More than four thousand children were denied Medicaid coverage last year as a result of a new “affordability” requirement in Missouri’s SCHIP program. Senate Bill 539, which was enacted last year, established new premiums for families in the Missouri state children’s health insurance (SCHIP) program1 and expanded the “affordability” test to families with incomes between 151% and 225% of the federal poverty level.

While premiums previously were applied only to families in the highest SCHIP income tier (226% to 300% of the federal poverty level), they now are applied to lower tiers, beginning at 151% of the federal poverty level or just over $24,144 per year for a family of three.

A significant amount of attention has been focused on the new premiums and their impact on families with children. Far less attention has been focused on the “affordability” test. Families who fail to meet the “affordability” test are denied SCHIP coverage for their children with no exceptions; they cannot make premium payments to keep their children’s coverage.

This provision denies health coverage to children in families who are deemed to have access to “affordable” health insurance – now defined as coverage that costs $342 per month for a family.2 The “affordability” threshold in the Missouri SCHIP program is indexed and therefore will likely increase every year, thereby causing more families to be denied SCHIP coverage each year.

Under the “affordability” test, a two-person family earning just over $1600 per month is ineligible for Medicaid if they have access to private insurance for $342 per month — over 1/5 of the family’s income. However, the federal SCHIP law recognizes that poor families cannot afford to pay more than 5% of family income for health insurance and still have money available to cover food, rent, and other necessities. Similarly, the premium amounts for the Missouri SCHIP programs are set at 1%, 3% and 5% of family income to reflect this fact.3

In adopting SB 539, the legislature did not determine the number of children who would lose health care coverage due to the application of the “affordability test. However, since its adoption, many families who formerly received SCHIP health insurance have lost coverage due to the “affordability” test. Consider the following real-life example:

“Jane,” a single mother earning $10 per hour as an administrative assistant, with a young son, received premium-free MC+ coverage for her son until September 1, 2005. She was never given the option of paying a premium; her son was removed from Medicaid for the following reasons, as stated in the notice she received from the State:

“. . .your family’s income exceeds the eligibility standard for receiving MC+ without paying a premium and you have access to affordable health insurance ($299.70 per month through your employer.) RSMo 208.185, Family Healthcare Manual 0920.020.10.05.”

Jane’s son was denied MC+ because Jane had access to “affordable” insurance at $300 a month. However, Jane’s MC+ premium, determined by income and family size, would have been only $16.6 Thus the state has two very different definitions of what is “affordable.”

The “affordability” test causes low-income children to lose SCHIP coverage and become uninsured if their families are unable to afford private insurance. This provision denies families access to SCHIP coverage even if the only available employer-sponsored coverage offers a far more limited benefit package or denies coverage for a pre-existing condition.

The Department of Social Services has determined that 3133 children in 1839 families lost Medicaid coverage based upon the “affordability” test from September to December 2005. In addition approximately 1312 children in 729 families applying for Medicaid were denied coverage based on the “affordability” test during the same period.

The “affordability” test is not a sensible health care policy for Missouri and should be reconsidered, especially for the lower income tiers of the SCHIP program. The state’s definition of “affordable” private insurance is simply beyond the reach of many families.

Joel Ferber is the Managing Attorney for the Health and Welfare Unit Legal Services of Eastern Missouri. This article is taken from a more detailed paper released in January 2006. To view the complete footnoted document please click here.