The Children’s Health Insurance Program (CHIP) has a long history of bipartisan support. But CHIP is not spared by the One Big Beautiful Bill Act (HB 1). It’s quite possible bipartisan CHIP supporters were not aware of the impact the bill rammed through the House in the wee hours of night would have on children enrolled in CHIP. As I noted in this blog, the bill places a 10-year moratorium on the Eligibility and Enrollment Rule (E&E rule) and freezes new regulations intended to strengthen and modernize CHIP coverage. But let’s start with the rushed drafting of the budget bill in the House that puts health coverage for lawfully residing immigrant children in CHIP, known as the Immigrant Children’s Health Insurance Act (ICHIA), at risk.
Budget writers made last-minute changes in the final House version of the reconciliation bill to exempt lawfully residing children and pregnant women in Medicaid from the harsh penalties proposed for expansion states that cover all children regardless of immigration status. But they neglected to exempt lawfully residing children in separate CHIP.
Section 214 of the CHIP Reauthorization Act of 2009 gave states the option to cover lawfully residing children and/or pregnant people in Medicaid and CHIP without a five-year wait. Since then, 38 states have adopted the option for children in Medicaid (and CHIP if they have a separate CHIP program), 5 of which are non-expansion states. Nearly a third of states (32) also cover lawfully residing pregnant individuals in Medicaid; 6 of which are non-expansion states. The irony of the budget bill – it only penalizes expansion states for adopting ICHIA. (Click here for a list of states adopting the ICHIA option.) Isn’t it obvious that this is yet another attack on Medicaid expansion?
Although it appears the House made an awkward attempt to draft language to exempt ICHIA in Medicaid from the penalty, which doubles the state share of the cost from 10% to 20% for expansion coverage, it did not include CHIP. CHIP-funded coverage in the 21 states, including DC, that enroll all children in Medicaid (M-CHIP) follow Medicaid rules with only one exception that the child be uninsured prior to enrolling. The bill language does not reference Title XXI, which it must do to apply to separate CHIP programs. Of the 30 states with separate CHIP programs, 21 have adopted ICHIA for kids, 4 of which are non-expansion states. Unless this provision is fixed in the Senate, 17 states (AR, CO, CT, DE, IA, LA, MA, MT, NV, NJ, NY, OR, PA, UT, VA, WA, WV) will be faced with the penalty or forced to drop coverage for lawfully residing children. It also affects 6 of the 7 (CO, KY, NJ, RI, VA, WV) states using separate CHIP to expand pregnancy coverage to lawfully residing pregnant people (bringing the total number of states affected by the provision to 19). Of course, that’s not the only provision intended to limit coverage for immigrants, even when a state is only using its own funds. For a deeper dive on other provisions impacting immigrants, check out this blog from my colleagues, Leo Cuello and Kelly Whitener.
Without the E&E rule, children in CHIP may continue to be subject to periods of uninsurance due to enrollment waiting periods, re-enrollment lockouts if disenrolled for missing a premium payment, and arbitrary limits on lifetime or annual benefits. Each of these provisions result in gaps in coverage and unmet health needs. Children may also experience enrollment delays and leave children uninsured when moving between Medicaid and CHIP due to increases in family income or other factors.
Waiting Periods
When CHIP was created in 1997, many years before the passage of the Affordable Care Act which completely changed the landscape, states were required to make sure that the expanded coverage did not substitute for private group health insurance. Although HHS encouraged states to adopt other mechanisms, separate CHIP programs often used “waiting periods” as their primary method of guarding against the potential for substitution, also known as “crowd-out.” States that chose instead to expand Medicaid for children using CHIP funding were also allowed to impose waiting periods through a Section 1115 waiver. As of January 2013, 38 states had waiting periods between one and twelve months, although some states exempted certain low-income groups and waived the waiting period if children met specific good cause exceptions, such as loss of job-related insurance. Crowd-out policies make no sense in a post-ACA world intended to provide coverage options for low-income children and families.
The Affordable Care Act (ACA) limited the waiting period in CHIP to 90 days. States were also required to waive the waiting period for specific good cause exceptions, track children subject to a waiting period, and enroll the child in CHIP after the waiting period was met. As a result, between January 2013 and January 2015, 20 states dropped their waiting periods while 7 states reduced the waiting period to 90 days or less. At the beginning of the pandemic, 13 states still applied waiting periods although some of them sought CHIP disaster SPAs to waive the waiting period during the COVID public health emergency. By January 2025, only four states continue to use waiting periods. But with the moratorium on the rule, will states reinstate waiting periods, particularly if state budgets get tight?
Lockouts for Missed Premium Payments
Before the ACA was enacted, a dozen states locked children out of coverage for as much as six months as a penalty if their parents missed a premium payment, a policy not allowed in Medicaid. Furthermore, families could also be required to complete a new application to re-enroll their child. The ACA prohibited lockouts longer than 90 days, prompting 5 states to reduce their lockout period. Although 13 states had lockouts in place in 2015, the pandemic once again had an impact. Separate CHIP programs were not subject to the disenrollment freeze but some states waived their CHIP policies. By the end of the pandemic, 8 states maintained their lock-out periods. But because states were already reacting to the E&E rule, this number was further reduced to only 2 states by January 2025. But will states be inclined to reintroduce these punitive policies that result in periods of uninsurance for children?
Annual or Lifetime Dollar Limits
Unlike Medicaid, CHIP has been allowed to place annual or lifetime dollar limits on CHIP benefits if the overall actuarial value of coverage meets CHIP standards. When the E&E rule was finalized, 13 states placed either an annual or lifetime dollar limit on at least one CHIP benefit. Twelve of the 13 states place an annual dollar limit on at least one CHIP benefit (AL, AR, CO, IA, MI, MS, MT, OK, PA, TN, TX, and UT), and 5 of the 13 states, plus Connecticut place a lifetime dollar limit on at least one benefit (CO, CT, MS, PA, TN, and TX). It is not clear if states eliminated these benefit caps in anticipation of the rule taking effect. But clearly, children could experience gaps in coverage that lead to unmet needs if states continue to set a maximum benefit. The ACA stopped insurance companies from limiting yearly or lifetime coverage for essential health benefits and children enrolled in CHIP should get that same protection.
Transitions between Medicaid and CHIP
Anecdotally, we hear about delays in CHIP enrollment in states where CHIP is administered separately from Medicaid. In 2022, MACPAC estimated that about 20% of children moving between Medicaid and CHIP experience gaps in health coverage. States must send an account transfer to the CHIP agency, which in turn must collect the first month’s premium, if any is charged. A Florida Healthy Kids official, who served on a panel with me during a public meeting, noted that the state’s CHIP agency needs a minimum of 45 days to enroll a child in CHIP. In most states CHIP coverage is prospective, that is, it doesn’t start until the first of the month following the eligibility determination – which means that gap in health coverage could extend to 2 or more months if families must first select a managed care plan or pay a premium. It’s a known fact that gaps in health coverage put children at risk.
Why is Congress perpetuating outdated policies for children in CHIP, which are not allowed for anyone covered by Medicaid or Marketplace plans? Compared to Medicaid, CHIP is a small program covering just over 7 million compared to 71 million in Medicaid? Without aligned policies between CHIP and Medicaid, children will continue to slip through the cracks rather than have continuity in coverage and access to care.