauthorize the Schip program early.

The Schip program was authorized to spend about $40 billion in federal matching funds over a 10-year period ending in 2007. Its coverage is less-comprehensive than Medicaid’s and often requires families to pay premiums and out-of-pocket expenses.

While no single national figure captures both the voluntary forgoing of company coverage and the increasing reliance on public programs among workers, several figures, taken together, illustrate that point.

Nationwide, the percentage of U.S. workers with employer-based health coverage fell to 71.5% in 2003, from 74.4% in 2000, according to a December study by the Employee Benefit Research Institute.

During the past four years, the percentage of children covered through employer plans fell to 58.3% from 62.3%, while the percentage of children covered by state health-care programs increased to 26.4% from 20.9%, according to the institute.

Most states offer Schip coverage to children in families with income at 200% or more of the poverty level, and some offer it to families of four with incomes as high as $56,550. About a third of the 45 million uninsured nationwide have a household income of $50,000 or more. Unlike Medicaid, coverage can be denied to families who are unable to pay for health care, and states can limit enrollment based on the matching funds available annually.

But a striking fact about the rise in Schip coverage is that many of the new enrollees would be eligible for company coverage through at least one parent. A 2003 study by the Kansas Health Institute found that 51% of children in the state’s Schip program were eligible for company coverage. That number for children on Medicaid was 33%.