Key CHIP design features

CHIP

CHIP is smaller than Medicaid both in terms of covered individuals (9.2 million versus an estimated 82.2 million in FY 2016) and total spending ($13.7 billion versus $552.0 billion in FY 2015, including both federal and state dollars). As with Medicaid, CHIP is administered by states within federal rules, and states receive federal matching funds for program spending. CHIP, however, differs from Medicaid in a variety of ways.

Program Design

While individuals who meet Medicaid program criteria (including the criteria for Medicaid-expansion CHIP programs) are entitled to Medicaid coverage, there is no individual entitlement to coverage in separate CHIP programs. Similarly, funding is not open-ended.

CHIP gives states flexibility to create their programs as an expansion of Medicaid, as a program entirely separate from Medicaid, or as a combination of both approaches. For example, some states use a Medicaid-expansion CHIP program to cover younger or lower-income children and a separate CHIP program for others. When states use a Medicaid-expansion CHIP program, federal Medicaid rules generally apply. Separate CHIP programs generally operate under a separate set of federal rules that allow states to design benefit packages that look more like commercial insurance than Medicaid. States may also use separate CHIP programs in order to charge premiums, to create waiting periods, and to brand and market their CHIP programs separate from Medicaid.

As of January 2017, 8 states, the District of Columbia, and 5 territories ran CHIP as a Medicaid expansion, 2 states operated separate CHIP programs, and 40 states operated a combination program. Click here for state-level detail on CHIP enrollment.

Nearly every state that was once categorized as having only a separate CHIP program now has a combination program. This shift to combination programs is due to the implementation of two provisions of the Patient Protection and Affordable Care Act (ACA, P.L. 111-148, as amended) that required states to move some separate CHIP enrollees into Medicaid: a mandatory income disregard equal to 5 percent of the federal poverty level (FPL) that effectively raises Medicaid (and CHIP) eligibility levels by 5 percentage points as well as a mandatory transition of 6- to 18-year-olds between 100 and 133 percent FPL previously in separate CHIP programs into Medicaid (so-called stair step children).

Waiting Periods

Because there is no individual entitlement to CHIP coverage, separate CHIP programs may generally use strategies to limit enrollment such as waiting periods, which is the length of time that children must be without employer-sponsored insurance before enrolling in CHIP. Currently, states’ ability to institute new eligibility restrictions is constrained by the MOE, but states may continue using waiting periods they previously had in place. As of January 2017, 15 states had CHIP waiting periods, down from 37 states in 2013 (Brooks et al. 2017, Heberlein et al. 2013). To reduce complexity and to promote continuity of coverage for children in the remaining states with CHIP waiting periods, MACPAC recommended that the Congress should eliminate CHIP waiting periods altogether. (See the chapter from our March 2014 report.)

Premiums and Cost Sharing

Separate CHIP programs are also permitted to charge premiums and cost sharing, which is generally prohibited for children in Medicaid. As of January 2017, 26 states charged premiums or enrollment fees for children enrolled in CHIP, and 4 states charged a premium for children in Medicaid. In Medicaid, premiums are not allowed for children with family incomes below 150 percent FPL, but in CHIP, 7 states charge premiums or enrollment fees for children with family incomes below 150 percent FPL. States often charge higher premiums as family income rises. For example, as of January 2017, in states with separate CHIP programs requiring premiums, the median monthly premium for families with incomes at 151 percent is $15 and for families at 251 percent FPL, the median monthly premium is $35 (Brooks et al. 2017).

MACPAC recommended that Congress change the law so that children with family incomes below 150 percent FPL not be subject to CHIP premiums. This would align premium policies in separate CHIP programs with premium policies in Medicaid while also reducing the number of uninsured children in the seven states with CHIP premiums below 150 percent FPL. This recommendation did not call for any change to CHIP’s premium policies for families above 150 percent FPL, the income range for the vast majority of CHIP enrollees subject to premiums and for whom the relatively small CHIP premiums are not found to increase the number of uninsured children.

As of January 2017, 24 separate CHIP and 3 Medicaid-expansion CHIP programs require cost sharing for at least some types of services. For example, 19 states impose cost sharing for non-preventive physician visits, and 12 states have cost sharing for non-emergency use of the emergency department (Brooks et al. 2017). Other common service categories associated with enrollee cost sharing include inpatient hospital visits, emergency room visits, and prescription drugs (Cardwell et al. 2014). CHIP programs are more likely to charge copayments for services than other forms of cost sharing like deductibles or coinsurance (Bly et al. 2014, McManus and Fox 2014).

Combined expenses for separate CHIP premiums and cost-sharing expenses may not exceed 5 percent of a family’s income. According to a review of the 42 states with separate CHIP programs in 2013 (including combination programs), 22 states utilized the 5 percent limitation, while 20 states had a lower cap (Cardwell et al. 2014).

Covered Benefits

Separate CHIP programs can model their benefits based on specific private insurance plans, a package equivalent to one of those benchmarks, or Secretary-approved coverage. Federal rules require that all separate CHIP programs cover dental services, well-baby and well-child care (including age-appropriate immunizations), and emergency services. In 2013, all separate CHIP programs covered inpatient and outpatient services, physician services, clinic services, laboratory and X-ray services, and prescription drug coverage, although some states may apply benefit limits to this coverage (Cardwell et al. 2014).

The most flexible benefit design option for separate CHIP programs is Secretary-approved coverage, which is the most common approach. As a result of this flexibility, covered benefits in CHIP differ substantially from state to state. On the other hand, 14 programs use a benefit package similar to Medicaid for Secretary-approved separate CHIP programs in 2013 (Cardwell et al. 2014).

Children in Medicaid-expansion CHIP programs are protected by federal Medicaid benefit requirements and cost-sharing limitations. They are entitled to all of Medicaid’s mandatory services, including Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services, generally without any enrollee cost sharing.