If Congress Doesn’t Act Fast on Children’s Health Insurance, Millions Could Be at Risk

Last Tuesday, the Senate Finance Committee announced it had reached a bipartisan agreement to extend funding for the national Children’s Health Insurance Program for five more years. The announcement, coming after months of pressure from children’s advocacy organizations, marked the first step toward renewing funding for the program, which provides health insurance for nearly nine million low-income children.

The catch: That funding runs out on September 30. So unless Congress can draft, pass, and reconcile the actual legislation in less than two weeks, families nationwide may be at risk of losing health coverage entirely for their children or facing soaring premiums.

“Here in New York, we’re all waiting with bated breath, because there would be an awful lot of work that would need to happen at the state level” should the funding not be renewed, says Ben Anderson, director of health policy for the Children’s Defense Fund–New York, one of the organizations that has been campaigning for an extender bill. “The deal that was announced sounds promising, but there’s still a lot of work to be done” before the deadline.

The Children’s Health Insurance Program, often referred to as CHIP, grants states federal matching funds to provide health insurance for children who don’t qualify for Medicaid, but whose families still don’t earn enough to afford insurance on their own. Thanks to CHIP and Medicaid, 95 percent of the country’s children are insured, according to the Georgetown University Health Policy Institute, Center for Children and Families. The program has enjoyed bipartisan support since its inception in 1997; it was authored by Democratic senator Ted Kennedy and Republican senator Orrin Hatch, the latter of whom is now the chairman of the same finance committee that just agreed to renew the program’s funding.

For the funding to be renewed, however, the following must still come to pass: The Senate Finance Committee must hammer out the particular language of the bill — it said on Tuesday that “full legislative language will be released in the coming days,” although that language has yet to surface — and then submit it to the Senate for a vote. The House must also pass a CHIP bill; if it writes its own legislation at the same time as the Senate, both bills must be reconciled. (At the time of this writing, the House is scheduled to be in session for only four more days this month.) After that, the president must sign the bill.

All of this must happen in the next two weeks. Even if an extender bill is ultimately passed after the September 30 deadline, there would still be immediate consequences for some states. Nevada, which projects its CHIP program will run out of federal funding before the year’s end, might terminate coverage on November 30; to give enrolled families thirty days’ notice, the state would have to start sending out notification letters by the beginning of October. West Virginia, which anticipates its funds will last through April 2018, is required by state statute to end its CHIP program if federal funds dip below 1997 levels. The state is trying to determine when the effective date of that dip would actually be: when the funds run out in April, or on October 1, immediately after the funding renewal deadline passes.

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New York could weather a delay in federal funding renewal, but only until the end of 2017. At that point, even though its current federal funding wouldn’t run out until March 2018, it would need to start determining how to transition affected children to other forms of coverage, because some of those efforts would require legislative actions and changes to the budget, which must be passed by April 1, 2018.

Beyond the short time frame left for passing an extender bill, uncertainty remains over how the bill will move forward in the Senate. Additional provisions on other healthcare- and Medicaid-related issues may yet be attached to the bill, which could impede a quick passage.

CHIP funding last received a two-year renewal in April 2015. That time, Congress reauthorized the renewal months before it was scheduled to expire.

“This is definitely an instance of a manufactured crisis,” says Anderson about the current last-minute rush to renew. “Congress has known that this deadline is coming for two years now, and it spent way too much time debating Affordable Care Act measures and cuts to Medicaid that were going nowhere. And as a result, over three hundred thousand kids in New York are waiting to see what their next step is.”

Those kids are covered by Child Health Plus, New York’s CHIP program. Created in 1991 — it predates CHIP and in fact served as a blueprint for the national program — it covers low-income children up to the age of 19, and also allows ineligible families to opt in to the program at a higher rate. Qualified enrollees are responsible for monthly premiums that, depending on annual income and family size, range from zero to $60. Beyond that, they pay nothing: no copays, no coinsurance, no deductible. The program offers twelve months of continuous coverage, open enrollment throughout the year, and coverage to children regardless of immigration status.

As Anderson notes, as of October 2016, New York state had more than three hundred thousand enrollees in Child Health Plus — nearly 7 percent of the state’s children. Twice that number may be covered by the program during a calendar year, though, as children enroll and unenroll following parents’ job losses, divorces, or other life events that affect their financial situations.

Although the content of a Senate bill is still being worked out, there have been hints that Child Health Plus and the rest of the country’s CHIP programs could be harmed even if funding renewal is passed. According to a statement put out by the finance committee, the proposal would, “over time, transition CHIP to its traditional federal-state partnership and provide additional protections for low-income children and flexibility for states.”

Reports have since indicated that the proposal intends to phase out additional CHIP funds the federal government has allocated to states under the Affordable Care Act. While CHIP’s original legislation granted states a greater share of matching funds than for Medicaid — on average, fifteen percentage points higher — the ACA authorized states to receive an additional 23 percentage points in funds, beginning in 2015. For New York, that means an additional $150 million in federal funds a year. The proposal announced last week would phase out these additional funds by 2021. (The original expansion mandated the allocation of the funds through 2019.)

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Republicans have chafed at this added funding in part because, thanks to the ACA, twelve states plus the District of Columbia are no longer paying anything at all toward their CHIP programs (hence the statement’s language of “traditional federal-state partnership”). But as Anderson notes, the additional funding was originally allocated to help the states transition to new health plan marketplaces and add new services made possible by the ACA — such as, in New York, the Essential Plan, the state’s basic health plan for low-income New Yorkers who don’t qualify for Medicaid.

“All of those changes require funding,” Anderson says. “And so the enhanced match was one way to help states offset that funding.”

Anderson notes that it’s always been an open question as to what would happen to CHIP funding after 2019: “We haven’t had a clear picture on what would happen, and I think that’s one of the reasons why it’s really important for Congress to figure this out quickly, so states can be in a better position to plan moving forward.”

The ACA included a maintenance of effort (MOE) provision that prohibits states from scaling back eligibility, increasing premiums, or changing enrollment waiting periods from those determined in 2010. Anderson believes the announcement’s reference to increasing “flexibility for states” signals an intention to let the MOE expire in 2019 and allow states whose current programs cover children above 300 percent of the federal poverty level to scale back their eligibility requirements. (New York’s Child Health Plus covers children up to 400 percent of the federal poverty level, the highest eligibility level in the country.)

According to the Kaiser Family Foundation, if CHIP funding is allowed to lapse, 32 states, including New York, will run out of their federal CHIP funds by March 2018.

Should that funding expire, parents of enrollees, managed care companies, and vendors will all need to be notified. The New York State health plan marketplace will have to be modified to transition children previously enrolled in Child Health Plus into new forms of coverage. All these changes require time and money. And while states usually get two years’ notice when Congress is planning such a substantial change, now they will have none.

As Anderson says, “We’re really getting down to the last minute.” Letting CHIP funding lapse, he says, “would create a big mess in New York.”

In the nation as a whole, children currently enrolled in CHIP programs could lose that coverage. In testimony before the Senate Finance Committee on September 7, Anne Schwartz, executive director of the nonpartisan Medicaid and CHIP Payment and Access Commission, warned that, should CHIP funding run out, 1.2 million children nationwide would not be able to afford alternative insurance; 61.3 percent of those children have family incomes below 200 percent of the federal poverty level, and 53.9 percent are non-white.

Those children whose families could afford to buy other insurance, either through employer-based plans or through state marketplaces, might receive less-comprehensive coverage. (For instance, CHIP programs cover dental care, whereas on the exchange, dental is usually offered under a separate plan, with its own premiums, copays, and deductibles.) And families would face higher healthcare costs: In her testimony, Schwartz noted that parents would have to pay $600 to $800 a year for premiums alone, as opposed to $127 a year on CHIP.

Following Tuesday’s announcement, Democratic senator Ron Wyden, ranking member on the Senate Finance Committee, tweeted that we “need to get this done ASAP.” That is a gross understatement. As Congress continues to work on legislation, CHIP’s funding is set to expire in thirteen days. Meanwhile, the healthcare of nine million children hangs in the balance.