During the legislative process, most of the talk was about Medicaid cuts, but we highlighted that the Children’s Health Insurance Program (CHIP) would not be spared if the budget reconciliation bill (HR 1) placed a moratorium on all provisions of the Eligibility and Enrollment Rule (E&E rule) finalized in April 2024. Thankfully, due to likely dynamics related to the Senate “Byrd Rule,” the final language of the budget reconciliation law passed by Congress blocking the E&E rule through September 30, 2034 did not include provisions of the E&E rule already in effect. Consequently, as of June 3, 2024, new rules prohibiting waiting periods, premium lockouts, and dollar limits on CHIP benefits went into effect preventing any new states from picking up such policies and requiring states with these policies in place to come into compliance by June 3, 2025.1 Here is our current take on where CHIP stands under the budget reconciliation law (see our explainer of HR1).
First, a little refresher on CHIP. Medicaid and CHIP together cover over 37 million children; 7.3 million of these children have coverage funded through CHIP.2 MACPAC estimated that 58% of CHIP-funded children in 2020 were enrolled in Medicaid with this share rising during the pandemic when Medicaid continuous enrollment was in place. Why does this matter? States have flexibility in how they design their CHIP programs, including covering all CHIP-eligible children in Medicaid (known as M-CHIP) as 21 states do. And all but 2 (CT and WA) of the remaining 30 states are “combination states” with some children in M-CHIP and some in a separate CHIP program. Only about 3 million children are covered in separate CHIP programs, less than 10% of the total Medicaid and CHIP child enrollment. Notably, CHIP-funded children enrolled in Medicaid are subject to Medicaid rules with the only exception that the child must be uninsured to be eligible.
Separate CHIP programs have more flexibility for states, including (in the past) imposing waiting periods prior to enrollment, lockouts after a premium payment was missed, and dollar limits on benefits. Many of these practices resulted from concerns about crowding out private insurance when CHIP was created in 1997 – many years before the Affordable Care Act (ACA) passed and changed the landscape of public and private insurance which rendered crowd out concerns largely moot. There is no evidence that separate CHIP policies are affecting employer decisions about the terms of dependent coverage in a post ACA world given that much larger issues are at play.
The E&E rule sought to more closely align Medicaid and CHIP coverage for children by phasing out outdated practices that are not allowed in Medicaid, and that result in gaps in coverage and unmet health needs for children in separate CHIP. Operating under different rules can be confusing to families, particularly considering that some families have a younger child in Medicaid and an older child in CHIP. Different rules can also trip up eligibility and call center workers and pediatricians and other providers who are trying to help families enroll and stay enrolled.
Now that the fate of the decade-long moratorium on the E&E rule is known and CHIP protections currently in effect remain intact, it’s incumbent on the federal Centers for Medicaid & Medicare Services (CMS) to ensure that all states are following all the rules. Waiting periods, lockouts, and dollar limits on benefits were no longer allowed as of June 3, 2025. CMS knows which states need to make changes and should ensure that these states are adhering to the rules or children will face gaps in coverage. Most states are already in compliance.
No More Waiting Periods Prior to Enrollment
In the early CHIP years, as discussed above, states were required to make sure that enrollment in CHIP did not substitute for private group health insurance. Although states were encouraged to adopt other mechanisms, separate CHIP programs often used “waiting periods” as their primary method of guarding against the potential for crowd-out. Prior to implementation of the ACA, 38 states had waiting periods between one and twelve months and some states had exceptions. The ACA limited the waiting period in CHIP to 90 days and required that states waive it for specific good cause exceptions, track children subject to it, and enroll the child in CHIP after the waiting period was met. This prompted the majority of states to drop or limit their waiting periods, and more states dropped them during the COVID-19 public health emergency. As of March 2025, four states (AR, FL, TX, and UT) were still imposing CHIP waiting periods of up to 90 days. Arkansas and Utah reported plans to eliminate the waiting period in June and July 2025, respectively. If Florida and Texas were waiting for the outcome of the budget reconciliation law, there should be no further delays now in eliminating their CHIP waiting periods that went into effect six weeks ago.
No More Lockouts for Non-Payment in CHIP
Lockouts following disenrollment for nonpayment of premium are fundamentally waiting periods that punish children when a parent misses a premium payment. CHIP premiums are not always affordable and low-income families experience frequent income fluctuations and unexpected expenses. The ACA prohibited lockouts of longer than 90 days. Thirteen states had lockouts in place in 2015 but by the end of the pandemic, only 8 states retained lock-out periods. This number was further reduced to only 2 states (KS, LA)3 by January 2025 as states took action in advance of the June 3, 2025 compliance date.
Of course, the fact that states are now required to keep children enrolled for 12 months, without allowing disenrollment for nonpayment, basically rendered the lockout policy extraneous in many cases. The Consolidated Appropriations Act of 2023 enacted 12-month continuous eligibility for children in Medicaid and CHIP. States must keep children continuously enrolled until the end of their 12-month period, unless they age out, move to another state, or request voluntary disenrollment; disenrollment for nonpayment was not specified as an exception. States may require upfront payment of the first month’s premium but once a child is enrolled in CHIP, they may not be disenrolled for non-payment until the end of their 12-month continuous eligibility period. And then states may not lock them out of coverage. While states aren’t required to renew coverage for children with unpaid premiums, they can’t require repayment or prevent the child from immediately reapplying. CMS guidance on 12-month continuous eligibility also clarified that unpaid premiums owed by one child cannot delay a sibling’s enrollment and that states may not require repayment of premiums for the child to re-enroll.
Florida is the only state in the country that has challenged the 12 months continuous coverage protection for children in separate CHIP. In 2023, the state legislature unanimously passed an expansion of Florida’s Healthy Kids (CHIP) program to 300 percent of the federal poverty level; a Section 1115 waiver is required in most cases to expand CHIP. To date the DeSantis administration has not implemented the expansion because they want to be able to disenroll children when their parents miss a premium payment. Instead the state sued the Biden Administration. Florida’s Section 1115 to expand CHIP without 12 months of continuous coverage for kids currently in CHIP and those who would become eligible remains pending with federal CMS – now awaiting the Trump Administration’s verdict. It is likely that the state continues to disenroll children currently covered in CHIP between 138 to 200 percent of the poverty line in violation of the 12 months continuous coverage protection — but that is a topic for a future blog.
No More Annual or Lifetime Dollar Limits on Benefits in CHIP
Medicaid has never applied dollar annual or lifetime limits on benefits and the ACA stopped private insurance companies from limiting yearly or lifetime coverage for essential health benefits. Children enrolled in CHIP should get that same protection, and the E&E rule made that happen. As of September 2022,13 states had 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 six states have 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 we know that benefit caps can translate into gaps in coverage that lead to unmet needs, particularly for children with special health care needs. These states should move swiftly to eliminate these limits if they have not already done so to adhere with the June 3, 2025 compliance date.
States must ensure smooth transitions between Medicaid and CHIP. Upon final publication of the E&E rule, states were required to boost efforts to coordinate seamless transitions between Medicaid and CHIP as expected under the ACA but the requirement? was never fully enforced. All states report processes that automatically transition between programs but, anecdotally, we hear about delays getting to CHIP. Most notably, Florida Healthy Kids officials told a panel that the agency needs at least 45 days to enroll a child moving from Medicaid to CHIP. In 2022, MACPAC estimated that about 20% of children moving between Medicaid and CHIP experience gaps in health coverage. The E&E rule addressed this problem by requiring CHIP and Medicaid agencies to accept determinations from each other and to issue a joint eligibility notice to reduce confusion for families with children split between coverage sources. Although the new rules governing Medicaid and CHIP transitions were effective on June 3, 2024, CMS recognized that states without a shared eligibility system would need time to make changes to meet these requirements.
This is an area that needs direct oversight as CMS doesn’t collect data that would assess gaps for children moving between CHIP and Medicaid. States with CHIP managed by separate agencies, in particular, must have new ways to avoid gaps. They do have options to ensure smooth transitions, including covering all CHIP children in Medicaid, eliminating or waiving the first month’s premium, and/or enrolling children in fee-for-service until families have time to select a managed care plan.
Bottom line — now that the current fate of the E&E rule is known, it’s incumbent on CMS to ensure that all states are following all the rules. Waiting periods, lockouts, and dollar limits on benefits were no longer allowed in separate CHIP as of June 3, 2025. CMS knows which states need to make changes and should ensure that these states are adhering to the rules.
On a separate and surprising note, the budget reconciliation law gives states the option to adopt 60-day retroactive coverage for CHIP enrollees. Section 71112 of the budget reconciliation law amends 2102(b)(1)(B) of the Social Security Act to allow states to implement 60-day retroactive coverage in separate CHIP programs. While the budget reconciliation law reduces the longstanding 90-day retroactive eligibility period for children in Medicaid to 60 days, retroactive coverage had previously not been an option for separate CHIP programs, and states can now align the rules for children in both Medicaid and CHIP. The policy is particularly important for uninsured children who experience a sudden illness or suffer a catastrophic event and become enrolled in public coverage. Again, it’s important for CMS to hold states accountable by not allowing the use of retroactive coverage to avoid making the system changes needed to seamlessly transition children between coverage sources without a gap.
Despite these gains for children enrolled in CHIP (largely under the E&E rule finalized by the previous administration), the Trump Administration last week worsened the outlook for babies and toddlers to have uninterrupted access to care by announcing their intention to eliminate Section 1115 waivers in Medicaid and CHIP focused on continuous coverage for young children.
CMS has another opportunity to decide whether to promote children’s health by enforcing the new CHIP protections – or not. We will be watching to see what they do.
- The budget reconciliation law (HR 1) Section 71101 identifies the specific rule changes in the E&E rule that are subject to the moratorium. Provisions that were already in effect were excluded, including CHIP prohibitions on waiting periods, lockouts, and dollar limits on benefits. ↩︎
- Seven states also use CHIP to cover pregnancy for adults not eligible for Medicaid which is reported as CHIP enrollment but the numbers are small. ↩︎
- The data in this blog is largely taken from the KFF-CCF annual eligibility and enrollment survey. Florida is the only state that does not respond to this survey. It appears on p. 97 of its CHIP State Plan that Florida has a 30 day premium lockout as well. ↩︎