What Is the Children’s Health Insurance Plan, and Why Does It Matter

by ParentCo. October 16, 2017

You might have seen the news that federal funding for the Children’s Health Insurance Program (CHIP) expired at the end of September. But you might not be as familiar with what the program does, who it covers, or what this latest development means. So here is CHIP 101 – a brief overview of everything you need to know about this important program.

What is CHIP?

Congress created CHIP in 1997 with support from Republicans and Democrats. It gave states money to give insurance to children who are not eligible for Medicaid – the public health insurance program that covers low-income Americans. Since then, CHIP as been re-authorized in 2009 and 2015, but funding expired on September 30th of this year. States can use the money they get from CHIP in two ways: either to pay for more kids to be on Medicaid, or to create a separate health insurance program. Some states use both approaches, enrolling lower income families in Medicaid and putting moderate income families on a separate program. About half the kids who benefit from CHIP funds are on Medicaid coverage. Separate CHIP programs often go by their own names, like Florida KidCare or BadgerCare Plus in Wisconsin. So if you have a state program for children’s insurance, it’s likely funded through CHIP even if you haven’t heard it called that.

Who uses CHIP?

Nationwide, about nine million children receive their health insurance from CHIP funds – about one in every eight kids. In 20 states, pregnant women can also be covered through CHIP. CHIP covers both low-income and moderate-income families under certain income limits. The limits are based on family size and a percentage of something called the federal poverty threshold. The federal poverty threshold is basically a number the federal government sets every year to determine who is living below the poverty line, and who is not. Eligibility for most state and federal programs is calculated based on a percentage of this number since families living above it may also benefit from the programs. Each state can set their own upward-income limit for CHIP. The average nationwide is 255 percent of the federal poverty threshold. So for a single mom with two kids, this means having an income less than $52,000 a year. For a two parent, three kid family, it means having an income of less than $73,000 a year. Because of CHIP, Medicaid, and the Affordable Care Act (ACA), health insurance coverage for children is now at record high – 95 percent. Even though many of the families that benefit from CHIP are middle class, it has definitely helped expand insurance to kids who did not have it before.

So what does it mean that funding expired?

CHIP funding has already expired – meaning states are not getting any money for their programs from the federal government – but it doesn’t mean that kids are immediately booted off the program. States typically have a reserve of federal CHIP funds that can get them through the next few months. But 11 states estimate they will run out of funds before the end of the year, and 21 more, including Washington, D.C., are expecting their reserves to be tapped by March 2018. Even if states run out of CHIP funds, they won’t be immediately shutting down their insurance programs. States who used CHIP funding to enroll kids in Medicaid must keep them in the program until 2019. The federal government basically agrees to pay for a certain percentage of the costs of Medicaid and CHIP. Under the old program, the federal government actually pays more per-kid for CHIP – even though those families tend to have higher incomes – because Congress wanted to give states an added incentive to expand coverage to those families. But with funding now expired, the state will have start paying a significantly higher percentage of the cost of covering CHIP kids because they won’t be receiving as much from the federal government. Coverage for kids who are on separate CHIP programs is a bit more precarious. If funding runs out, states will be able to start capping or freezing enrollment, meaning some families who would have been eligible won’t be able to receive coverage. Worst case scenario, some states may be forced to shut down their programs altogether. If CHIP programs close, some kids will be able to receive coverage through parents’ employer plans, but many will go without insurance altogether. Study after study shows that children do better when they have health insurance coverage. They have better health throughout their lives, are more likely to graduate from high school and college, and their families are less likely to go bankrupt.

What happens next?

The House and Senate are currently considering bills to extend funding for CHIP through 2022. These bill keeps up current funding levels through 2019, and then reduces it for the remaining years. The new bill would raise costs for high-income Medicare beneficiaries to offset the costs.

What can I do?

If you are concerned about your child’s access to insurance, contact your local state office for more information. They will be able to help you determine which type of plan you are on and if you will potentially be affected. You can also contact your members of Congress to share your experience of using CHIP. In the past, the program has received support from both sides of the aisle, so representatives from both political parties will appreciate hearing your stories.

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