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How Does Chip Work

By David Krug David Krug is the CEO & President of Bankovia. He's a lifelong expat who has lived in the Philippines, Mexico, Thailand, and Colombia. When he's not reading about cryptocurrencies, he's researching the latest personal finance software. 8 minute read

According to a survey from the Census Bureau, 10.6 million American children, or about one out of every seven children in the country, lacked health insurance in 1996. An even higher percentage of children from low-income families were uninsured: approximately 25%. 

According to a survey from the Georgetown University Health Policy Institute, the number of uninsured children dropped to 3.5 million by 2015. To date, this was the first time in American history that more than ninety-five percent of all children could claim insurance.

This shift was driven by two primary causes. The Patient Protection and Affordable Care Act (often known as “Obamacare”) was enacted in 2010. 

The other was the Children’s Health Insurance Program (CHIP), a federal initiative that receives less publicity but is nonetheless very important to the health and well-being of American kids. Children from low-income homes who don’t qualify for Medicaid can take advantage of this program’s affordable medical coverage.

In 2018, 9.6 million children across the country were covered by CHIP, per the Medicaid website. Over 35% of American children have ensured that year thanks to a combination of Medicaid and the Children’s Health Insurance Program (CHIP), according to the U.S. Census Bureau.

How CHIP Operates

As a result of the failure of President Bill Clinton’s 1993 effort to offer universal health coverage for Americans, his administration and its allies in Congress shifted their focus to a more specific objective. For the sake of the kids, they wanted to increase the number of people who are covered.

The State Children’s Health Insurance Program (SCHIP) was formed in 1997 after years of debate in Congress (later shortened to CHIP). It established the new program as a joint venture between the federal and state governments. Different states administer their own plans, with some assistance from the federal government.

Each state receives a yearly allocation of CHIP monies from the Centers for Medicare & Medicaid Services (CMS). It does this by revising the sum the state received the previous year to reflect fluctuations in both the number of children in the state and the price of providing medical care for them.

The states must first supply matching funds from their own budgets before they can get their portion of the federal monies. The Commission on Medicaid and CHIP Payment and Access (MACPAC) estimates that the federal government pays for around 93% of the entire cost of the program, with states paying the remaining 7%.

Once a state receives CHIP funding, it can select how to best help disadvantaged children in its state. In each of the 50 states, there is a Children’s Health Insurance Program (CHIP) that complements Medicaid. 

The Children’s Health Insurance Program (CHIP) goes by a variety of names in different states. In Iowa, it’s known as Hawkki, and in Vermont, it’s known as Dr. Dynasaur.

Each state has the authority to determine its own CHIP eligibility requirements, benefits, and the degree to which it is integrated with its own Medicaid system. 

Eight states, five territories, and the District of Columbia administer CHIP entirely as a Medicaid expansion, according to a 2018 MACPAC data sheet. Twenty-two states consider it a standalone initiative, while the remaining forty classify it as a hybrid initiative.

Who Makes Use of CHIP?

Children up to age 18 who do not have any other health insurance and who do not qualify for Medicaid are covered by all state CHIP programs. Previously excluded groups, such as pregnant women, are now included in some states’ insurance plans. Some demographics are more likely than others to use CHIP.

1. Working families with low incomes

There is a minimum household income requirement in place in every state for CHIP participation. This threshold is between 170% and 400% of the federal poverty level (FPL). Nearly nine out of ten children enrolled in CHIP come from families with incomes of less than twice the federal poverty level, as stated in the 2018 MACPAC information sheet.

It doesn’t mean, however, that these families qualify for welfare or that these kids are on government assistance. Health Affairs published research in 2019 that found that more than half of low-income working parents use Medicaid or CHIP to support their children. 

Those who qualify will find that it offers better and more affordable coverage than their company’s private insurance.

2. Ethnic Minorities

Children of particular ethnic minority groups are more likely to receive coverage under CHIP or Medicaid in 2020, according to a fact sheet on children’s coverage issued by the Georgetown University Health Policy Institute. 

In 2018, 57% of all Black children, 56% of all Native American children, and 55% of all Latino children were covered by Medicaid or CHIP. Children of color had a lower percentage than white and Asian children.

3. Residents of Rural Areas

First Focus found in 2014 that kids living in rural areas are more likely to use government health programs like CHIP and Medicaid. According to the data, in 2012, 47% of rural children and 38% of urban children benefited from these programs’ health coverage.

4. Children with Special Needs

About half of all children with special health care needs in 2017 were covered by CHIP or Medicaid, according to the Kaiser Family Foundation. Children with autism, cerebral palsy, Down syndrome, and other persistent physical, emotional, and developmental disorders are included.

5. Working parents who lack access to affordable family coverage

The Affordable Care Act’s (ACA) family glitch hinders some workers from obtaining cheap health insurance for their families, however, CHIP helps many families get around this problem. 

Workers who have access to affordable health insurance for themselves at work but not for their families face this issue and are therefore not eligible to obtain subsidies for family coverage.

What Covers is CHIP

The precise services rendered vary from one state to the next due to the fact that each has its own CHIP program. 

The essentials, however, are covered in every state.

  • Routine care, such as checkups, other doctor visits, and immunizations
  • Hospital care, including inpatient and outpatient care as well as emergency services
  • Prescription medicines
  • Medical tests, including lab work and X-rays
  • Additional services that many employer-sponsored health plans don’t include, such as dental and vision care

Other services, such as speech and language therapy or hearing aids, may be covered at the discretion of individual states. Access the webpage for your state’s CHIP program at InsureKidsNow.gov to learn about the services that are covered in your area.

CHIP is not accepted by all medical professionals or drug stores. If a family enrolls in CHIP but their present doctor doesn’t take the insurance, they may continue seeing them for a short period while they look for a new doctor who does. However, whether or not this is permitted depends on the specific state program.

Visiting the Medicaid or CHIP website of your state should give you information about which providers accept CHIP. Call the Medicaid or CHIP agency in your state if you can’t find the info you need on their website. 

There ought to be a phone number prominently displayed on the website and included in the paperwork you get after enrolling in the program.

Fees to Patients

Well-child exams, as well as dental checkups, are always covered without cost to families thanks to CHIP. Other services may demand copayments at the discretion of specific states. According to the 2018 MACPAC information sheet, twenty-four states mandate some sort of cost sharing for medical care.

However, in other jurisdictions, families participating in CHIP must pay a monthly premium. The data sheet notes that in 17 states, households with incomes greater than twice the FPL are subject to premiums of $25 per child, per month on average. 

For households with earnings of around 150% of the FPL, premiums in seven states average $18 per child, per month. Premiums and co-pays for CHIP cannot exceed 5% of a family’s gross income, though.

With this regulation in place, CHIP is substantially more cost-effective than alternative child health insurance options. In 2017, the Bipartisan Policy Center conducted research that found the average CHIP household spends only $158 annually on health care premiums and cost-sharing. 

On the other hand, if those same families had been required to purchase silver-level policies through the ACA health insurance marketplace, even with subsidies for this coverage, they would have paid an average of $1,073 per year out of pocket.

The difference of $900 may seem like a lot, but it’s actually about average. The expense differential would be considerably greater for kids with major medical issues. 

According to the analysis, if families of children with exceptional health care requirements were to switch from CHIP to private coverage through the health insurance marketplace, the total cost of medical treatment for their children would increase to more than $10,000 annually.

Process for CHIP Application

If your family’s annual income is less than the state’s minimum requirement, you may be eligible for the Children’s Health Insurance Program (CHIP). Depending on the state, this cap might be anywhere from 130% to 320% of the federal poverty line. 

The Medicaid and CHIP income thresholds for 2020 are displayed in this table from Medicaid.gov. You can discover if you qualify for Medicaid or CHIP in your state by filling out an application. 

You can enroll in CHIP and Medicaid at any time of year, unlike the majority of health insurance plans offered through the federal health insurance marketplace.

Those interested in applying for Medicaid or CHIP can do so in one of three ways:

  • By calling. Marketplace customer care can be reached at 1-800-318-2596 (TTY: 1-855-889-4325).
  • Online. Use HealthCare.gov, the federal government’s health insurance exchange, to submit an application. Your information will be immediately forwarded to your state’s Medicaid agency if your application reveals that you or anybody living in your home is eligible for Medicaid or CHIP. Afterward, a representative from the state department will get in touch with you to assist with the enrollment process.
  • Using the Department of Your State. The Children’s Health Insurance Program (CHIP) in your state is another option. InsureKidsNow.gov has a drop-down menu where you can select your state, and then the site will provide details on your state’s CHIP and Medicaid programs, as well as an application link.

Bottom Line

Unfortunately, while CHIP can be a lifesaver for children in need of medical care, it is unable to assist the parents of these youngsters. Medicaid coverage and Obamacare subsidies are your best bets if you are a parent or expectant parent in need of inexpensive health care. 

Subsidized health plans and Medicaid are available to those who apply through the HealthCare.gov marketplace. Both programs have income restrictions, so not everyone with a low income can get covered. 

In this case, you may be eligible for free clinics, prescription discount programs, and other low-cost medical care options. You can take care of yourself and your family’s health while CHIP looks after the kids by using these tools.

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