Explainer: Children’s Health Insurance Program Helps Keep Medical Costs Low

Andrew Kitchenman | February 24, 2015 | Explainer, Health Care
But families could face skyrocketing out-of-pocket costs if federal funding isn’t renewed before October

Children's Health Insurance Plan CHIP
What it is: While many children in low-income families began to get health coverage under the federal Medicaid program in 1965, the Children’s Health Insurance Program (CHIP) signed into law by President Bill Clinton in 1997 increased the number of children with coverage. Eligibility was expanded even further in 2009 through a law signed by President Barack Obama, a year before he signed the broader Affordable Care Act into law.

What it does: In New Jersey, CHIP covers children in households with income equal to up to 355 percent of the poverty line, or $56,552 for a family of two and $86,088 for a family of four, according to the Kaiser Family Foundation.

Eligibility for Medicaid varies by age and family income, with children under 1 covered by Medicaid if their family income is up to 200 percent of the poverty line, children ages 1 to 5 covered by Medicaid if their family income is up to 147 percent of the poverty line, and children ages 6 to 18 covered by Medicaid if their family income is up to 138 percent of the poverty line.

Both CHIP and Medicaid coverage in the state are offered through the New Jersey FamilyCare program. More than 100,000 New Jersey children are covered through CHIP would not qualify for Medicaid. FamilyCare covers a total of 787,000 children in the state.

Why it’s important: The ACA funded CHIP through Sept. 30, 2015. If the federal government doesn’t renew funding for the program before then, parents could cover formerly CHIP-eligible children through the federal health insurance marketplace for individuals and families. But the out-of-pocket costs paid by these families would skyrocket.

For example, a Wakely Consulting Group report found found that a family with an income of $50,085 would see its annual out-of-pocket costs rise from $103 through CHIP to $960 through a marketplace plan.

For those with more expensive chronic conditions, the difference would be even larger: maximum out-of-pocket costs under CHIP are $1,497, while they could be as high as $5,200 for a child covered by a marketplace plan. And children whose parents are insured through their employers aren’t eligible for tax subsidies for marketplace coverage.

Not just money: In addition to higher out-of-pocket costs, CHIP covers a wider range of services than those mandated under marketplace plans. For example, children who require speech therapy are covered for up to 60 days of therapy through CHIP, while marketplace plans are only required to cover up to 30 days.

A New Jersey voice in Congress: One of the congressional leaders pushing for early renewal of CHIP funding is U.S. Rep. Frank Pallone (D-6th), who has co-sponsored bills that would extend CHIP funding through 2019. The latest bill, introduced in early February, would allow states to reduce the administrative burden on themselves and beneficiaries. Pallone was also one of the original co-sponsors of the 1997 CHIP law.

Pallone has been working with state legislators to increase awareness of the dangers of losing CHIP funding. On Feb. 17, he met with state Senate President Steven M. Sweeney (D-Cumberland, Gloucester and Salem) and state Sen. Joseph F. Vitale (D-Middlesex) at PSE&G Children’s Specialized Hospital in New Brunswick to discuss the status of the law and its importance.

Not just children: Pregnant women with income above the Medicaid threshold can also receive prenatal care through CHIP. Vitale expressed concern about these women.

“They are from low-income families and they don’t qualify for Medicaid, so they could be left without health care at a time when they need it most,” he said.

A scaled-back alternative? The center-right policy organization American Action Forum has suggested that CHIP funding be narrowly targeted to benefit children who aren’t covered by either Medicaid or marketplace subsidies. As it currently stands, the three programs overlap to some extent.

But policy analysts argue that it’s too late to develop a new narrowly tailored approach and implement it before current CHIP funding expires.