Examining Substitution: State Strategies to Limit "Crowd Out" in the Era of Children's Health Insurance Expansions. A. Implications for the design of Title XXI programs by states


Decisions regarding how and to what extent to expand coverage for uninsured children will be made in the context of broader state policy objectives and existing state programs. The issue of substitution and how states will address it is likely to be influenced by specific views regarding the role of the public and private (employer) sectors in providing affordable health care coverage for their citizens. There are two ways that substitution can occur under CHIP: (1) substitution of coverage, which can occur when families or employers drop existing private coverage to enroll in CHIP, and (2) substitution of premiums, which can occur when employers reduce their contribution levels for dependent coverage because families are able to obtain subsidies that offset the reduced amount of contribution. Existing and potential policies regarding insurance reform, efforts to assist employers in providing coverage, and state social and economic policies are likely to be examined in the overall planning for expanded children's coverage and the effect of possible substitution of private coverage. Current research coupled with past experiences of states provides some information for states to consider as they plan and implement programs funded by Title XXI. Four major program design issues were identified as important areas in addressing substitution: the overall design of the program; determining whether to use Medicaid expansions or separate state programs; the development of specific provisions related to employer coverage; and the oversight and evaluation of the expanded program.