Planning Now: State Policy and Operational Considerations if Federal CHIP Funding Ends

Federal funding for the Children’s Health Insurance Program (CHIP) is currently set to end in September 2017, and states need to be prepared for the possibility that Congress will not act to extend the funding. Medicaid expansion CHIP programs are required through the Affordable Care Act’s (ACA) maintenance of effort (MOE) provision to maintain eligibility levels for children through 2019, even if federal CHIP funding ends. In this scenario, they would receive the regular Medicaid match rate for enrollees in these programs rather than CHIP’s enhanced match. However, the 42 states with separate CHIP programs can limit enrollment in these programs if federal funds are not available.

If it becomes necessary for states to close their separate CHIP programs and begin to transition enrollees to other sources of coverage, this process will take time and states will need to begin planning many months ahead. Based on guidance and input from state CHIP officials, NASHP developed a timeline that outlines key budgetary, statutory, and operational issues and changes states would need to consider and/or implement.

The timeline assumes the current September 2017 federal funding termination date and is intended to highlight for federal policymakers and other stakeholders the main policy and programmatic issues and critical decision points that states would confront. While states would exhaust their federal CHIP allotments at different points in time due to factors such as program structure and state expenditures, the timeline assumes that states will have funds available to spend from their federal CHIP allotments through at least the first quarter of federal fiscal year 2018.

Some factors that add complexity to the issue of how states can begin planning for the possibility of federal CHIP funding ending are that states have different budget cycles and legislative calendars. As a result, the timing of state decisions and changes that will need to be made, especially for those with biennial budgets or legislatures that meet every other year, may differ. States will also have to consider making modifications to existing or future contracts with managed care organizations, third party administrators, and/or call centers and planning for potential eligibility, claims, and other systems changes. State officials emphasized that implementing many of the changes reflected in the timeline could involve significant administrative expenses and staff resources.

A primary concern raised by state officials if future federal funding for CHIP remains uncertain months into 2017 is providing clear communication to families about the potential changes to children’s coverage. Officials expressed serious concerns about having time to identify children receiving ongoing health care and facilitating a seamless coverage transition to minimize any care disruption. And CHIP does not only cover children—some states also use CHIP funding to provide coverage to pregnant women, and so issues related to transitioning these enrollees to other sources of coverage will also be a consideration for states.

Additionally, should CHIP end, there are concerns about the availability of affordable, appropriate pediatric benefits in private coverage, outlined in this NASHP brief. Ideally state officials from CHIP, Medicaid, insurance commissions, and health insurance exchanges along with health providers and other stakeholders would coordinate efforts to develop transition plans to minimize coverage gaps and promote care continuity.

Further, the impact of the uncertainty of future federal CHIP funding affects more than just the program itself. CHIP funding is also used by states to provide support for some sister agency programs including Title V programs, and in a limited way some states use the funding for other children’s services such as Health Services Initiatives to improve low-income children’s health.

States will need guidance from federal officials to implement many of the issues identified in the timeline, and consequently the timing of this guidance will affect the ability of states to address the policy and program changes needed. State officials managing separate CHIP programs will be in a challenging position if the future of federal CHIP funding continues to remain uncertain in the coming year. Maintaining the gains in children’s coverage is an important issue for states within the changing health care environment, and NASHP will be continuing to convene state officials and offer further resources to help states ensure strong children’s coverage into the future.

Infographic: A Timeline for States