Examining Substitution: State Strategies to Limit "Crowd Out" in the Era of Children's Health Insurance Expansions. Mechanism 4: Limiting the Scope of the Benefit Package


Limiting the scope or comprehensiveness of the benefit package is another mechanism that seems to deter families from opting out of employer coverage. The CaliforniaKids program, the Massachusetts Children’s Medical Security Plan, and until recently, New York’s Child Health Plus program, declined to offer inpatient care with the rationale that it was better to provide a more modest benefit package to greater numbers of children. Although CaliforniaKids and Child Health Plus were primarily concerned with stretching their funding to meet the basic health care needs of as many children as possible, representatives from both programs believed that excluding inpatient care deterred substitution. These programs were comfortable with offering a limited benefit package, knowing that Medicaid would serve as a safety net for children requiring inpatient care or extended benefits. Because most employer plans include inpatient care, families were less inclined to drop private coverage. Limited benefit packages also reduce the risk of adverse selection within state-funded programs. Families with children having special health care needs may not select out of private coverage or Medicaid in order to obtain coverage under a state program offering a less generous benefit package. In addition to the benefit package, families with such children may also examine the provider network encompassed by the state program before substituting for their existing coverage. As children with special health care needs must often access specialty services, parents are faced with complex choices which relate not only to cost, but substantially to access of health services. Such considerations may limit adverse selection into state programs that provide limited benefit packages and access to specialty services as compared to private insurance plans and Medicaid.