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This background paper examines and analyzes early efforts by states to subsidize employment-based health insurance under the State Children's Health Insurance Program (SCHIP), which offers states a more generous funding rate than under Medicaid. As the Health Care Financing Administration prepares to issue regulations governing SCHIP, the paper summarizes complaints by state officials that federal rules governing how job-based coverage might be subsidized under the program are overly complex and rigid. After interviewing officials at the federal level and in six states as well as a variety of researchers and policy experts, the author considered whether and to what extent the difficulties state officials have encountered in launching these subsidy programs are due to the nature of the SCHIP statute, its interpretation by federal regulators, or to the implementation approaches selected by the states themselves. The challenges inherent in attempting to merge public subsidies with voluntary employment-based health coverage also are discussed.

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