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Life Health > Health Insurance > Health Insurance

On the Third Hand: PPACA and the Children

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The Patient Protection and Affordable Care Act of 2010 (PPACA) is supposed to fill in some of the gaps in the quilt of children’s coverage provided by Medicaid, CHIP plans and commercial health insurance by expanding funding for Medicaid and CHIP and creating a new federal income tax credit that employers could use to pay for commercial coverage. 

But officials at the U.S. Government Accountability Office (GAO) are warning that some children may continue to face gaps in coverage even if PPACA takes effect on schedule and works as expected.

Katherine Iritani, a GAO director, talks about possible children’s coverage gaps in a summary of the GAO investigators’ analysis of children’s access to health insurance.

Iritani doesn’t offer many ideas for what to do about any new gaps that show up; about all she can come up with is that the Internal Revenue Service rules take children into account and that officials seek clarification from Congress (that smoothly running, collegial source of clarity) about its intent.

Some committed proponents of free-market philosophies say that people without the ability to pay for health care have no right to expect society to provide any care. Some of the advocates of a free-market approach might be so committed to that approach that they would extend that approach to providing care for children. If parents want their children to get medical care, they should make sure they have the cash or insurance to pay for care, or do what they can to get help from private charities, some of the committed advocates of a free-market approach might say.

A child

I’m actually sympathetic to that approach. Taking a pure free-market approach to health care might cause tragic problems for some people, but it would eliminate an awful lot of ambiguity and complexity. In the long run, maybe it would lower costs, improve many people’s access to care, and make the entire U.S. economy more sustainable, by flushing a lot of  wishful thinking out of the system.

On the other hand, I doubt many of us are really comfortable with a pure “show me the money” approach to paying for care for children, and especially for our own children, or any specific child that we’ve ever set eyes on.

In recent years, at least, the health insurance community has acted on the assumption that government health insurance programs for children are a necessary evill.

America’s Health Insurance Plans (AHIP), Washington, has argued that the case of children who need care is different from the case of adults who need care and that children may need different programs to serve their needs.

One reason advocates for special programs children give is that children have no ability to control whether they exist or not, little ability to earn a significant amount of income, and little or no control over whether they have health insurance.

My feeling is that another reason for this approach is tactical.

Sick children are often photogenic. If a health insurer, doctor or hospital gets into a financial battle with a seriously ill child, and a picture of the child ends up in a newspaper next to a story about the conflict, the child is likely to have an edge in the court of the opinion.

Many Republicans have accepted the idea that low-income and moderate-income children deserve extra help with getting access to health benefits, and Republicans, including Sen. Orrin Hatch, R-Utah, were active in helping to create the Children’s Health Insurance Program (CHIP).

PPACA health coverage funding provisions and tax credit provisions could have provided new access to Medicaid or CHIP coverage  for about  75% of the 7 million U.S. children who were uninsured in 2009, Iritani says.

But Iritani says about 1.7 million of the uninsured children might have been out luck.

About 900,000 of the children who would have still been uninsured were children who were not citizens.

Another 460,000 of the children would have been children in households that, in theory, had access to “affordable” employer-provided health coverage but chose not to buy the coverage.

Roughly 380,000 of the children would be the children of parents who earned more than 400% of the federal poverty level and, in theory, had enough money to buy coverage, got no help from the government with buying health coverage, and chose not to buy coverage.

In other words, if 960,000 potentially photogenic, poor, non-citizen 4-year-olds who were lugged to the United States by their parents show up in emergency room with broken legs, the hospital and doctors will get no new help with paying to get the legs fixed. It will still be up to the intake staffers to give the parents a pamphlet on setting a broken leg with sticks and old magazines and send them out the door without treating the 4-year-olds. Or, maybe the government will give the hospitals permission to put the 4-year-olds, or the 4-year-olds and the parents, in the custody of the immigration authorities (if any parents dare bring their 4-year-olds to the hospital under those rules), and let the immigration authorities handle any questions about medical care. 

That situation won’t be of much concern to private insurers and private health insurance producers. But health insurers, producers and employers could be affected by the controversy over how the IRS will define what constitutes “affordable heatlh insurance.”

PPACA imposes a “shared responsibility penalty” on employers that fail to provide a minimum amount of “affordable” health benefits for eligible employees.

The affordability requirement is supposed to keep employers from getting around the requirement by providing access to coverage set up in such a way that the employee’s share fo the premium is too high for the employee to pay.

The IRS is thinking about defining “affordable” by requiring that the employee’s share of the premium for individual coverage be no more than 9.5% of the employee’s W-2 income from the employer that sponsors the plan.

Consumer groups and others are asking what will happen if an employer offers affordable individual coverage to an employee who needs coverage to cover three children and a spouse as well as the employee.

Will the IRS find a way to factor the affordability of family coverage into the calculations?

Will the government take the burden off employers by providing extra subsidies for employees who can afford to pay for employer-sponsored individual coverage for themselves but not for employer-sponsored dependent coverage?

Will something else happen?

Given how dramatic the story of PPACA has been so far, the most likely answer seems to be that some extremely strange and unexpected else will happen.

Regardless: If policymakers leave some photogenic, U.S.-born 4-year-olds whose working-poor parents have access only to affordable employer-sponsored individual coverage, not to affordable dependent coverage, stranded in a no-coverage donut hole, then the doctors and hospitals will have to eat much of the cost of caring for those 4-year-olds or send the parents out the door with self-care pamphlets.

The situation of children with parents who earn more than 400% of the federal poverty level cou.ld be even more difficult.

The U.S. Department of Health and Human Services (HHS) says the federal poverty level for a family of 4 is $94,200.

That’s a high income in my hometown, Kansas City, Mo.

But in New York City, the big city I now live near, the cost of low-deductible health maintenance organization coverage for a couple with two children starts at about $1,500 per month, or about 19% of the income a family at the 400% poverty level cut-off would earn. Before taxes. And a family living in New York with an annual income of $94,200 could be paying plenty of taxes.

It’s pretty easy to imagine that Congress, states, private charities or someone will come up with a solution for children stranded in a “no affordable dependent coverage” doughnut hole, but it seems as if society could leave at least some kids in allegedly high-income families that fail to buy allegedly affordable coverage in a doughnut hole. Even if the parents can argue that the available insurance is unaffordable and can get out of  paying penalties, the children will still be uninsured.

Maybe those children will be in households with incomes over $100,000 per year. Maybe in households with incomes over $150,000 per year. But they are as photogenic, small, and unable to control their health coverage as lower-income children.

Certainly, some children are already in that situation today.

If PPACA succeeds at lowering the cost of coverage, the situation might get better. Maybe coverage will be more affordable for moderately high-income children who are uninsured simply because they have health problems that make finding affordable coverage difficult.

But if, as some fear, PPACA leads to increases in the full cost of commercial coverage, the situation could get worse.

One solution might be to come up with creative new ways to squeeze money out of the parents.

Another, more pleasant solution might be for insurers to work with policymakers to find some way to develop a new type of child-only catastrophic-coverage or limited-benefit policies that don’t necessarily meet PPACA credible coverage standards but would give moderately high-income parents who feel they cannot afford to buy PPACA-credible coverage a way to provide some protection for their children.


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