• States Providing Direct Insurance Coverage are required to describe the procedures in their State SCHIP plan that reduce the potential for crowd-out, particularly when coverage is provided to children with family income at higher poverty levels (above 150 percent of the Federal Poverty Level).

• States Providing Employer-Sponsored Group Health Plans are required to incorporate in their SCHIP plan mechanisms the equivalent to the following five provisions aimed at promoting cost-effectiveness and discouraging reductions in employer coverage/contributions and reductions in utilization of such coverage/contributions:

• Children may not be eligible for SCHIP if the family had employer-sponsored group coverage for these children within the previous 6 months.

• Subsidies will be available for the purchase of dependent coverage only in cases where the employer contributes at least 6 percent of the cost of coverage.

• Families must be required to apply for the full premium contribution available from the employer to reduce the SCHIP contribution toward the premium.

• The State’s payment for a child enrolled in the plan will be no greater than the payment that the State would make if the child were enrolled in a separate State SCHIP program.

• The State must collect information and conduct an evaluation that examines the amount of substitution that has occurred under the program and the effect of these provisions on access to the program.

• SCHIP Requirements Regarding Medicaid Substitution

• HCFA’s February 13, 1998, Letter to State Officials regarding substitution of SCHIP coverage for private group health coverage. This letter and other HCFA guidance can be found at http://cms.hhs.gov/schip/.

• SCHIP Guidance - HCFA Guidance

• Lisa Dubay