States Cannot Terminate CHIP Coverage for Non-Payment of Premiums Under 12-Months Continuous Eligibility Requirement

The Consolidated Appropriations Act, 2023 established a new requirement that all states provide 12-months continuous eligibility in Medicaid and the Children’s Health Insurance Program (CHIP) for children starting on January 1, 2024.  Currently, only about half of the states have taken up the option to provide 12-months continuous eligibility for children in both programs.  In September 2023, the Centers for Medicare and Medicaid Services (CMS) issued guidance related to state implementation of the 12-months continuous eligibility requirement but indicated that it was still considering how the requirement would interact with non-payment of premiums in separate state CHIP programs, as existing CHIP regulations provide an exception to 12-months continuous eligibility (for those states that have adopted it in CHIP) allowing disenrollment in the case of non-payment of premiums or enrollment fees.

On October 27, 2023, CMS clarified in a Frequently Asked Questions (FAQ) that because the Consolidated Appropriations Act included only three statutory exceptions allowing disenrollment during a 12-month continuous eligibility period — the child reaches age 19, the child is no longer a resident in the state, and in the case of CHIP, the child becomes eligible for Medicaid — states will not be permitted to disenroll children for failure to pay CHIP premiums or enrollment fees during the continuous eligibility period once the 12-months continuous eligibility requirement takes effect.

This is consistent with the statutory language.  The Consolidated Appropriations Act strikes the prior language at section 1902(e)(12) of the Social Security Act providing the existing option for 12-months continuous eligibility (and under whose authority the existing Medicaid and CHIP regulations were promulgated) and replaces it with new 1902(e)(12) language requiring 12-months continuous eligibility for children and allowing only two exceptions for age and residency.  It then adds CHIP language to section 2107(e)(1)(K) of the Social Security Act incorporating the exceptions in 1902(e)(12) and then adding only one additional exception for eligibility for full Medicaid benefits.  As the FAQ states: “There is not an exception to CE for non-payment of premiums.  Thus, the existing regulatory option… for states operating a separate CHIP to consider non-payment of premiums as an exception to CE will end on December 31, 2023….”  CMS notes that its earlier guidance continues to allow disenrollment in the case of death, voluntary disenrollment and erroneous finding of eligibility due to agency error or fraud.  While these additional exceptions are not explicitly included in the statutory language, unlike disenrollment for non-payment of premiums, such exceptions are not inconsistent with the Consolidated Appropriations Act, do not undermine the 12-months continuous eligibility requirement and are important to protecting program integrity.

CMS, however, indicates that states can continue to charge upfront enrollment fees and/or require payment of the first month’s premium before enrollment in a separate state CHIP program.  (As of January 2020, 30 states charged CHIP premiums or enrollment fees but since the start of the pandemic, six states have permanently eliminated or plan to permanently eliminate such premiums.)  States, however, should consider eliminating any such enrollment fees and requirements to pay the first month’s premiums as well or at least extending premium grace periods and eliminating lockout periods for re-enrollment.  (A proposed federal eligibility and enrollment rule, if finalized, would prohibit such lockout periods as our public comments to the rule explain.)

Otherwise, as of January 1, 2024, once a child is enrolled in a separate state CHIP program, the child will benefit from 12-months continuous eligibility whether or not there is non-payment of some CHIP premiums.  This will enhance the benefits of 12-months continuous eligibility and thus further reduce churn, maintain continuity of care and increase enrollment in separate CHIP programs among eligible children.  That’s especially critical with mounting child coverage losses due to unwinding of the Medicaid continuous coverage protection and stagnant CHIP enrollment even though many children determined to be no longer eligible for Medicaid should now be eligible for CHIP.

Edwin Park is a Research Professor at the Georgetown University McCourt School of Public Policy’s Center for Children and Families.