Crowd-Out: A phenomenon whereby new public programs or expansions of existing public programs designed to extend coverage to the uninsured prompt some privately insured persons to drop their private coverage and take advantage of the expanded public subsidy.

Crowd-out also occurs when such programs act as an incentive for employers to contribute fewer dollars to employees’ health insurance coverage, or altogether drop coverage in an effort to prompt employees to enroll their children in the new program.

Crowd-out is a concern of both State and Federal programs because it may create shifts in coverage from private to public insurance rather than decreasing the number of uninsured children, leading to:

The Health Care Financing Administration (HCFA) indicated in a February 1998 letter to State officials (this letter and other HCFA guidance can be found at http://cms.hhs.gov/schip/), that the potential for crowd-out—substitution of SCHIP coverage for private group health coverage—exists because SCHIP provides low-cost coverage for similar benefits that some individuals and employers currently purchase with their own funds.

There is a concern that in order to save money, employers with low-wage employees could potentially stop offering dependent coverage and encourage their employees to enroll their children in SCHIP; or that parents who are currently contributing significantly toward family coverage may drop that coverage in order to take advantage of the lower out-of-pocket cost of the SCHIP plan.

Related Questions:

Give me an overall context

• Show Me the National Profile - Population Size and Characteristics of Uninsured Children

• Why Do These Children Lack Health Insurance?

Give me more details

• Describe Crowd-Out Implications

• What Is the Regulatory Guidance Regarding Crowd-Out Under SCHIP?

• What Are Some Strategies Utilized to Prevent Crowd-Out?

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