Here’s a Good Idea – Some States Are Removing Barriers to Coverage by Dropping CHIP Premiums

In January 2020, 30 states charged premiums or enrollment fees to children in Medicaid or CHIP, which were suspended in 19 states during the public health emergency. Since then, six states have eliminated premiums or do not plan to resume them – California, Colorado, Illinois, Maine, New Jersey, and North Carolina. New York also eliminated premiums for the lowest income tier of its CHIP program (160% to 222% FPL). Other states are delaying resumption of premiums until the end of the unwinding (which varies by state) or until the end of the public health emergency in May. The remaining states have established a specific date for resuming premiums or have not made a final determination.

Premiums are not allowed in Medicaid or CHIP for anyone with household income below 150% FPL. In January 2020, only four states charged premiums to children in Medicaid – these states (California, Michigan, Maryland, and Vermont) cover all CHIP children in Medicaid. Without getting into the regulations, separate CHIP programs have more flexibility in imposing premiums and cost-sharing for children, which combined cannot exceed 5 percent of family income. Going forward, only three states will continue to charge premiums for children in Medicaid while 21 states will continue or resume premiums or enrollment fees in their separate CHIP programs. So, how do premiums enter into the unwinding equation?

States that suspended Medicaid and/or CHIP premiums through a disaster SPA are required to resume charging premiums after the end of the public health emergency. However, it’s not as simple as restarting premium collection on a specific date for all enrollees. Plus, states have options to delay the resumption of premiums or to eliminate them entirely going forward. If states choose to resume premiums, they must comply with federal guidance best outlined in this FAQ, Questions 24 – 31.

States must provide advance notice to enrollees before resuming premiums. In Medicaid, states must provide each enrollee with a minimum of 10-day advance notice, including the premium amount, a clear statement of why premiums are being assessed, the basis for the premium calculation, and the right to a fair hearing prior to resuming charges. For CHIP, states must provide timely and adequate written notice and rights to the CHIP review process prior to resuming premiums.

States can only resume premiums after the PHE ends if the state has completed a renewal in the last 12 months. If the enrollee has not had a redetermination of household income in the past 12 months, the state must complete a renewal before reimposing premiums. If the state has completed a renewal in the past 12 months, they may resume premiums with restrictions on increasing premium amounts before the end of the quarter in which the PHE ends (June 30, 2023).

States may delay resuming premiums by extending their disaster SPA or by submitting a regular SPA. MACPAC research has shown that 1 in 5 children experience a gap in transitioning from Medicaid to CHIP, and premiums are a known barrier to both enrollment and seamless transitions. By delaying the resumption of premiums, states can eliminate gaps in coverage and mitigate coverage losses for children during the unwinding.

Eleven states charge premiums or enrollment fees for children in families with incomes below at 151% FPL. Premiums are a financial hardship, particularly when families get a small raise but then must pay premiums for multiple children. While about half of the states charge a per-family premium (regardless of the number of children in the family), some states charge per child premiums up to a family maximum with two states charging per child premiums without any family maximum beyond the 5 percent of family income cap.

In CHIP, states can lock children out of coverage for up to 90 days if parents are unable to pay premiums. States must provide a 60-day grace period for payment of premiums in Medicaid, but only a 30-day grace period in CHIP. Moreover, unlike Medicaid, CHIP programs can “lock kids out of coverage” for up to 90 days following disenrollment for nonpayment of premium. Thirteen states apply lockouts in CHIP, of which 11 states lock children out of coverage for a maximum of 90 days.

State administrative costs to collect premiums and manage lockouts diminish or offset the net revenue the state receives from charging premiums. Although internet payment methods have become most cost-effective over time, the administrative costs of collecting premiums along with state oversight of vendors, who may be contracted to administer premiums and lockouts, offset revenue received by the state and may result in negative program experiences and discontinuity of coverage.

Here are some ideas for states to smooth transition from Medicaid to CHIP in states that charge premiums. If eliminating premiums isn’t an option, waive premiums for the first two months to give families a chance to work the cost into their budgets. (Rhode Island is paying premiums for the first two months for Medicaid enrollees transitioning to Marketplace coverage.) States could also extend the grace period for premium payment. Five states provide only 30 days for payment and could take a page from the playbook of the four states that keep children enrolled until their annual renewal. Have a rescue fund that covers premiums when families encounter a temporary income decrease or an unexpected major expense.

There is NO requirement for states to charge premiums in Medicaid or CHIP and eliminating premiums will help ensure that low-income children stay connected to coverage. Charging premiums in CHIP is a zero-sum game. Premiums add barriers to health insurance for low-income children; administering premiums is administratively costly; and disruptions in continuity of coverage associated with premiums impede a state’s ability to adequately measure and improve the quality of care. States may discontinue premiums at any time by submitting a state plan amendment (SPA) to CMS.

For more thoughts on how premiums and premium collection processes impact Medicaid and CHIP, check out this slightly dated brief that still has some relevant information.

[Editor’s Note: This is the 30th blog in the Unwinding Wednesday series. For more information, visit our PHE Unwinding resource page where you’ll find other blogs in this series, reports, webinars and the 50-state tracker.]

Tricia Brooks is a Research Professor at the Center for Children and Families (CCF), part of the McCourt School of Public Policy at Georgetown University.