Examining Substitution: State Strategies to Limit "Crowd Out" in the Era of Children's Health Insurance Expansions. Disconnect Between State Experiences and Research


While research has yielded varying estimates of crowding out private coverage, ranging from 0-50%, states providing coverage for low-income children indicate they have seen little evidence of these levels of substitution. Although the majority of these states have not collected sufficient data to determine an accurate estimate of crowd-out, states’ anecdotal evidence pointed to minimal numbers of enrollees with access to affordable private coverage and did not seem to warrant further investigations. States queried about their experience with substitution noted that despite some researchers’ predictions about employers strategically eliminating or reducing their contribution to employee health benefits, real or potential crowd out is primarily the result of families opting to discontinue private insurance for financial reasons.

States that have collected information on the number of program participants with previous insurance, revealed estimates that were lower than estimates derived from nationally-based research.

· Preliminary data from Colorado’s Child Health Plan estimate that 0.007% dropped employer coverage to enroll in the plan. In addition 5% of their enrollees carry other insurance coverage.

· Florida’s Healthy Kids program estimates that 94% of their children had been uninsured for 6-12 months before enrolling in Healthy Kids.

· New York found that more than 50% of all Child Health Plus enrollees had no insurance at all during their lifetimes; approximately one-sixth had Medicaid prior to Child Health Plus; and approximately one-sixth were underinsured or fully insured.

MinnesotaCare, which began as a state sponsored program in 1992 and switched to a Medicaid waiver program expansion in 1995, is one of the few programs that has evaluated their participants' access to private coverage. MinnesotaCare, offering coverage to families with children under 275% of the federal poverty level, noted that approximately 13% of their enrollees technically had access to other health coverage: 7.1% reported giving up private market insurance and 5.7% of the sample reported dropping coverage from another public program to enroll in MinnesotaCare. Of note, the majority of enrollees who had access to private insurance said they could not afford it.