State CHIP Changes Are Coming Soon

As we enter into August, there is increased pressure on states because federal funding for the Children’s Health Insurance Program (CHIP) remains uncertain beyond September 30, which means states are now facing critical decision points. States do not know if and when Congress will continue funding CHIP and even if federal funds are extended will the extension include the 23% funding increase upon which states have come to rely? Given the uncertainty many states have begun internal planning, which includes coordinating with Health Insurance Exchanges and programming for eligibility systems changes. States are weighing when to send notification to families that their children’s coverage may be in jeopardy – taking both federal financing and their own state requirements into account.

The most recent projections from the Medicaid and CHIP Payment and Access Commission (MACPAC) show that all states will spend out their federal CHIP funding at some point during federal fiscal year (FFY) 2018. Thirty states and the District of Columbia (D.C.) are projected to exhaust federal funds by March 2018 or sooner, with the first states and D.C. projected to spend their federal CHIP funds by December 2017. Although states have several months before they exhaust their CHIP funding, there are multiple policy and operational issues that must be addressed and there is little time to do it.

In addition to understanding when their federal allotments will run out, the type of CHIP program(s) a state operates is also a factor in determining what steps different states must take and when. States that operate separate CHIP programs can close their programs if federal funding is insufficient, but those operating Medicaid-expansion CHIP programs must continue to provide coverage through Medicaid at the lower Medicaid federal matching rate due to the federal maintenance of effort (MOE). (See NASHP’s map of state CHIP programs for more information on their individual programs.)

State requirements: from notices to budget
States have their own budgetary restraints as well as statutory and regulatory requirements that must be considered as they develop contingency plans for their CHIP programs. For instance, states have their own laws or regulations mandating notification requirements of changes to public programs. In July 2017, NASHP surveyed states to better understand these requirements and how they would affect state’s CHIP contingency planning. Of the 39 states that responded to the survey:

  • 21 responded yes, their state has public noticing requirements that apply to CHIP and many noted time frames that range from 30 days to 100 days prior to implementing a change in the program;
  • 3 responded no, it is not a state requirement but noted the state plans to notify families at least 60 days in advance of a programmatic change; and
  • Several states operating Medicaid-expansion programs will not disenroll children from coverage, so officials noted that public notification requirements didn’t apply.

While state officials are hesitant to send out letters to families too soon, especially if Congress does extend federal CHIP funding, they want to alert families to the possibility of CHIP ending before placing a public notice online. So, states that are projected to run out of their CHIP funds in the winter will need to send out notices soon.

At this point all states have enacted budgets for their current fiscal year and most states’ legislatures have wrapped up their legislative sessions until next year. Through our survey we learned:

  • 36 out of 39 states that responded assume the 23% bump in federal matching funds will continue; and
  • 35 out of 39 states that responded do not have contingency funds available if the 23% bump does not continue.

State legislatures relied upon the information they had and as a result states are counting on Congress to extend federal CHIP dollars at the enhanced matching rate that is currently in federal law. As NASHP previously noted, state budgets are under pressure. This means that states will not be able to extend children’s coverage without federal CHIP funding and therefore will need to take steps ahead of time to end the program when federal funds are exhausted.

Federal contingency options
Recognizing the position states are in, CMS recently held a call with state officials to discuss initial contingency planning options for states if there is a shortfall of federal CHIP funds. CMS outlined three main options for transitioning children to other sources of coverage: 1) phase out separate CHIP coverage and coordinate with other insurance affordability programs to transition children to either Medicaid or exchange coverage; 2) move children covered under separate CHIP programs to a Medicaid expansion CHIP program; or 3) establish a combination of these approaches based on income level.

While these options provide states with flexible approaches, developing procedures to transfer children to the exchanges or Medicaid will require substantial planning, interagency coordination, and investment of state staff time and financial resources. For example, some of these options would require states to submit state plan amendments to CMS. States would also need to develop plans for any necessary eligibility and claims systems changes, consider any modifications needed to managed care or third party administrator contracts, and ensure communication to families, providers, and other stakeholders is timely and clear. As noted, states that choose to move children currently covered in CHIP to Medicaid would receive the lower Medicaid match rate for covering previously CHIP-eligible children and states have not budgeted for that increased expense.

In addition to the administrative and fiscal burdens for states, there is the overall risk of coverage losses and access to care challenges for children if CHIP coverage is no longer available. For states that opt to transition children to exchange coverage, gains in children’s coverage could be lost due to issues during the transfer process or because coverage may be unaffordable for families. Also, even with thorough care continuity planning it could be challenging to ensure that children with complex health care needs continue to receive necessary care.

Although Congress may eventually extend CHIP funding, states must act in response to current law, considering their own state noticing requirements and their own budget constraints. States with separate CHIP programs can no longer delay in developing plans to potentially close them.