Examining Substitution: State Strategies to Limit "Crowd Out" in the Era of Children's Health Insurance Expansions. Mechanism 3: Use of Subsidies


Some states are designing their programs to work in tandem with employer-sponsored coverage as a means of limiting substitution. Assisting families to purchase private coverage with public funds may deter families from dropping, or not pursuing employer-sponsored insurance beyond their economic reach. While subsidies support families in purchasing insurance in the private market, they may also contribute to substitution. Oregon's 1997-1999 budget proposed the creation of the Family Health Insurance Assistance Program (FHIAP), an insurance subsidy program for families with incomes between 100% and 185% of poverty. Essentially, FHIAP will establish a voucher system for families with access to employer-sponsored insurance, assisting eligible families in buying into employer-sponsored programs. Colorado has also considered subsidizing families’ insurance as a viable means of limiting substitution and is considering the implementation of a voucher program. Colorado has identified this strategy as an approach that will prompt the public and private sector to cooperate in the process to insure children. Florida is also considering a type of voucher mechanism that will assist families in purchasing coverage as a supplement to Healthy Kids and other efforts.