The State Children's Health Insurance Program (SCHIP)

Overview: Created as part of the historic, bipartisan Balanced Budget Act of 1997, the State Children's Health Insurance Program (SCHIP) is the largest single expansion of health insurance coverage for children in more than 30 years. Today, more than 10 million American children - one in seven - are uninsured. This initiative was designed to reach these children, many of whom come from working families with incomes too high to qualify for Medicaid but too low to afford private health insurance. This new initiative set aside $24 billion over five years for states to provide new health coverage for millions of children - the largest children's health care investment since the creation of Medicaid in 1965. States are able to use part of their federal funds to expand outreach and ensure that all children eligible for Medicaid and the new SCHIP program are enrolled.

The initiative is a partnership between the federal and state governments that will help provide children with the health coverage they need to grow up healthy and strong. The SCHIP program requires that states use this new money to cover uninsured children -- and not replace existing health coverage. The program also includes important cost-sharing protections so that low-income families will not be burdened with heavy out-of-pocket expenses. Funds for the program became available to the states on October 1, 1997. States receive enhanced federal matching funds only for actual expenditures to insure children.

HHS has approved SCHIP plans for all 50 states, five U.S. territories, and the District of Columbia. Additionally, 71 amendments to SCHIP plans and three demonstration projects have been approved to enroll even more children and families. In fiscal year 2000, 3.3 million children were covered by SCHIP.

EXPANDING CHILDREN'S ACCESS TO HEALTH COVERAGE

The State Children's Health Insurance Program (SCHIP), created under Title XXI of the Social Security Act, expands health coverage to uninsured children whose families earn too much for Medicaid but too little to afford private coverage. It builds on Medicaid, the federal-state health insurance program that covers approximately 41.4 million low-income individuals, including 20.2 million children in 1998. Because Medicaid allows states flexibility in determining eligibility, states currently cover children whose family incomes range generally from below the federal poverty level (FPL) to as high as 350 percent FPL. The majority of states' Medicaid programs cover children in families between 100 and 150 percent of the FPL. The FPL for a family of four was $17,050 in 2000. In the SCHIP program, states may either cover children in families whose incomes are above the Medicaid eligibility threshold but less than 200 percent of the poverty level, or up to 50 percentage points over the state's current Medicaid income limit for children. Most states provide SCHIP coverage for children in families at or above 200 percent of the poverty level.

Ensuring Meaningful Health Benefits. Under the program, states have flexibility in targeting eligible uninsured children. States may choose to expand their Medicaid programs, design new child health insurance programs, or a combination of both. States choosing a new children's health insurance program may offer one of the following benchmark plans: the standard Blue Cross/Blue Shield Preferred Provider Option offered by the Federal Employees Health Benefit Program; a health benefit plan offered by the state to its employees; or the HMO benefit plan with the largest commercial enrollment in the state. A state may also choose to offer the "equivalent" of one of the benchmark plans. If a state chooses this option, its plan's value must be at least equal to the benchmark plan's and it must include inpatient and outpatient hospital services, physicians' surgical and medical services, laboratory and X-ray services, and well baby/child care services including immunizations. In addition, if the benchmark-equivalent plan offers any of the following services - prescription drugs, mental health services, vision care and hearing related care - the actuarial value of each of these categories of service in the benchmark must be at least 75 percent of the value of such a category of service in the benchmark plans selected by the state. Under the law, New York, Pennsylvania and Florida can continue to offer the benefit plans under their existing state programs for uninsured children (with some modifications to comply with the law's cost-sharing protections). States choosing the Medicaid option must offer the full Medicaid benefit package.

Limiting Patient Costs. Patient out-of-pocket costs for this program are allowed but limited. If a state expands its Medicaid program, existing Medicaid limits apply to the newly enrolled children. If a new health plan is developed, premiums for families whose income are under 150 percent of the poverty level cannot exceed $19 per family per month, copayments must be nominal and annual total out of pocket costs cannot exceed 2.5 percent of family income. Cost sharing is not permitted for well-baby, well-child or adolescent well visits, and immunizations. For families with incomes above 150 percent of poverty, cost-sharing may be based on an income-related sliding scale with an annual total out of pocket maximum not to exceed five percent of the family's income.

Preventing Cost Shifting. To prevent states from shifting children from the traditional Medicaid program to this new program, states must not tighten the Medicaid eligibility standards for children that were in place on June 1, 1997. In addition, states must screen all applicants for Medicaid, and if found eligible, applicants must be enrolled in the Medicaid program instead of SCHIP. For states that expand their existing Medicaid programs, children who would have been eligible under Medicaid eligibility rules in effect on March 31, 1997, cannot be counted in the scope of the SCHIP-related expansion. All states must design their programs to address private cost shifting as well. In their child health plans, states will describe methods they will use to prevent "crowd out," or the shifting of children from private insurance to SCHIP.

Ensuring Patient Protections. SCHIP regulations provide certain patient protections to enrolled children, including access to health care specialists, access to emergency services when and where the need arises, an assurance that doctors and patients can openly discuss treatment options, and access to a fair, unbiased and timely appeals process.

Continuing to Provide Flexibility to States. The SCHIP law allows HHS to grant states a waiver for a section 1115 demonstration projects that would enable them to test new and innovative approaches that promote the objectives of SCHIP. These demonstrations may help states expand coverage and improve enrollment, health care outcomes, and access to health care services for children by allowing states to employ strategies not otherwise allowable under the SCHIP statute. In July 2000, HCFA issued guidance to states regarding these SCHIP demonstration projects. This guidance helps states understand various types of possible demonstration projects and informs states of the information needed for approval.

To date, HHS has approved waivers allowing three states, New Jersey, Rhode Island and Wisconsin, to provide enhanced federal matching funds for parents of children enrolled in SCHIP. These states will now receive an enhanced federal match to cover low-income families with children who earn too much to qualify for traditional Medicaid, yet not enough to afford private coverage. Additionally, the New Jersey and Rhode Island demonstrations will expand coverage to pregnant women.

ACCESSING FEDERAL FUNDING

Under the law, states are eligible to receive an enhanced federal matching rate drawn from an "allotment" for state programs approved by the Secretary of Health and Human Services that expand access to targeted, low-income children under SCHIP. Funds are allotted to each participating state according to their number of uninsured and low-income children, accounting for regional cost differences. States have three years to spend a given year's allotment. Allotments for each fiscal year are published in the Federal Register. Allotments for fiscal year 2001 ranged from $493,763 for Northern Mariana Islands' relatively small population to a high of $705 million for California.

Under current law, the calculation of SCHIP funds for U.S. territories is separate from that used for states, resulting in a lower subsidy than is given to states. In order to provide more equitable funding for children's health care under the Balanced Budget Refinement Act of 1999 (BBRA), U.S. territories, received an additional $34.2 million in fiscal year 2000 and fiscal year 2001. The total additional funding for territories is about $249 million beginning in fiscal year 2000 through fiscal year 2007.

EXPANDING OUTREACH

States and U.S. territories may use up to 10 percent of their SCHIP total program costs for outreach efforts, other child health assistance and administrative costs. HHS has worked with the states, the National Governors' Association (NGA), private foundations and businesses, and other federal agencies to promote and supplement state outreach efforts. These efforts include the Insure Kids Now campaign to help states reach families of uninsured children. As part of this campaign, the NGA established a national toll-free number - 1-877-KIDS-NOW - that automatically directs callers to their state's program. HHS' Health Resources and Services Administration (HRSA) maintains the toll-free line, which handled nearly 500,000 calls as of December 2000. A national Web site - http://www.insurekidsnow.gov - that provides links to eligibility and contact information for each state, territory and the District of Columbia. The Federal Interagency Task Force on Children's Health Insurance Outreach, comprised of over 10 federal agencies, also prepared an outreach training kit for use by workers from these federal departments. In 2001, HRSA and the NGA began a series of conference calls with state program directors to share state hotline best practices. HHS also has supported national media campaigns, paid advertisements and public service announcements, and has worked with the Departments of Education and Agriculture to encourage and promote school-based outreach and enrollment.

Outreach information, including effective strategies from states, conference reports, and links to other outreach sites, is available at www.hcfa.gov/init/outreach/outhome.htm .

STATE SCHIP PROGRAMS

HCFA keeps information about every state's SCHIP programs, including eligibility and enrollment information, approval letters, amendments and contact information, electronically in the approved plan information files at http://www.cms.hhs.gov/home/schip.asp. Consumer-oriented information about each state's plan is available at http://www.insurekidsnow.gov.

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