Interim Evaluation Report: Congressionally Mandated Evaluation of the State Children’s Health Insurance Program. C. Premium Assistance Programs


The purpose of a premium assistance program is to leverage available employer-sponsored and other private health insurance for children or families. To operate a premium assistance program, states must demonstrate that program costs will not exceed the costs the state would incur if it were to provide direct insurance coverage. The initial SCHIP regulations limited premium assistance to situations in which the employer contributed at least 60 percent of the cost of the premium. Additionally, the benefit package offered through the private insurance must be at least as comprehensive as the package the state provides to SCHIP participants. States must also require waiting periods in the premium assistance program to prevent the substitution of public for private coverage, which would happen if employers reduced or eliminated their premium contributions, or families opted to drop dependent coverage with an employer to enroll their children in SCHIP.

In response to complaints from many states that the initial proposed regulations were too limiting, final rules issued by CMS in January 2001 eliminated the minimum percentage-contribution language from the final SCHIP regulation (as many states argued, the employer contribution must still be significant for the cost effectiveness standard to be met), allowed states to establish "reasonable" exceptions to the waiting period, and clarified how states can meet the benefit package standards when employer benefit packages do not comply with the SCHIP statute.

Among the six study states, Colorado originally envisioned a second phase to its SCHIP program, which would include a premium assistance component. The state explored the idea further during 2000, but concluded that federal rules would make implementation of the program infeasible. Texas also has expressed some interest in a SCHIP premium assistance program (they already have a premium assistance program in Medicaid). In summer 2001, the state legislature gave the SCHIP agency authority to explore this option and the state is considering a HIFA waiver for premium assistance. To date, no other study state has added a premium-assistance component to its SCHIP program.

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