Crowd out: evidence from the Florida Healthy Kids Program.

Abstract

To determine the percentage of children who had insurance coverage in the 12 months preceding enrollment in a state-subsidized program; the percentage of parents who had access to employer-based family coverage; and the cost of the families' share of the premium per month. We randomly selected 930 families whose children were enrolled in the Florida Healthy Kids Program for a period of between 1 and 3 months and conducted telephone interviews with them in 1998 about their children's insurance coverage before program entry and their access to employer-based family coverage. There were 653 families in the final sample. Only 5% of the children had employer-based coverage before program enrollment. However, 26% had access to family coverage through their employers with the family share of the premiums representing on average 13% of their incomes. Access to employer-based coverage varied significantly by family income. Throughout the development of the State Children's Health Insurance Program legislation, policy analysts expressed concern that families may crowd out or substitute a subsidized state plan for employer-based coverage. This substitution could result in fewer improvements in access to care and health status than were anticipated, because families are simply moving to a different form of health insurance. There is some degree of crowd out in the Healthy Kids Program. The economic burden to near-poor families to purchase employer-based coverage is significant. Some degree of substitution may need to be tolerated to ensure that children receive needed health insurance.