Crowd out: Evidence from the Florida Healthy Kids Program

Objective. To determine the percentage of children who had insurance covera ge in the 12 months preceding enrollment in a state-subsidized program; the percentage of parents who had access to employer-based family coverage; an d the cost of the families' share of the premium per month. Methods. 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 in surance coverage before program entry and their access to employer-based fa mily coverage. There were 653 families in the final sample. Results. Only 5% of the children had employer-based coverage before program enrollment. However, 26% had access to family coverage through their emplo yers with the family share of the premiums representing on average 13% of t heir incomes. Access to employer-based coverage varied significantly by fam ily income. Conclusions. Throughout the development of the State Children's Health Insu rance Program legislation, policy analysts expressed concern that families may crowd out or substitute a subsidized state plan for employer-based cove rage. This substitution could result in fewer improvements in access to car e and health status than were anticipated, because families are simply movi ng to a different form of health insurance. There is some degree of crowd o ut in the Healthy Kids Program. The economic burden to near-poor families t o purchase employer-based coverage is significant. Some degree of substitut ion may need to be tolerated to ensure that children receive needed health insurance.