Examining Substitution: State Strategies to Limit "Crowd Out" in the Era of Children's Health Insurance Expansions. Mechanism 2: Using Periods of Uninsurance, Access to Employer-Sponsored Insurance, and Employer Contributions


Several states have established requirements based on access to employer-sponsored insurance, employer contributions, and/or specific periods of uninsurance as a means to limit substitution. MinnesotaCare has instituted relatively stringent time and cost requirements, described by some as "firewalls" in order to prevent the crowd out of employer-sponsored insurance. For example, MinnesotaCare requires that prior to enrollment in the program, families may not have access to employer-sponsored coverage in which an employer subsidizes 50% or more of the cost of the policy for at least eighteen months preceding application to the program. Exemptions to this include children under 150% FPL and situations where a parent in a family over 150% FPL becomes unemployed, does not qualify for workers compensation, and is unable to pay for COBRA.

The process of verification of access to employer-sponsored insurance, employer contributions, and periods of uninsurance has been challenging for states. Most states verify eligibility based on self disclosure or the "honor system," as other means of verification are costly and increase the complexity of enrollment processes. Some states have chosen to piggy back on other existing state programs in order to efficiently evaluate eligibility status. The most commonly cited example has been the process used by the Florida Healthy Kids Corporation in which eligible children are required to qualify for the National School Lunch Program. Other states have chosen to utilize existing verification structures of state Medicaid programs to assist in the determination of eligible enrollees.