By Stacy Collins, MSW
Associate Director, Health Reform Implementation, AMCHP
Created in 1997, the Children's Health Insurance Program (CHIP) was designed to finance health care for children caught in a coverage gap – those whose families earned too much to qualify for Medicaid, but too little to afford commercial health insurance. At the time of passage, Medicaid eligibility levels for children ranged from 100-133 percent of the federal poverty level (FPL) nationally, and the uninsured rate for children under the age of 19 was 14 percent. Enactment of CHIP, coupled with changes in Medicaid, raised eligibility levels for children over time to a median of 235 percent FPL.
Today, CHIP finances health coverage for more than eight million children. Together, Medicaid and CHIP helped reduce the uninsured rate for children to a record low of 7 percent in 2012.
Positive Changes to CHIP under the ACA
The Affordable Care Act (ACA) has strengthened CHIP in the areas of enrollment, eligibility and financing.
The ACA established new enrollment and renewal rules for Medicaid and CHIP, designed to create a simplified, "no wrong door" process for children and families. States are required to implement these new procedures regardless of whether they adopt the Medicaid expansion for low-income adults. The ACA also included a "maintenance of effort" requirement, whereby states must continue the eligibility thresholds for children under Medicaid and CHIP that were in place in March 2010, through Sept. 30, 2019. The ACA also offers states the option of providing CHIP coverage to children of state public employees.
The ACA extended federal CHIP funding through September 2015. CHIP was recently funded for an additional two years (through September 2017) under the "doc fix" bill (P.L. 114-110), signed into law by the president in April. With this recent reauthorization, the ACA provision that increases the federal CHIP matching rate takes effect. With the start of fiscal year 2016, the rate will rise 23 percentage points, resulting in matching rates ranging from 88 percent to 100 percent.
Risks to CHIP in the ACA Era
As originally envisioned, the ACA would create a comprehensive system of health coverage for low-income Americans through the insurance marketplaces, tax subsidies and an expanded Medicaid program. Most ACA architects envisioned a system in which children and parents would be covered under the same health care plan, thus eliminating the need for a gap-filling program like CHIP. In addition, some states see a CHIP phase out as helpful to stretched budgets. Although states pay only a small share of the cost of CHIP, health coverage for the same low-income families would be cost-free for states if they eliminated CHIP and directed families to the health insurance exchanges.
But a phase out of CHIP in the near future poses risks for children's coverage. A major concern is an apparent mistake in the ACA, known as the "family glitch," that could make employer-sponsored insurance too costly for many low-income workers. Under the ACA, anyone who is offered "affordable" insurance by their employer is not eligible for federal tax credits. Affordable insurance is defined as employee-only coverage that does not exceed 9.5 percent of a worker's income. Premiums for family coverage, however, are typically three times as much as individual coverage. Without a CHIP program, children in families opting out of expensive employer coverage may likely go uninsured, if they don't otherwise qualify for Medicaid.
The financial burden on families covered through exchange plans is generally greater than CHIP coverage. Exchange plans have substantially higher out-of-pocket expenses, including copays and deductibles. And although they must comply with ACA minimum essential coverage requirements, exchange plans often have fewer child-specific benefits and less robust provider networks than CHIP. In any discussion of the transition from CHIP to exchange plans, access to specialized pediatric providers – and increasingly narrow networks – have emerged as major issues for families who have children with special health care needs.
The two years of additional CHIP funding provides an opportunity for policymakers and advocates to tackle the issues of affordability, child-specific benefits, and network adequacy that must be addressed before transitioning children from CHIP to exchange plans or employer sponsored coverage. Recommendations include fixing the 'family glitch," refashioning CHIP as a pediatric-specific exchange plan, or creating new rules that decrease cost sharing for family coverage purchased on the exchanges. Moreover, policymakers need to understand the role that CHIP continues to play in meeting the unique coverage needs of children in low-income working families, and that CHIP should not be abandoned until comparable coverage is guaranteed.