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Children’s Health Insurance Program (CHIP) – Coverage & How It Works

In 1996, 10.6 million American children  one out of every seven kids in the country  had no health insurance, according to a report from the Census Bureau. For kids from low-income families, the numbers were even worse; nearly one out of four poor children were uninsured.

By 2015, according to a report from the Georgetown University Health Policy Institute, that number had fallen to 3.5 million. More than 95% of all U.S. kids were now insured, more than at any point in the country’s history.

There were two big factors behind this change. One was the 2010 Affordable Care Act (ACA), commonly known as Obamacare. The other was a government program that’s not as well-known but is just as crucial for our country’s children: the Children’s Health Insurance Program, or CHIP. This program provides low-cost health coverage to kids whose families can’t easily afford health care but aren’t poor enough to qualify for Medicaid.

According to the Medicaid website, CHIP currently provides coverage for 9.4 million kids nationwide. A 2017 fact sheet from the Kaiser Family Foundation shows that Medicaid and CHIP together provide coverage for 39% of all children in the country.

How CHIP Works

In 1993, after President Bill Clinton’s attempt to provide universal health coverage for Americans failed, the administration and its allies in Congress set its sights on a narrower goal: expanding coverage for children. After several years of wrangling, Congress finally passed a bill in 1997 that established the State Children’s Health Insurance Program, or SCHIP (later shortened to CHIP). It set up this new program as a partnership between federal and state governments. Each state runs its own program but receives part of its funding from the federal government.

Each year, the Centers for Medicare & Medicaid Services (CMS) takes all the money set aside for CHIP that year and determines what share of it goes to each state. To do this, it uses a formula based on the one used for allotting Medicaid funds. However, before the states can get their share of the federal funds, they must provide matching funds out of their own budgets. According to a 2017 report from the Medicaid and CHIP Payment and Access Commission (MACPAC), the federal government pays for about 71% of the total cost of the program, and the states cover the other 29%.

Once states get their CHIP funds, they decide how to distribute them to children in need. Each state has its own CHIP program, which works closely with the state’s Medicaid program. Some states simply call the program CHIP; others use unique names such as Healthy and Well Kids in Iowa (hawk-i) and Dr. Dynasaur in Vermont.

The states can make their own decisions about who qualifies for CHIP, what benefits to provide, and how closely the program is tied to the state Medicaid program. A 2017 MACPAC fact sheet shows that 10 states, including the District of Columbia, run CHIP solely as an expansion of Medicaid, two treat it as a completely separate program, and 39 treat it as a combination program.

Who Uses CHIP

All state CHIP programs cover children up to age 19, and some states have expanded coverage to include pregnant women. Groups particularly likely to rely on CHIP include:

1. Low-Income Working Families

The 2017 MACPAC report found that nearly 9 out of 10 children covered by CHIP are from families making less than twice the federal poverty level (FPL). However, most of these children aren’t from “welfare families.” The MACPAC fact sheet shows that nearly 85% of them are from households where are least one parent worked for at least 50 weeks out of the past year.

2. Ethnic Minorities

According to a 2018 snapshot of children’s coverage from the Georgetown University Health Policy Institute, African-American and Hispanic children are particularly likely to receive coverage under CHIP or Medicaid. In 2016, 57% of children covered by CHIP and Medicaid belonged to these two groups.

3. Those in Rural Communities

According to a 2014 report by First Focus, children in rural areas are also especially likely to rely on CHIP and Medicaid. The report found that in 2012, 47% of rural children got health coverage from these programs, compared to 38% of urban children.

4. Special-Needs Children

According to the Kaiser Family Foundation, nearly half of all children with special health needs received coverage from CHIP or Medicaid in 2016. That includes children with a variety of chronic physical, emotional, and developmental conditions, including autism, cerebral palsy, and Down syndrome.

5. Working Parents Without Affordable Family Coverage

CHIP helps many families caught in the ACA family glitch, which prevents some workers from getting affordable health insurance for their families. Because of this problem, workers who have access to affordable health plans at work for themselves, but not for their families, aren’t allowed to receive subsidies for family coverage.

Baby Mommy Kiss Window

What CHIP Covers

Because each state has its own CHIP program, the exact benefits provided vary from state to state. However, all states cover the basics, including:

  • Routine care, such as checkups, other doctor visits, and immunizations
  • Hospital care, including inpatient and outpatient care as well as emergency services
  • Prescription medicines
  • Medical tests, including lab work and X-rays
  • Additional services that many employer-sponsored health plans don’t include, such as dental care, vision care, hearing tests, and speech and language therapy

Individual states can choose to cover additional benefits besides those listed here, such as hearing aids. To learn about what benefits your state covers, check the website of your state’s CHIP program, which you can find through InsureKidsNow.gov.

Not all doctors and pharmacies accept CHIP. If a family signs up for CHIP and their current health provider doesn’t accept it, they can sometimes keep seeing that provider for a little while, but only until they’re able to find another one. In most states, you can find out which providers accept CHIP by visiting the state’s Medicaid or CHIP website. If the website doesn’t have this information, you can call the number for your state Medicaid or CHIP agency, which appears on the website and in the documents you receive when you sign up for the program.

Costs for Patients

Regular medical and dental checkups, or “well child” visits, are always free under CHIP. However, individual states can choose to require copayments for other services. The 2017 MACPAC fact sheet shows that 24 states require copayments for at least some services.

In addition, some states charge CHIP families a monthly premium for their coverage. According to the fact sheet, 17 states charge premiums averaging $25 per child per month for families with incomes higher than twice the FPL. Seven states charge premiums averaging $18 per child per month for families with incomes about 150% of the FPL. However, a family’s total costs for CHIP, including premiums and copayments, can’t add up to more than 5% of its income.

This rule makes CHIP much more affordable than most other health insurance plans for children. A 2017 study by the Bipartisan Policy Center found that the average family using CHIP spent just $158 per year for coverage. By contrast, if those same families had to buy silver-level plans through the ACA Health Insurance Marketplace, even if they received subsidies for this coverage, they would have paid an average of $1,073 per year out of pocket.

That $900 difference looks like a lot, but it’s just the average amount. For children with serious medical conditions, the cost difference would be even higher. The report indicates that if children with special health care needs had to move from CHIP to the Health Insurance Marketplace, their families could end up paying more than $10,000 per year for health care.

Young Girl Nebulizer Stuffed Bear Sick

How to Apply for CHIP

To qualify for CHIP, you must have a household income below the cutoff set by your state. This limit varies from state to state, but in most, it’s somewhere between 200% and 325% of the FPL. This chart from Medicaid.gov shows the 2018 income limits for both Medicaid and CHIP in all 50 states.

If you’re not sure whether your kids qualify for CHIP or Medicaid in your state, you can find out by applying. Unlike most health insurance plans available through the Health Insurance Marketplace, CHIP and Medicaid don’t have a specific open enrollment period, so you can apply for them at any time.

There are three ways to apply for CHIP or Medicaid:

  • By Phone. Call 1-800-318-2596 to reach customer service for the Health Insurance Marketplace.
  • Online. Fill out an application through the online Health Insurance Marketplace at HealthCare.gov. If your application shows that you or anyone in your household qualifies for Medicaid or CHIP, the system will automatically send your information on to your state Medicaid agency. The state agency will then contact you to help you enroll.
  • Through Your State Agency. You can also go directly to your state CHIP program to apply. To find the program for your state, visit InsureKidsNow.gov. Click on the link for your state, and the site will show you information about the CHIP and Medicaid programs in your state, along with a link to apply for benefits.

Final Word

Although CHIP can be a literal lifesaver for children in need of health care, it can’t do anything to help their parents. If you’re a parent (or parent-to-be) in need of affordable health care, your best bets are Medicaid and the Obamacare subsidies. If you fill out an application through the Health Insurance Marketplace, you can find out whether you qualify for Medicaid or a subsidized health care plan.

Unfortunately, some low-income people can’t qualify for coverage under either program. If you fall into this category, check out our article on emergency financial assistance. It can help you find free clinics, drug discount programs, and other sources of affordable medical care. These resources can help you keep yourself healthy while CHIP looks after your kids.

Now that you know the facts about CHIP, how do you feel about this program? Do you think it’s a worthwhile use of your tax dollars?

Amy Livingston
Amy Livingston is a freelance writer who can actually answer yes to the question, "And from that you make a living?" She has written about personal finance and shopping strategies for a variety of publications, including ConsumerSearch.com, ShopSmart.com, and the Dollar Stretcher newsletter. She also maintains a personal blog, Ecofrugal Living, on ways to save money and live green at the same time.

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