State of Florida Files Legal Challenge to Weaken Continuous Coverage Protection for Children in CHIP Nationwide

On February 1, the State of Florida filed a lawsuit in federal court in Tampa against the Centers for Medicare & Medicaid Services in an effort to prevent the agency from enforcing 12-month continuous eligibility in the state’s CHIP program. As loyal readers of Say Ahhh! know, the Consolidated Appropriations Act of 2023 required that all state Medicaid and CHIP programs extend 12 months of continuous coverage to eligible children, effective January 1, 2024. The state operates a separate CHIP program that currently imposes monthly premiums and terminates coverage for children whose families do not pay their premiums.  It is asking the federal court to allow it —and, by implication, all other states with similar policies — to continue to terminate CHIP children for nonpayment of premiums despite the CAA’s 12-month continuous enrollment protection.

CMS has implemented the new CAA requirement through Frequently Asked Questions (FAQs).  As my colleague Edwin Park explained here, this guidance laid out the new requirements – states can charge an enrollment fee or first month’s premium to establish eligibility and require payment, but once a child is determined eligible they are guaranteed a 12-month period of coverage. States can still charge monthly premiums therefore, and they will likely still collect some or most of those premiums, but if a family’s car breaks down and they miss a payment, their children cannot lose their health insurance for the rest of the 12-month CE period.

The state has filed a motion for a preliminary injunction asking the court to “preliminarily enjoin CMS from enforcing the FAQs and prohibiting Florida from disenrolling CHIP participants for nonpayment of premiums.”  The briefing on that motion closes on March 5, and a ruling could come anytime thereafter.  The state’s basic argument is that the FAQs are invalid under the Administrative Procedures Act because it was not issued using notice-and-comment rulemaking procedures, so CMS cannot enforce compliance with them. The Department of Justice, which represents CMS in federal litigation, argues that the state’s request is premature because CMS has taken no action to enforce compliance with the FAQs, and that if CMS does take such action, which would involve withholding some or all federal CHIP matching funds, the state has extensive due process protections under the CHIP statute. The case has been assigned to Judge William Jung.

The litigation was not filed in a vacuum.

As Medicaid unwinding continues with an estimated four million fewer children enrolled, the importance of stable CHIP coverage has only grown. Florida is on the cusp of disenrolling half a million children in its Medicaid program (the second highest total in the nation after Texas). Children in Healthy Kids (Florida’s CHIP program) and in numerous other states nationwide have a new protection that Congress put in place for them; but Governor DeSantis is seeking to take that away while exposing more children and families across the country to harmful gaps in coverage and medical debt.

Isn’t Florida trying to expand their Healthy Kids program to cover more kids? Yes, the legislature passed an expansion to 300% of the federal poverty thresholds for the state’s CHIP program in its 2023 session. This has not yet been implemented for reasons that are largely irrelevant to the litigation.  Most states seeking to expand CHIP income eligibility have to get a Section 1115 CHIP demonstration waiver approved (which takes some time1) and Florida has moved slowly – which has had the practical effect of delaying the planned implementation date of January 1, 2024. Arizona, where the legislature also passed a CHIP expansion in 2023, has already received approval from the federal government for its Section 1115 waiver and will be implementing its CHIP expansion on March 1st. Florida has issued a waiver proposal and started the process (the state public comment period closed on Feb. 21st and the state just submitted its proposal to the federal government – having entirely ignored all public comments it received). The federal government now has 15 days to decide if the application can be deemed complete, and once that is so, will take public comment for 30 days before negotiating the final terms of the agreement.

CMS wants to move these waivers quickly as evidenced by its speedy action on Arizona, but Florida’s waiver is more complex as the state is seeking permission to maintain and expand its existing separate state CHIP premium schedule and be able to continue to terminate coverage for children whose families miss a premium payment – which is exactly the issue that is being contested in the litigation as discussed above. Notably, Florida wants to be exempted from continuous coverage rules and be allowed to continue to terminate children for non-payment of premiums in its existing Healthy Kids program as well as for the expansion group.

Meanwhile, federal continuous coverage protections kicked in on January 1, 2024. As regular readers of SayAhhh! are well aware, and has become glaringly apparent during the Medicaid unwinding, children and adults (but especially children) often face gaps in coverage due to red tape or procedural losses of public coverage despite remaining eligible. To state the obvious, it is not good news for children to be uninsured for any length of time exposing their families to large medical bills and leading to gaps in necessary primary and preventive care such as vaccines and wellness checks. Just yesterday I heard from a pediatrician in Florida about her patient, a 12-year-old girl with severe asthma, who had been terminated from Medicaid and has already been to the emergency room three times because she has not been able to access her medications and the family incurred a $500 bill for just the first visit.

These red tape losses are not new.  Congress recognized and responded to this problem by enacting the federal continuous eligibility requirements contained in the CAA to protect children from coverage gaps.

Twelve month continuous eligibility in Medicaid and CHIP has been a state option for many years (since the passage of CHIPRA in 2009), and about half of the states (26 in Medicaid and 24 in CHIP) had adopted the policy as of January 2023. The CAA replaced this option with a requirement that all states adopt 12 months continuous eligibility for children in both Medicaid and CHIP with only limited statutory exceptions: in Medicaid, they are attaining age 19 and no longer being a resident of the state (and in the case of separate state CHIP, also being determined eligible for regular Medicaid.) That’s it – those are the only exceptions. Non-payment of premiums is not an exception.

How many states charge premiums to children in CHIP?

In general, states cannot charge premiums to children in Medicaid but have been permitted to charge premiums to children who are enrolled in separate CHIP programs. But the Consolidated Appropriations Act modified that. While states can continue to charge premiums, the establishment of the federal guarantee of 12 months of continuous eligibility for children in Medicaid and CHIP prohibits disenrollment for failure to pay premiums during the 12-month period.

The KFF/CCF eligibility and enrollment survey has tracked this question but it has not been updated since 2020 because many states suspended premiums during the COVID-19 public health emergency. There will be an updated survey later this year but, as of this writing, our best assessment is that 22 states charge premiums (20 on a monthly basis, 2 on a quarterly basis). (Please see the full list here.)

It is worth noting that only nine states charge premiums at income ranges between 138% to 150% of the poverty thresholds, Florida being one of them. This has the effect of creating a situation where children are paying premiums for health coverage but their parents are not if enrolled in subsidized Marketplace coverage.

Where do things go from here?

The main question for now is whether Judge Jung will grant a preliminary injunction and, if so, what it will say. Children in Florida’s Healthy Kids program could lose the protection of 12 months of coverage that Congress put in place for them – as could children in separate CHIP programs nationwide if a future ruling invalidates the FAQ altogether.

The author would like to thank Allie Gardner, Edwin Park and Andy Schneider for their assistance with this blog.

1 A side note – this is something Congress needs to fix! States should be able to do this through a simple CHIP state plan amendment but a technical correction is needed as we called for in this report in 2021.

Joan Alker is the Executive Director of the Center for Children and Families and a Research Professor at the Georgetown McCourt School of Public Policy.