In 1997, the Children’s Health Insurance Program (CHIP) was created with strong bipartisan support. CHIP gives states financial support to expand publicly funded coverage to uninsured children who are not eligible for Medicaid. As block grant, CHIP provides states with a set amount of funding that must be matched with state dollars.
The Children’s Health Insurance Program Reauthorization Act (CHIPRA) reauthorized CHIP in April 2009 and the 2010 Affordable Care Act (ACA) contained provisions to strengthen the program. The ACA extended CHIP funding until September 30, 2015 and requires states to maintain eligibility standards through 2019. This difference in expiration for federal funding versus the maintenance of eligibility requirements creates an unfunded gap from October 1st, 2015 through 2019. The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 extended CHIP funding with no programmatic changes through September 30, 2017. Legislative action will be required to extend federal funding past September 2017.
This primer provides a general overview of the program structure and rules for CHIP. Additional resources on CHIP are available here. Also see our Facts & Statistics for eligibility and program rules by state.
CHIP builds on the children’s health coverage that was in place under Medicaid immediately before CHIP was created. States can use their federal CHIP funds to finance coverage for children whose family incomes are too high to qualify for Medicaid under the rules the state had in place as of June 1997. States may opt to use CHIP funds to expand Medicaid for children beyond the June 1997 levels, cover children through a separate CHIP program, or combine the two approaches. As of July 2014, nine states (including the District of Columbia) opted to use CHIP funds to expand their Medicaid programs. In the remaining 42 states, CHIP funds are used to run a combination or separate health insurance program.
In FY 2013, about 8 million children were enrolled in coverage funded by CHIP while 39 million children were enrolled in Medicaid-financed coverage. CHIP spending reached $13.2 billion, compared to $460 billion in Medicaid.
Federal and state governments jointly finance CHIP, although the federal government assumes a larger share of the financing with an enhanced federal matching rate ranging from 65 to 81 percent, an average of 15 percentage points higher than Medicaid’s matching rate. The ACA (2010) established, and MACRA (2015) funded, a boost the CHIP enhanced matching rate by an additional 23 percentage points up to a 100 percent maximum through 2017. Unlike Medicaid, CHIP funds are capped overall and for each state. This capped funding is distributed through state-specific allotments established by a statute that uses a formula to account for the state’s actual use of CHIP funds, adjusted for health care inflation and child population growth. States facing funding shortfalls can obtain additional funding through a child enrollment contingency fund and allotment increases are available for states with approved plans to expand eligibility or benefits.
CHIP funds generally must be used to provide coverage to uninsured, low‐income children who do not qualify for regular Medicaid. States also can use a limited amount of funds for administrative costs and other non‐coverage activities, such as outreach.
Texas spends roughly $350-$400 million annually in the state chip CHIP. This program still depends on the for-profit healthcare system to deliver basic health services to low-income families.
Pew Research – The Children’s Health Insurance Program
Code – Health and Safety Code
Chapter 62 – Child Health Plan for Low Income Children