By Joe Touschner

As Tricia Brooks wrote last week, new rules set limits on how states handle lock out periods for children enrolled in CHIP.  Several states impose a lock out period—a length of time when a child may not receive CHIP coverage—when families fail to pay CHIP premiums.  The new rules limit lock out periods to 90 days and require states to review families’ circumstances when imposing a lock out.  Tricia also weighed in on the new rules around CHIP waiting periods that can delay a child from being enrolled in CHIP in the first place.

In addition to the final HHS rules on CHIP, the IRS published for comment a proposed policy on how premium tax credit eligibility would be impacted by CHIP waiting periods and lock outs.  As expected, premium tax credits would be available to help families afford coverage while a CHIP waiting period is in place.  While switching between coverage sources due to a waiting period is less than ideal, at least families have a pathway to reduced-cost coverage.

For lock outs however, the IRS has proposed that a child would not be eligible for a premium tax credit for the months he or she is locked out.  This means that families, already struggling to pay CHIP premiums, will not receive any federal affordability assistance for their children’s coverage during these periods.  Putting children’s health and families’ financial security at further risk does not seem like a productive response to non-payment of premiums.  If lock out periods are to remain in place, having a path to coverage through qualified health plans and premium tax credits can help families maintain protection for health needs that can come about at any time—even during a lock out period.

The IRS will be accepting comments on its proposed policy through August 26.  CCF plans to submit comments requesting that the IRS treat lock out periods the same way it does waiting periods—windows when children do not have access to CHIP coverage and are therefore eligible for the tax credits.  Comments can be submitted to Notice.Comments@irscounsel.treas.gov with reference to Notice 2013-41.