Children's Health Insurance Expansions: State Experiences in Developing Benefit Packages and Cost-Sharing Arrangements. C. Addressing Price Sensitivity


Several states identified the affordability of employer-sponsored insurance as an important consideration in the implementation of mechanisms to limit crowd out. In the context of cost-sharing, "price sensitivity" refers to levels of premiums and copayments that families perceive to be affordable. It is important to note that price sensitive requirements may not be what families can afford, but rather what they are willing to pay for health care services. States' consideration of cost-sharing levels is critical to assuring the success of a children's health insurance program, as it influences family decisions to enroll in a program and utilize services.

Although states were interested in the affordability of private coverage, there is a lack of research that has identified the affordability and price sensitivity of private insurance coverage. One of the programs, MinnesotaCare, found that in a 1995 survey conducted as part of their program evaluation, approximately 73% of those questioned who were uninsured stated that they could not afford to purchase insurance. The overall lack of data on affordability has led states to experiment with specific strategies to determine effective cost-sharing levels in their children's health insurance programs. States have tried to balance how best to use premiums and copayments to encourage participation yet limit families from substituting public for private health coverage.

Several states have identified the importance of establishing cost-sharing levels that do not deter eligible families from enrolling in state programs and utilizing necessary services. 

  • Florida experimented with raising premiums beyond ten dollars in Volusia county, but found these amounts resulted in decreased enrollment. State program representatives felt that premiums at a lower level (between $5-10) were a viable means of evoking a sense of responsibility in participants by making public insurance comparable to employer-sponsored coverage.
  • CaliforniaKids also experimented with cost-sharing levels. The program is currently experimenting with serving families over 200% FPL in San Diego and has implemented sliding scale premiums: Families between 200-250% of the poverty level pay a premium of $25/member/month, and families between 250-300% of the poverty level pay $35/member/month. CaliforniaKids is monitoring enrollment rates to determine whether premium levels are discouraging families from participating.
  • The New York Child Health Plus program found that recent premium increases have resulted in decreased enrollment. Families between 120% and 222%, previously receiving full premium subsidies, are paying between $9-13 per member/month, effective October 1, 1997. Although participants received a letter informing them that these premiums will again be adjusted to lower rates, pursuant to Title XXI, the program is still seeing families disenroll.