Perceptions about the extent of crowd-out varied across the study states and by case study respondents. However, with the exception of Louisiana, most state officials, legislative staff, and advocates were not concerned about crowd-out and did not perceive consumer- or employer-based crowd-out as occurring at significant levels.
New York was the only state able to substantiate its assessment of the extent of crowd-out with data. 66 Parents of between four and six percent of children enrolled in Child Health Plus indicated that they had held private health insurance coverage within the six months preceding their application for SCHIP but had dropped it voluntarily. In the four states with waiting periods, between 1 and 5 percent of children applying for SCHIP were denied coverage because they had private insurance during the waiting period. 67
In these states, officials tended to use these figures to indicate the low potential for crowd-out since the numbers actually represent "prevented" crowd-out cases.
Most case study respondents believe that waiting periods may deter crowd-out because families are unwilling to allow their children to go without health insurance for three to six months while waiting to obtain SCHIP; state and local officials reported that they actively discouraged parents from taking this step. Most staff assisting parents to apply stated that they discouraged applicants from dropping their children's private insurance. In New York, which has no waiting period, enrollers warned applicants that if families were found to be dropping private coverage, a waiting period might be introduced.
Louisiana is the one state in the study where some case study respondents believed that it is not uncommon for families with private dependent coverage to drop it to qualify for LaCHIP. According to eligibility workers in New Orleans, the number of children whose parents dropped private insurance for them increased after the SCHIP waiting period was dropped. One application assistor said that, among the families she has helped, as many as one in five had dropped coverage in order to apply for LaCHIP. Application assistors indicated, too, that many children who are denied coverage because they have existing coverage drop the coverage and reapply. Case study respondents cited prohibitively expensive employer-sponsored coverage as the driving force behind this trend.
Despite the widespread perception that rates of crowd-out were low in the other five states, staff assisting parents with applications reported anecdotes about crowd-out at the local level. They reported that high (or rising) insurance costs was the most common reason families gave for dropping private insurance. In addition, case study respondents believed that crowd-out is an issue to monitor in the future.
Many families in the focus groups indicated that they had tried to obtain insurance for their children through their employers, but that when private insurance was unaffordable or otherwise unavailable, many turned to Medicaid and SCHIP as an alternative source of coverage. The study also reveals that some parents who previously had private insurance for their children enrolled them in public programs either because they wanted to save money or because they wanted the better benefit package public programs offer. Some families did not understand the purpose of the waiting period.
Case study respondents viewed as "equitable and fair" the exemptions from waiting periods that were implemented in three states to allow children covered by high-cost policies to switch to broader, less expensive coverage under SCHIP. The impact of the exemptions on enrollment was not clear in California or Colorado; but, in Texas, "literally thousands" of families were reported to be qualifying for coverage under the "10 percent of income" exception.
66. The data obtained from monitoring are subject to applicants' accuracy in self reporting previous coverage.
67. There are no current data for Louisiana, in part, because the application questions do not necessarily reveal whether families dropped coverage before they applied. When the waiting period was in place, prevented crowd-out cases reportedly were 1 percent.