In truth, employer coverage of workers' children has been eroding steadily since the 1970s and, without major economic or policy changes, will continue to erode because of competitive market forces, whether or not states use new federal money to cover uninsured children. The only question is whether children losing employer coverage will receive other coverage or be left uninsured. Few employees replace coverage of spouses and children with coverage of children alone. Most employer-sponsored family insurance covers the spouse, not just children. Few families would shift from such dependent coverage to a new child health program if that move would end coverage for the worker's spouse.
States can take sensible steps to prevent crowd-out.
Although significant crowd-out is unlikely, states can adopt reasonable protections to be on the safe side. California enacted a similar rule for all employers, including those not subject to the federal law. Few companies will cut benefits for the janitor's children if that would also hurt senior managers and their families. Brief waiting periods if employer coverage is dropped because of the state program. The agency administering the California program may deny assistance for three months after children lose employer-based insurance.