Children's Health Insurance Expansions: State Experiences in Developing Benefit Packages and Cost-Sharing Arrangements. B. Reasons for Imposing Cost-sharing


When designing cost-sharing mechanisms, there were a number of complex issues that programs considered to address their primary objectives. Cost-sharing mechanisms were implemented for a variety of reasons including: 1) to reduce the total health spending which is paid for by the plan; 2) to deter enrollment and utilization, thereby reducing program expenditures; 3) to instill a sense of ownership in participants for their health care; and 4) to minimize the welfare stigma associated with public or "free" programs. The majority of the states interviewed for this study instituted cost-sharing mechanisms to address the third and fourth objectives.

Program directors believed that by instituting moderately priced premiums and copayments, families were more willing to participate (enroll) and did not view the program as welfare. For example, the CaliforniaKids program talked to families prior to establishing copayment levels and learned that participants attached a welfare stigma to a free program. CaliforniaKids used a moderate $5 copayment for most services to instill a sense of responsibility in participants without creating a barrier to enrollment. Similarly, the Colorado Children's Health Insurance Plan established low $2 copayments for doctor visits, health screenings and prescriptions, and an annual enrollment fee of $25 per family. The Pennsylvania CHIP program also believed that most families respected the idea of cost-sharing and liked the idea that they were paying for their children's health care through a monthly premium. In addition to countering welfare stigma, cost-sharing mechanisms were viewed as a way of helping acclimate participants to the requirements of employer-sponsored insurance, thus building a bridge between conditions of uninsurance and private insurance.