Frequently Asked Questions about the Children’s Health Insurance Program (CHIP)

Updated December 2017

The Children’s Health Insurance Program (CHIP) was enacted in 1997 under Title XXI of the Social Security Act and has since provided critical health coverage to children in families with low to moderate incomes. In federal fiscal year (FFY) 2016,[1] more than 8.9 million children were enrolled in CHIP.[2] This fact sheet provides an overview of CHIP, for state-specific information, see NASHP’s State CHIP Fact Sheets.

How is CHIP funded?

CHIP is jointly funded by states and the federal government. Federal CHIP allotments are capped through a block grant model and provided to states annually based on their recent CHIP spending. States draw down federal CHIP funds at an enhanced Federal Medicaid Assistance Percentage (E-FMAP) rate. The Affordable Care Act (ACA) increased this enhanced match rate by 23 percentage points (commonly referred to as the “23 percent bump”) beginning in October 2015 through September 2019. As a result of the increase, the CHIP matching rate currently ranges from 88 to 100 percent across states. For current information on available CHIP funds, please see below.

Who is eligible?

CHIP provides coverage to uninsured children up to the age of 19 in families with incomes that are too high to qualify for Medicaid — currently set at an eligibility floor of 138 percent federal poverty level (FPL) for children — but who cannot afford private coverage. States have discretion to set income eligibility limits, so it varies across states with a median income eligibility of 255 percent FPL or about $52,000 for a family of three[3]. Beginning in 2014, eligibility levels for CHIP were revised based on Modified Adjusted Gross Income (MAGI). For state-specific information on eligibility standards, see NASHP’s State Medicaid and CHIP Eligibility Standards.

Since 2002, states have been able to use CHIP funding to cover pregnant women through the “unborn child” option. Since this option technically covers the unborn child rather than the pregnant woman, some states have specifically used this option to provide critical prenatal care to woman regardless of their immigration status. State benefit packages under this option vary, however are typically limited and can only cover services related to the pregnancy or conditions that will impact the unborn child. In 2009, the Children’s Health Insurance Program Reauthorization Act (CHIPRA) created an option for states to use CHIP funding to explicitly cover pregnant women as a separate category if the state met certain criteria. For more information, see NASHP’s Eligibility Levels for Coverage of Pregnant Women in Medicaid and CHIP.

Do states have flexibility in administering their CHIP program?

States have the option to design their CHIP program in one of three ways:

  1. Separate CHIP: States receive federal funding to provide child health assistance to uninsured low-income children.
  2. Medicaid expansion CHIP: States receives federal funding to expand Medicaid coverage to targeted low-income children.
  3. Combination CHIP: States receive federal funding to implement both a Medicaid expansion and separate CHIP program concurrently.

Is there cost sharing in CHIP?

States with separate CHIP programs have the option of imposing limited enrollment fees, premiums, deductibles, coinsurance, or copayments, but in total these cannot exceed 5 percent of a family’s annual income and are prohibited for certain services and enrollees. As of January 2017, four states charge annual enrollment fees, 22 states charge monthly or quarterly premiums, and 24 states require nominal co-payments for certain services in their separate CHIP programs.[4] States with Medicaid expansion CHIP programs must adhere to Medicaid cost-sharing rules.

What is covered under CHIP?

CHIP provides pediatric-centered, comprehensive benefits, however, coverage varies by state and type of program. Medicaid expansion CHIP programs must provide the standard Medicaid benefit package that includes Early and Periodic Screening, Diagnostic, and Treatment (EPSDT) services and covers all medically-necessary services, such as mental health and dental services. States with separate CHIP programs have more flexibility to determine the scope of benefits, but they must be based on a benchmark package or approved by the secretary of Health and Human Services. In addition, all separate CHIP programs must provide dental services, well-baby and well-child care services, emergency services, and coverage for age-appropriate immunizations.

What is the role of states in developing CHIP programs and serving families?

Over the last two decades, states have invested time and resources to develop their CHIP programs. CHIP’s flexibility in terms of program design and administration has enabled states to build efficient enrollment systems and implement diverse health services including poison control centers and lead abatement activities. CHIP not only serves as a crucial funding source that states would not otherwise have to provide coverage for low- to moderate-income children, but also encourages states to foster pediatric-specific provider networks and develop quality measures that address children’s unique health needs.[5] For children in low- and moderate-income families, CHIP provides a more affordable coverage option than employer-sponsored insurance or marketplace coverage and typically offers more comprehensive benefit packages.

Update on Current CHIP Funding Uncertainty (as of 12/8/2017)

Is CHIP currently authorized?

Since CHIP was established in 1997, Congress has passed bipartisan legislation several times to reauthorize and extend funding for the program. It is currently authorized to operate, but needs a new appropriation of federal funds. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) included federal funding for CHIP in fiscal years 2016 and 2017, which ended Sept. 30, 2017. Since Congress has not yet acted to extend funding, there are currently no new federal funds for CHIP for FFY 2018 or beyond. With no new federal funding allocated, the total projected FFY 2018 national CHIP funding shortfall is approximately $13 billion.

How are states currently supporting their CHIP programs?

Federal statute allows states two years to spend their total annual federal allotment, so states must first use unspent funds, known as “carryover funds,” from FFY 2017 to continue to support their CHIP programs. However, there is a “claw-back” provision in MACRA that requires states to reduce their FFY 2017 carryover by one-third and return it to the federal Treasury to help off-set or pay for the cost of that legislation. After states spend their carryover funds, the Centers for Medicare & Medicaid Services (CMS) are authorized to redistribute unused funds from previous fiscal years to help stave off states experiencing CHIP funding shortfalls. As of Oct. 1, 2017, there was $2.9 billion total in unspent CHIP dollars available to be redistributed proportionately across all states as their FFY 2017 carryover funds run out. No state, however, is projected to receive enough redistribution funding to cover its full estimated FFY 2018 CHIP funding shortfall. As of Dec. 1, 2017, 17 states including Washington, DC, have received redistribution grants from CMS and another nine are expected to receive their allotment in the coming days and weeks. For more details about current funding sources and the process for claiming redistribution funds, see CMS’ recent guidance.

Have any steps been taken to extend federal funding?

In September and October 2017, bills to reauthorize and extend federal CHIP funding were introduced in both the Senate (KIDS Act of 2017) and House of Representatives (HEALTHY KIDS Act). On Nov. 3, 2017 the House passed an amended version of the bill called the CHAMPIONING HEALTHY KIDS Act which combined funding extensions for CHIP and community health centers. The CHIP provisions in the Senate and House bills mirror each other to extend federal funding for five years, maintain the 23 percent bump through FFY 2019, and then phase it out in FFY 2020. However, the House bill differs in that it includes offsets to pay for the costs of the bill that are above the baseline funding. These offsets include taking money away from the ACA’s Prevention and Public Health Fund and increasing premiums for higher-income Medicare enrollees.

When will states run out of funds?

Based on quarterly anticipated expense projections submitted by states to CMS in August, the Medicaid and CHIP Payment and Access Commission (MACPAC) has estimated when each state will run out of their total available CHIP dollars, including unspent FFY 2017 allotment and redistribution funds. The majority of states are projected to exhaust funding by March 2018, however some are projected to run out as early as December 2017. It is important to note that these are just projections and there are many factors that could result in states spending down their funds sooner, such as increased enrollment and unanticipated utilization of medical services.

What are states’ options once their federal CHIP funds are exhausted?

States that operate Medicaid expansion CHIP programs, due to the ACA’s maintenance of effort (MOE) requirement, must maintain until Sept. 30, 2019 the CHIP eligibility levels they had in place when the ACA was enacted, but at the lower Medicaid match rate. These states can draw Medicaid matching funds for the children in their Medicaid expansion CHIP program if federal CHIP funds expire. However, these states face serious budget issues as the Medicaid FMAP is lower than the CHIP FMAP and the difference will need to be made up using state funds. States that operate separate CHIP programs have the option to 1) phase out coverage; 2) transition children and pregnant women to Medicaid; or 3) develop an approach that is a combination of these options. Given the limited time states have to prepare both in terms of policy design and implementation as well as financially, most that operate separate CHIP programs will have need to shut down their programs and disenroll children.

How is the continued funding uncertainty impacting states?

States are currently trying to maintain coverage for as long as possible, however, with the continued uncertainty of when Congress will act and funds beginning to run out, some states can no longer wait to enact their contingency plans. Ideally, state officials would have at least one year to plan for such significant program changes, but now states are considering having to shut down their programs within just a matter of weeks, which will be very challenging, costly, and time-consuming for state staff. States have sought to avoid notifying families in case Congress acts to extend funding. However, a growing number of states are now approaching the date when they are projected to run out of funds and may have no choice but to notify families that their children’s coverage may be in jeopardy in December and early January.


[1] Statistical Enrollment Data System. 2016 Number of Children Ever Enrolled Report. (Washington, DC: Center for Medicare & Medicaid Services, Feb. 2017).

[2] Statistical Enrollment Data System. 2016 Number of Children Ever Enrolled Report. (Washington, DC: Center for Medicare & Medicaid Services, Feb. 2017).

[3] Kaiser Family Foundation. “Medicaid and CHIP Income Eligibility Limits for Children as a Percent of the Federal Poverty Level as of January 1, 2017”,%22sort%22:%22asc%22%7D

[4] Tricia Brooks, et al., Medicaid and CHIP Eligibility, Enrollment, Renewal, and Cost Sharing Policies as of January 2017: Findings from a 50-State Survey (Washington, DC: Kaiser Family Foundation, Jan. 2017).

[5] Center for Medicare & Medicaid Services “CHIPRA Initial Core Set of Children’s Health Care Quality Measures” Retrieved April 19, 2017.