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February 2005, Vol 95, No. 2 | American Journal of Public Health 279-285
© 2005 American Public Health Association
DOI: 10.2105/AJPH.2003.025882


RESEARCH AND PRACTICE

Welfare Reform and Health Insurance: Consequences for Parents

Jane L. Holl, MD, MPH, Kristen Shook Slack, PhD and Amy Bush Stevens, MSW, MPH

Jane L. Holl is with the Institute for Health Services Research and Policy Studies and Departments of Pediatrics and Preventive Medicine, Feinberg School of Medicine, Northwestern University, Chicago, Ill. Kristen Shook Slack is with the School of Social Work, University of Wisconsin, Madison. Amy Bush Stevens is with Owl Creek Consulting, Gambier, Ohio.

Correspondence: Requests for reprints should be sent to Jane L. Holl, MD, MPH, Institute for Health Services Research and Policy Studies, 339 E Chicago Ave, Room 713, Chicago, IL 60611–3071 (e-mail: j-holl{at}northwestern.edu).


    ABSTRACT
 TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 

Objectives. We assessed the relation between the work promotion, welfare reduction, and marriage goals of welfare reform and the stability of health insurance of parents in transition from welfare to work.

Methods. We analyzed a panel survey (1999–2002) of a stratified random sample of Illinois families receiving welfare in 1998 (n=1363).

Results. Medicaid remains the foremost source of health insurance despite a significant decline in the proportion of parents with Medicaid. Regardless of work/welfare status in year 1, transitioning to work only or no work/no welfare increased the likelihood of having unstable health insurance in years 2 and 3 compared with those who remained on welfare only.

Conclusions. Parents who meet the welfare reform goals of work promotion and reduction of welfare dependence experience significant loss and instability of health insurance.


    INTRODUCTION
 TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 
The past decade has seen dramatic changes in both welfare policy and expansions of publicly funded health insurance programs in the United States.1 In 1996, the US Congress enacted the Personal Responsibility and Work Opportunity Reconciliation Act,2 replacing the entitlement program Aid to Families with Dependent Children with a block grant program, Temporary Assistance for Needy Families (TANF).

TANF, popularly known as welfare reform, seeks to promote work and marriage and to decrease welfare dependence. A key feature of the TANF legislation was the separation of eligibility for welfare and for Medicaid. Initially, Medicaid administrative difficulties for eligible families3–5 and increasing uninsured rates6–10 were documented. Many studies and reports focus on those who leave welfare completely ("leaver" studies)11–13 or use Medicaid administrative data that report on Medicaid recipients only.14,15 Considerably less is known about the stability of different types of health insurance, over time, for families transitioning from welfare to work, perhaps because longitudinal data are necessary to assess the dynamic relations between the key goals of welfare reform—work promotion, welfare reduction, and marriage—and the stability of health insurance.

Recent reports show that for working-age adults, being uninsured and not having continuous health insurance coverage leads to unfavorable health outcomes.16,17 Low-income and minority populations, which encompass many parents involved in the transition from welfare to work, experience worse health status and have a greater number of chronic health conditions.18 Furthermore, welfare recipients have considerable rates of mental (35%) and physical (20%) health problems that are significant barriers to employment,19 and former welfare recipients with a self-reported health limitation are at increased risk for job loss.20 There is also evidence that many common conditions (i.e., diabetes,21 allergy,22 depression23) affect worker absenteeism and reduce job performance, situations that may contribute to job loss. Lack of health insurance and poor access to health care, by limiting timely and optimal treatment of health conditions, illnesses, and injuries, are likely to lead to greater worker absenteeism.24 In addition, the uninsured limit their use of nonacute (e.g., preventive or chronic disease care) health care to avoid out-of-pocket costs.25 Health insurance coverage of parents also has implications for the health care of their children because parents’ use of any physician services is a potent predictor of any physician visit by their children.26

The TANF legislation included some provisions to preserve Medicaid eligibility by maintaining state Aid to Families with Dependent Children levels of eligibility and by requiring states to provide at least 6 months of Medicaid through Transitional Medical Assistance to families leaving welfare for work.27 In addition, some states have expanded Medicaid eligibility above low-income levels or used federal waivers to expand the State Children’s Health Insurance Program to include adult family members.28

In this study, we examined the relations between changes in work, welfare, and marriage status and the stability of health insurance coverage for parents in transition from welfare to work. During a 3-year period (1999–2002), we followed a representative sample of families who were receiving welfare in late 1998. As welfare reform evolves, it is particularly important for policymakers to consider the important role that health insurance coverage may play in enabling parents to achieve and sustain the work promotion, welfare reduction, and marriage goals of welfare reform.

The Illinois TANF program, implemented in July 1997, has a 60-month lifetime limit on assistance, although the "clock stops" for parents who qualify for and receive welfare while working at least 30 to 35 hours per week. With the exception of denial of cash assistance for a child born 10 months or more after enrollment, the Illinois TANF program does not have any of the policies associated with decreased Medicaid enrollment and increased uninsured rates.29 Illinois TANF recipients can receive up to 12 months of Transitional Medical Assistance. However, Illinois, like many other states, has had difficulties with the state’s automated eligibility system, resulting in families not being offered Transitional Medical Assistance.30

An estimated 38.5% of low-income nonelderly Illinois adults had no health insurance in 1999–2000,31 and an early study of Illinois welfare leavers showed that 6 to 8 months after leaving welfare, 36% had no health insurance.32 Medicaid enrollment of families, children, and pregnant women in Illinois declined in 1997–1998 but overall has increased by 13% between 1997 and 2001.33


    METHODS
 TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 
Study Design
The Illinois Families Study is a 6-year longitudinal study designed to assess work, welfare receipt, and well-being outcomes of families affected by welfare reform.34 The study consists of an annual in-person survey conducted in English and individual-level administrative data from the Illinois Department of Human Services and the Illinois Department of Children and Family Services. The data presented in this paper are from the first, second, and third annual surveys, conducted in 1999–2000 (year 1), 2001 (year 2), and 2002 (year 3).

Sample
A stratified sample of 1899 TANF recipients was randomly selected from the last quarter of 1998 Illinois welfare caseloads. The stratification ensured variability in regional representation, with half the sample members residing in Cook County (Chicago and suburbs) and the other half residing in 1 of 8 "downstate" counties representing mid-sized and small urban and rural areas. To reduce potential bias from administrative disenrollment and reenrollment, we randomly selected sample members from within each stratum over a 3-month period.

Weighting
The analysis weights were derived by the multiplication of the stratification weights with separate weights developed to adjust for nonparticipation (nonresponse) of subjects. The nonresponse adjustment weight was based on demographic, employment, and Medicaid enrollment characteristics at the point of sample selection from administrative data of subjects who participated and subjects who did not participate (nonrespondents). The method involved an algorithm that yields a set of mutually exclusive groups, which together account for the greatest amount of variation in response probabilities.35–37

Measures
Dependent variables. Subjects who answered no to "Are you covered by any health insurance plan(s) right now?" were classified as uninsured; subjects who answered yes were then asked whether they received Medicaid, employer-sponsored insurance (ESI), health insurance through a spouse/partner, or some other type of health insurance. Subjects who experienced a gap in coverage since the last interview were asked about the length of the gap; a gap of 4 months or more was classified as a long gap. For these analyses, dependent variables were derived from the year 2 and 3 surveys.

Independent variables. Independent variables were selected by a literature review for key predictors of the outcomes under investigation. Demographic variables included region of residence (Cook County or downstate); number of children in the household (<3 or ≥3); having at least 1 child aged ≤5 years; and having a high school diploma or GED. Race is categorized as non-Hispanic Black, non-Hispanic White, and Hispanic. Few subjects identified themselves as "other," and because their outcomes were most similar to those of the non-Hispanic White group, they were included in this group. Gender is not included: more than 96% of the sample is female. Marriage is coded dichotomously based on status reported at time of the year 1 survey. With regard to "gave birth": the year 1 survey refers to "within the past year" and later surveys refer to "since the last interview." Welfare variables include "receiving welfare" if cash TANF benefits were reported at the time of the survey, and the cumulative total number of years of prior Aid to Families with Dependent Children or TANF receipt was derived from administrative data. Employment variables include working if any pay for work was received at the time of the survey, working part-time if working less than 30 hours during the previous week (all jobs combined), and hourly wage. The work variable and the welfare variable were combined to create a work and welfare status variable (work only, work plus welfare, no work/no welfare, welfare only).

Health insurance and the work and welfare variables are used to describe the transitions of health insurance and of work and welfare status between year 1 and year 3. All independent variables except "gave birth" are from year 1 because the timing of these variables (e.g., completion of high school) in relation to the outcomes was not precise. The most proximate measure of "gave birth" to the outcomes was used because exact timing of a birth was available.

Analysis
We used paired-sample t tests to compare respondents across consecutive years of data on welfare, work, and health insurance status. The analyses were weighted to adjust for nonresponse and for nonproportional sampling. We tested multivariate statistical models to determine the relative contributions of various year 1 characteristics in predicting being uninsured, having any gap in coverage, and having a long gap in coverage in years 2 and 3.


    RESULTS
 TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 
The survey achieved a 72% retention rate (1363 interviews) in year 1, 87% (1183 interviews) in year 2, and 91% (1072) in year 3. Interviews were conducted in person in the subject’s home or at a site near the subject’s home. The median time between the month when a subject was selected for the sample (September through November 1998) and the date of the subject’s year 1 interview was 16 months; the median time between the date of a subject’s year 1 interview and year 2 interview was 12.4 months; and the median time between the date of a subject’s year 2 interview and year 3 interview was 11.3 months.

Demographic, Marriage, Health, Work, and Welfare Characteristics
Table 1Go shows the weighted proportion and standard deviation for the study population for demographic, marriage, health, welfare, and work characteristics in year 1. All subjects were the primary caregivers for at least 1 child in their household, and we refer to the study population as parents. Most parents resided in an urban setting (Chicago or Cook County), were from a minority racial or ethnic group, and were not married. Forty percent of parents had 3 or more children at home, 62% had at least 1 child aged 5 years or younger, and only 41% had a GED or high school diploma. Eleven percent received Supplemental Security Income or had given birth in the past year, and 22% had a self-reported chronic condition that limited work. Fifty-two percent of all subjects were receiving welfare, 51% of all subjects were working, and 45% of all subjects had received welfare for more than 4 years at the time of their year 1 interview. Most were employed in the service industry and retail trades (types of work were coded based on the US Census Bureau’s standard industry categories38), and the average hourly wage was $7.58. Similar analyses were conducted for years 2 and 3 and showed no significant changes.


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TABLE 1— Baseline Demographic, Marriage, Health, Welfare, and Work Characteristics: Illinois Families Study, 1999–2002
 
Health Insurance, Work, and TANF
As shown in Figure 1Go, Medicaid remained the predominant type of health insurance between years 1 and 3, although the proportion of parents covered by Medicaid declined significantly in years 2 and 3 compared with year 1 (P <.05). Both uninsured and ESI coverage increased significantly in years 2 and year 3 compared with year 1 (P <.05). Health insurance through a spouse or other insurance provided coverage for few (1% to 2%) parents throughout all 3 years.




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FIGURE 1— Changes in welfare status and health insurance coverage in the study population, 1999–2002.
Note. ESI = employer-sponsored insurance.

 
With regard to changes in work and welfare, the proportion of parents in the welfare only and the work/welfare groups decreased significantly each year (P <.05), whereas the proportion of parents in the work only and the no work/no welfare groups increased significantly each year (P <.05).

The upper part of Table 2Go shows the health insurance transitions between years 1 and 3. In year 1, 73% of parents had Medicaid. In years 2 and 3, 71.6% and 72.8% of these parents, respectively, continued to have Medicaid; 21.5% and 17.1%, respectively, became uninsured; 5.0% and 8.6%, respectively, were covered by ESI; and 1.9% and 1.4%, respectively, were covered by insurance through a spouse or other type of insurance. In years 2 and 3, among the 18% of uninsured parents in year 1, 42.2% and 50.3%, respectively, gained Medicaid coverage; 39.4% and 34.2%, respectively, remained uninsured; 17.9% and 14.0%, respectively, gained ESI; and 0.5% and 1.6%, respectively, gained spouse/other insurance. Of the 8% of parents with ESI in year 1, many maintained their coverage in years 2 (69.3%) and 3 (61.0%), although 20.8% and 18.3%, respectively, became uninsured in years 2 and 3. Among the small proportion of parents with health insurance through a spouse or other insurance in year 1 (3%), 22.2% and 29.6% maintained this coverage in years 2 and 3, respectively. In years 2 and 3, 18.5% and 25.9%, respectively, of these parents changed to Medicaid, 25.9% became uninsured; and 33.3% and 18.5%, respectively, obtained employer-sponsored insurance.


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TABLE 2— Health Insurance Transitions Between Year 1 and Year 3 and Health Insurance Instability in Years 2 and 3a
 
Instability of health insurance is shown in the lower part of Table 2Go. Among parents with Medicaid in year 1, 21.5% and 17.1% became uninsured in years 2 and 3, respectively. In years 2 and 3, 31.1% and 26.6%, respectively, of these parents experienced a gap in coverage, and 17.1% and 17.9%, respectively, reported having a gap of 4 months or greater. Unstable health insurance was common among parents who were uninsured in year 1: 39.4% and 34.2% of these parents remained uninsured in years 2 and 3, respectively. In years 2 and 3, 53.2% and 42.5%, respectively, of these parents experienced a gap in coverage and 36.2% and 32.6%, respectively, reported having a gap of 4 months or greater. Parents with ESI or spouse/other insurance in year 1 had in years 2 and 3 uninsured, gap in coverage, and gap of 4 months or more rates similar to those of parents who had Medicaid in year 1.

Predictors of Health Insurance
Table 3Go depicts the odds ratios and corresponding standard errors of parents becoming uninsured, having any gap in coverage, or having a long gap in coverage in years 2 and 3. We controlled for year 1 demographic characteristics and health insurance status, and for 15 of the 16 possible welfare and work transitions (e.g., welfare only in year 1 and work plus welfare in year 2 or work plus welfare in year 1 and no work/no welfare in year 2) in each model but include in the table only those transitions with statistically significant effects on 1 or more outcomes. Other variables that were controlled for but omitted from the table because of statistical insignificance included region of residence, education level, duration of welfare receipt, marital status, and recent birth. All race/ethnicity and health insurance categories are depicted in the table, irrespective of statistical significance, because multiple categories are compared with a single reference group. Some of the work and welfare transition cells have large standard errors because of sparse data.


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TABLE 3— Predictors (Adjusted Odds Ratios) With Standard Errors of Parents’ Being Uninsured, Having a Gap in Coverage, or Having a Long Gap in Coverage in Years 2 and 3
 
Having at least 1 child aged 5 years or younger or having 3 or more children in the home was protective of unstable coverage in year 3. Having Supplemental Security Income increased the likelihood of having a long gap in coverage in year 3. Being uninsured in year 1 significantly increased the likelihood of having unstable health insurance in subsequent years, and having ESI in year 1 was only protective of having a gap in health insurance in year 2.

Regardless of work and welfare status in year 1, transitioning to work only or to no work/no welfare in year 2 increased, with few exceptions, the likelihood of having unstable health insurance in years 2 and 3 compared with those who remained on welfare only (P <.001 and P <.01). Transitioning to work plus welfare in year 2, regardless of work and welfare status in year 1, did not result in significant differences in the likelihood of having unstable health insurance in year 2 compared with those who remained on welfare only with 1 exception: parents who continued to have work plus welfare were protected from having any gap in coverage (P<.05) in year 2. Transitioning from work plus welfare in year 1 to welfare only in year 2 reduced the likelihood of having any gap in coverage in year 2 (P <.05).

Strengths and Limitations
Although these results pertain to the Illinois welfare reform experience, they should, nevertheless, be informative for a national audience. First, the study takes place in a state with the fifth largest TANF caseload before welfare reform in 1996.39 Second, Illinois welfare reform policies, in comparison with those in other states, are considered to be moderately supportive.3 Third, Illinois has had a comparatively stable health care market during this period40 with fewer market effects influencing Illinois health insurance coverage rates than in other states.

A relative strength of this study is the high retention rate, comparable to those of other major welfare reform studies that include samples from major metropolitan areas.41 An additional strength is the ability to include a nonresponse weight.

This study has several limitations. Health insurance, work, and welfare receipt are self-reported. Although self-reports of having insurance are highly valid, self-reported data on the source, length, and type of insurance are less reliable.42 Thus, the uninsured rate may be more valid than findings about the type of insurance or gaps in coverage. This is also a study of only 1 state, Illinois, which limits the generalizability of these results.


    DISCUSSION
 TOP
 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 
Although the 1996 welfare reform legislation did not directly address the issue of health insurance for parents leaving welfare for work, legislators recognized that access to health insurance was likely to be a problem and included requirements for states to continue Medicaid eligibility and extend coverage to persons after they left welfare programs.

This study found that many parents, although meeting the goals of welfare reform, experienced unstable health insurance or became uninsured. Medicaid remains the most common type of health insurance for these parents yet covers fewer parents each year, and about 20% of parents who lose Medicaid become uninsured. We are currently conducting analyses using administrative data to assess the role of improper termination and delayed reinstatement in loss of Medicaid coverage. The continuing problem of Medicaid eligibility determination for these families has been acknowledged at the federal level.43

Overall, in 2000, 20% of parents in transition from welfare to work in Illinois were uninsured. Although similar to the uninsured rate reported in other welfare studies,4–6,29 this rate is lower than the uninsured rate of low-income Illinois adults (32.2%) in 2000.44 However, the study also suggests that parents who become uninsured have difficulty regaining health insurance: 39.4% and 34.2% of parents who were uninsured in year 1 were still uninsured in years 2 and 3, respectively.

ESI provides coverage for a small, although growing, proportion of parents. The small proportion of parents gaining ESI coverage is not surprising given the decadelong rise in health care costs and health plan premiums and the resulting erosion of ESI for low-wage workers.45,46 Additional analyses, not presented in this article, found that ESI is closely tied to education and employment, with more educated, full-time, and higher-wage parents being significantly more likely to be offered and participate in ESI.47 The study also found that the many parents in retail or service jobs had lower rates of ESI, whereas parents employed in the communication or transportation industries fared better with regard to ESI.46

In addition to loss of health insurance, having a gap in coverage, particularly a long gap in coverage, is a significant problem for many parents. Not surprisingly, uninsured parents experience considerable instability in their coverage over time, although parents who have Medicaid or ESI are not immune from the instability. Whether the magnitude of instability among a former welfare population differs significantly from that of a low-income working population will require further research. Data about instability of coverage among the working poor are not available for Illinois.

Multivariate analyses from this study show that nearly all groups of parents who met the goals of welfare reform through work or decreased welfare dependence were considerably more likely to experience being uninsured or having unstable health insurance than those parents who continued to receive welfare only. The additional welfare reform goal of marriage did not significantly reduce the instability of health insurance coverage of parents.

Several favorable findings should also be noted. There is some evidence that parents with young children (aged 5 years or younger) or with 3 or more children in the household are protected from health insurance instability. Although further analyses are needed to fully identify the reasons (e.g., type of health insurance, work/TANF status) for this favorable outcome, the finding is important because of the link between parents’ and childrens’ use of health care.

Studies have shown that marriage, although protective for the general population,48 is not protective against being uninsured and having gaps in coverage among low-income families.49

For parents in transition from welfare to work, marriage did not confer any protection against having unstable health insurance. We speculate that the combined household income of married parents may be beyond acceptable levels for Medicaid/Transitional Medical Assistance eligibility, that despite higher household income, premiums for ESI are prohibitive for these families, and that married parents may feel stigmatized when applying for Medicaid.

Although many former welfare recipients have met the goals of work and reduction of welfare, loss and instability of health insurance has emerged as a considerable problem for these parents. Medicaid remains the main source of health insurance for this population yet coverage rates are declining, and a better understanding of the role of improper termination, delayed reinstatement, and inadequate outreach by Medicaid is needed. ESI, although increasing, is unlikely to become a major source of health insurance for parents: among the 50% of parents who were employed, only 11% were covered by ESI.

Tax credit proposals to assist low-income people to purchase health insurance, although having strong bipartisan support, are not a viable solution without significant individual insurance market reforms and better ways of spreading risk.50 It may also be difficult for these families to afford the average annual employee contribution for ESI ($360/year for single coverage to $1800/year for family coverage)51 considering their limited annual average incomes ($14,145 in year 3).44

States are facing their largest budget deficits in half a century, and Medicaid matching funds are often the second largest item of most state budgets. A recent survey reported that 44 states will consider or have considered freezing or reducing Medicaid eligibility benefits and reimbursements in the 2003 state legislative sessions.52 On the basis of proposed or implemented state cutbacks in Medicaid, at least 1 million low-income individuals could be affected.53 The current federal administration has also proposed significant changes to Medicaid,54 and concerns about the impact of the proposed block grant "capped" growth rate on state Medicaid budgets and Medicaid eligibility have been raised.

Policymakers should consider that reductions in state and federal Medicaid funds may increase the number of uninsured parents and reduce their access to health care, which can, in turn, lead to increased worker absenteeism, reduced job performance, and possibly job loss. Raising income eligibility levels for Medicaid for adults, expanding State Children’s Health Insurance Program coverage to adults, and extending the eligibility period for Medicaid Transitional Medical Assistance through state Medicaid and State Children’s Health Insurance Program waivers appear to be among the most realistic solutions for stabilizing health insurance coverage and supporting work among poor parents. Policymakers should reassess the ability of welfare reform and Medicaid policies to provide long-term, stable health insurance for all parents who transition from welfare to work because of the essential role that health insurance plays in sustaining the work promotion and welfare reduction goals of welfare reform.


    Acknowledgments
 
Support was provided by the John D. and Catherine T. MacArthur Foundation, the Joyce Foundation, the Woods Fund, the Polk Bros Foundation, the Annie E. Casey Foundation, the Illinois Board of Higher Education, the Administration for Children and Families (grant 90PA 0005), the US Department of Education (grant R3 05T010869), the National Institute of Justice, and the National Institute of Child Health and Human Development (grant U01 HD 39148 and K01 HD 41703 for K.S. Slack).

The authors thank Lynette Renner, Matt Smith, and Joan Yoo, doctoral candidates in the School of Social Work at the University of Wisconsin, Madison, for their help with the analyses and Greg Duncan, PhD, and Peter Budetti, MD, JD, for their insightful and helpful comments about the paper.

Human Participant Protection
Signed consent was obtained from all participants. Study protocol was approved by Northwestern University’s institutional review board.


    Footnotes
 
Peer Reviewed

Contributors
J.L. Holl and K.S. Slack were involved throughout the study. They originated the study, oversaw data collection, conducted analyses, interpreted results, and led the writing. A.B. Stevens oversaw data collection, conducted analyses, interpreted results, and participated in the writing.

Accepted for publication January 7, 2004.


    References
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 ABSTRACT
 INTRODUCTION
 METHODS
 RESULTS
 DISCUSSION
 References
 
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