Parents' willingness-to-pay for State Children's Health Insurance Program (SCHIP) premiums in Delaware

Since 1997, the State Children's Health Insurance Program (SCHIP) has played an important role in reducing the number of uninsured children and increasing access to care for millions of low-income children. As states struggle to contain cost, expand access and minimize crowd-out, they are increasingly relying on premiums in SCHIP. Retrospective studies have shown, to varying degrees, the impact of increasing premiums on disenrollment and uninsurance, particularly among the lowest income families.

This presentation will describe how a willingness-to-pay (WTP) approach can inform policymakers as they set SCHIP premiums and anticipate changes in enrollment. Whereas previous studies generally conclude that disenrollment happens because people can no longer afford coverage, the WTP analysis takes into account how much individuals value the good—in this case, health insurance—in addition to how much they can afford to pay for it.

Data analyzed from the Delaware Healthy Children Program Surveys, conducted in 1999-2002, are used to explore the WTP approach as it relates to SCHIP premiums in Delaware. Baseline and follow-up surveys were conducted either by telephone or as mail questionnaires. Our findings are based on separate random surveys of three cohorts enrolled in Delaware's SCHIP that, separately and when combined, had less than a 5% margin of error.

The WTP analysis is based upon two survey questions asked in sequence. Referred to as the contingent valuation method, this approach is used to prompt respondents' thinking about the benefits of the program so as to provide an immediate context for their consideration of its monetary value. Our results indicate that parents highly value SCHIP and the majority is willing to pay higher amounts than the premiums currently charged. Survey results are used to demonstrate the impact that hypothetical premium changes could have on disenrollment. Income level and number of children in the family are important predictors of WTP. These findings are consistent with the validity requirements of contingent valuation methodology. The presentation will further include results of ordinary least squares regressions which reveal other factors, such as education level and length of time enrolled in the program, that are associated with differences in the amounts parents were willing to pay for coverage. Finally, a demand curve for subsidized health insurance, using our survey results, illustrates how policy-makers may prospectively identify premium levels in SCHIP to maximize revenue and minimize disenrollment.