Guidance Issued on CHIP Eligibility for Children of State Employees

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For years federal funding was not available to states to enroll eligible children of state employees in the Children's Health Insurance Program (CHIP). It was assumed that state employees had access to affordable, comprehensive insurance but, over time, that myth has been dispelled. The Affordable Care Act (ACA) sought to remedy this but it took a little tweak in a different law (details not important) to move this along. And now, long-awaited guidance from the Centers for Medicare and Medicare (CMS) provides clarification on this new option.

State Health Official Letter (SHO) #11-002 will be helpful to states in determining if and when children of state employees (and state employees who are pregnant) may be eligible for coverage under CHIP if they otherwise meet state eligibility criteria. One of two circumstances must exist. Under the first circumstance, the state must demonstrate that it has consistently maintained its contribution to the cost of employee coverage, with adjustments for inflation, since 1997. The guidance details how to ascertain if the state contribution is consistent by using the Consumer Price Index for medical expenses (CPI-M) to calculate what the state contribution amount would be over time.

Alternatively, state employees may qualify for a hardship exception if their aggregate annual cost for family premiums, deductibles and cost-sharing (based on reasonable projections) exceeds 5% of family income. CMS will work with states to determine if the state meets one of these two conditions but the SHO letter emphasizes that the conditions must be met on an ongoing basis with the qualifying calculations being updated annually.

States would not necessarily extend the state employee CHIP coverage option to all income levels covered under regular CHIP eligibility. For example, if a state has CHIP coverage up to 300% FPL but determines that the hardship exception applies only to families below 200% FPL, then eligibility in CHIP for state employee dependents would be limited to 200% FPL. The state also may limit the specific eligibility groups that meet the requirements. For example, if the state University system provides coverage that differs in cost-sharing or state contribution level than other state agencies, then the state would limit eligibility to the employee groups that meet one of the conditions.

The new rules can be applied, at the state's discretion, to low-income pregnant women who are state employees, as well as children's dental coverage if the state has implemented a CHIP stand-alone dental plan. States also may use the new option in conjunction with premium assistance, helping to financially support enrollment in a state employee health benefits plan if certain requirements are met. In terms of CHIP crowd-out provisions (which have prompted many states to impose CHIP waiting periods), the guidance reminds us that states have flexibility in how they monitor and discourage crowd out and that waiting periods are not required. Some states with waiting periods have affordability exceptions and these could be amended to include eligible state employees.

All in all, this is good news for low-income state workers who are unable to afford coverage for their children through the state employee plan but have been locked out of the CHIP program. It's also good news to states that will have happier, more productive workers because their kids have access to affordable coverage.

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