urban institute nonprofit social and economic policy research

Children's Health Insurance Programs

Where States Are, Where They Are Headed

Read complete document: PDF

PrintPrint this page
Share on Facebook Share on Twitter Share on LinkedIn Share on Digg Share on Reddit
| Email this pageE-mail
Document date: May 01, 1998
Released online: May 01, 1998

Number A-20 in Series, "New Federalism: Issues and Options for States"

The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders.

The Balanced Budget Act of 1997 provides $24 billion in federal funds over the next five years for children's health.1 The State Children's Health Insurance Program (CHIP) accounts for over $20 billion of these funds. Established as Title XXI of the Social Security Act, this program entitles states to grants to help create and expand insurance programs for low-income children. Funds are allocated to each state based on its share of the nation's uninsured children with family incomes below 200 percent of the federal poverty level, with adjustments for differences in health care costs across states. States must supply matching funds, but the required matching rates are lower than Medicaid matching rates.

States choosing to participate in CHIP may expand Medicaid, create or expand a non-Medicaid program, or use a combination of both approaches. While CHIP rules specify that states may only cover uninsured children in families with incomes up to 200 percent of poverty, there are important exceptions. In states that had expanded Medicaid eligibility for children beyond 150 percent of poverty prior to CHIP, CHIP eligibility limits can be raised up to 50 percentage points above their existing Medicaid eligibility thresholds2 States will receive the enhanced matching rate only for children above these existing eligibility thresholds. In addition, the Health Care Financing Administration (HCFA) will allow states to disregard income under the rules outlined in Section 1902(r)(2) of the Social Security Act. The 1902(r)(2) provision essentially allows states to cover uninsured children at any income level under CHIP.

This brief first examines the variation in states' provision of health insurance coverage to children under both the Medicaid program and separate state initiatives prior to CHIP. The brief then summarizes states' CHIP plans, including those submitted to HCFA for approval and those proposed by governors, legislatures, or committees but still under consideration at the state level. We find that variety is, was, and will continue to be a dominant feature of children's health insurance programs.

Pre-CHIP Efforts to Cover Low-Income Children

During the early 1990s, the federal government granted states in creasing flexibility to cover low-income children under Medicaid. Many states took advantage of this flexibility by extending Medicaid eligibility for children beyond the mandated age and income thresholds using Section 1115 waivers and Section 1902(r)(2) provisions. Some states also developed "state-only" initiatives to provide health insurance to low-income children outside of the Medicaid program in the past few years. State-only programs can cap program enrollment, impose cost-sharing requirements, and limit benefit packages—approaches that are limited or prohibited in the Medicaid program. As a result of states' varying commitments and approaches, publicly subsidized insurance coverage of children is markedly different among states in terms of the family income and age of children eligible for coverage, the benefits provided, the costs imposed on families, and the mechanisms through which coverage is provided (figure 1).

In general, states have taken three approaches to providing health insurance coverage to children. "Broad-coverage" states offer Medicaid coverage to children with family incomes well above federally mandated levels. With the exception of the state of Washington, states with the most liberal income and age limits for Medicaid established these limits through Medicaid research and demonstration waivers, also known as Section 1115 waivers. "Low-coverage" states offer sufficient coverage to meet federal Medicaid mandates, but little or no additional coverage. The remaining "middle-of-the-road" states either run relatively large state programs in addition to Medicaid or set Medicaid income and age limits somewhat above the federal mandates.3

Broad-Coverage States

Income and age limits for Medicaid eligibility in Minnesota, Rhode Island, Tennessee, Vermont, and Washington are significantly higher than mandated federal standards (figure 1). The first four states expanded Medicaid through research and demonstration waivers. In addition to having much higher income limits for children, these programs often rely on mandatory managed care enrollment to control costs. Washington used options available under Section 1902(r)(2) of the Social Security Act to raise age limits for children.

Although all five states offer coverage to children with incomes well above the mandated levels, these states impose premiums and other cost-sharing on certain families. For example, Rhode Island's RIte Care project requires that individuals with family incomes between 185 and 250 percent of poverty pay either fixed monthly premiums or copayments imposed at the point of service. Washington provides a comprehensive benefit package to children under age 19 with family incomes up to 200 percent of poverty through its Basic Health Plus program at no cost to the family. Basic Health Plus is a Medicaid program for children only that is coordinated with the state's Basic Health program, which provides partially subsidized coverage for adults and non-Medicaid-eligible children with family incomes up to 200 percent of poverty. Children (and adults) with family incomes over 200 percent of poverty may also participate in the regular Basic Health program, but the state does not subsidize this coverage and families must pay the entire premium. There is also a long waiting list because enrollment is capped.

Low-Coverage States

Several states provide Medicaid coverage for low-income children that complies with the standards mandated by the federal government but offer little or no coverage beyond that point. As of June 1, 1997, Medicaid income and age thresholds in 11 states were equal to the federal mandates: Alabama, Alaska, Arkansas, Colorado, Idaho, Illinois, Louisiana, Montana, Nevada, Ohio, and Wyoming. Colorado also funds a state health insurance program for low-income children, but this plan was not available statewide as of June 1, 1997, and it offered a limited benefit package. Another group of states provides coverage barely exceeding federally mandated levels. Arizona, Iowa, Mississippi, Nebraska, Oklahoma, South Carolina, Texas, and the District of Columbia had higher Medicaid income limits for pregnant women and infants, but income and age limits for children remained at or near the mandated levels.

Middle-of-the-Road States

Middle-of-the-road states provide coverage for low-income children with age and income limits above the federally mandated levels, but their income and/or age limits tend to be lower than those in broad-coverage states. Some states in this category have high income or age limits for Medicaid; others operate large state programs. A few states use both approaches. As a result, there are actually many different levels of coverage within this last category.

Florida, Massachusetts, New Jersey, New York, and Pennsylvania fund relatively large state-only programs that cover low-income children who are not eligible for Medicaid. Florida, New York, and Pennsylvania offer comprehensive benefit packages; Massachusetts and New Jersey provide more basic care. Regardless of the comprehensiveness of the benefit packages, these state initiatives provide care to children who might otherwise have no coverage at all. In addition, these states all offer Medicaid coverage to pregnant women and infants with family incomes up to at least 185 percent of poverty.

Other states in the middle-of-the-road group extend Medicaid to children whose ages or family incomes are somewhat higher than the federal mandates. Connecticut, Maryland, and Wisconsin raised their Medicaid income limits for children, but they only cover children born after September 30, 1983 (the federal mandate). Hawaii, North Dakota, Oregon, South Dakota, Utah, and Virginia cover older children, but they have not raised their income thresholds. As of June 1, 1997, Hawaii technically offered Medicaid coverage to children with family incomes as high as 300 percent of poverty; however, financial troubles prevented the state from subsidizing coverage above mandated income levels. Consequently, children with family incomes above the mandated levels had to pay the full premium. Hawaii recently amended its Section 1115 waiver, lowering income eligibility to the mandated levels, although it continues to provide coverage to children through age 18. The 13 remaining middle-of-the-road states have higher income and age thresholds for children, but these expansions are modest compared to the thresholds in broad-coverage states.

A Sign of Things to Come

Several states were actively seeking to expand coverage for low-income children even before CHIP became a reality. According to the National Conference of State Legislatures, 38 states considered legislation to improve children's health care coverage during their 1997 legislative sessions; several initiatives passed (see comments, (figure 1). Low-coverage states such as Arkansas, Indiana, Ohio, and Oklahoma passed legislation authorizing Medicaid expansions for children. Like wise, Colorado authorized expanded eligibility and a broader benefit package for its existing non-Medicaid plan. A number of middle-of-the-road states also considered new child health initiatives. California and Connecticut both authorized Medicaid expansions, while Massachusetts expanded eligibility in MassHealth, a Medicaid program. Several of these expansions were not implemented right away, and subsequently they have been submitted to HCFA under CHIP to take advantage of enhanced matching rates.

CHIP—The Next Wave of Expansion

Federal funds for CHIP became available October 1, 1997, sparking a flurry of activity devoted to children's health coverage. Most states are in the process of determining whom they can and will cover under CHIP and the mechanisms through which such coverage will be provided. States have raised questions regarding eligibility, funding, outreach, and other important aspects of the new program. Consequently, the development of CHIP plans has involved considerable interaction between the states and HCFA. Although there are no final regulations for CHIP, several states have already submitted plans for HCFA approval.

Submitted Plans

As of February 28, 1998, 18 states—Alabama, California, Colorado, Connecticut, Florida, Idaho, Illinois, Massachusetts, Michigan, Missouri, New Jersey, New York, Ohio, Oklahoma, Pennsylvania, Rhode Island, South Carolina, and Tennessee—had submitted CHIP plans to HCFA. The plans in Alabama, Colorado, Florida, and South Carolina had received HCFA's approval at the time of this writing. All three approaches to coverage allowed under Title XXI are reflected in the submitted plans (see figure 2).

Fourteen of the 18 plans submitted to HCFA include Medicaid expansions. Of the 14 plans using Medicaid expansions, five plans—from California, Connecticut, Florida, Massachusetts, and New Jersey—are combination plans that include non-Medicaid programs. Few states have submitted plans for entirely new programs. Of the nine states that submitted plans to HCFA involving non-Medicaid programs (including the mixed plans), only California, Connecticut, Massachusetts, Michigan, and New Jersey want to create entirely new state-only programs. Colorado, Florida, New York, and Pennsylvania all plan to expand existing non-Medicaid programs.

Still in the Planning Stages

Preliminary indications from other states suggest that new children's health initiatives will continue to be diverse. According to information collected from several sources, six states—Alaska, Delaware, Indiana, Maryland, Nebraska, and New Mexico—and the District of Columbia are contemplating Medicaid expansions; five states—Arizona, Nevada, North Carolina, Utah, and Wisconsin—may create or expand non-Medicaid programs; and six states—Georgia, Iowa, Kentucky, Maine, Oregon, and West Virginia—are considering mixed approaches (see figure 2).4

Some states that have submitted plans are also considering additional expansions. For example, Alabama's CHIP planning commission voted to cover children up to 200 percent of poverty after the state submitted its approved plan. The state is still debating what form this additional expansion will take.5 Illinois, Ohio, Oklahoma, and Rhode Island all submitted plans for modest Medicaid expansions, but additional expansions are under consideration in each of these states. Additional expansions to Florida's Healthy Kids program are also being discussed.

It should be noted that most of the plans still under discussion are proposals by governors, planning commissions, or legislatures. These plans may change before they are submitted to HCFA for approval. For example, some legislators in Maryland have expressed interest in a smaller Medicaid expansion than the governor has proposed, preferring a non-Medicaid plan for children from families with higher incomes. Some states may also add to their proposals before submitting them to HCFA. Idaho and Indiana appear to be leaning toward small Medicaid expansions, but they are still examining other options. In addition, some of the programs under consideration use unique administrative, benefit, and/or funding approaches that may require special waivers from HCFA. For example, Wisconsin's planned BadgerCare program would subsidize coverage for families, which is not allowed without a waiver.


The flurry of legislative activity devoted to children's health during 1997 state legislative sessions demonstrates that states are interested in expanding coverage for children. CHIP will help states expand coverage for children by providing an enhanced federal match for Medicaid expansions for children and new federal funds for non-Medicaid children's health initiatives developed by the states. Eighteen CHIP plans have already been submitted to HCFA for approval, four have been approved, and many more are under consideration.

One of the first choices states face is deciding whether to use CHIP funding to expand Medicaid or to create or expand non-Medicaid programs. During the debate leading up to the passage of CHIP, states demanded the flexibility to design their own plans. They did not want to be forced into a particular benefit package or delivery system. The inclusion of both options is a key feature of the CHIP legislation. The variety of proposed and submitted plans is a visible result of this freedom. A majority of states are choosing Medicaid expansions, but there are several non-Medicaid and mixed plans.

Three factors might explain why many states are leaning toward a Medicaid expansion in their initial proposals and submitted plans, even though a Medicaid expansion affords less flexibility than the creation of a state program. First, administrative structures and benefit packages for Medicaid are already in place, an advantage for states that want to act quickly. States with small numbers of uninsured children may also prefer Medicaid expansions because they do not have to set up a whole new program for relatively few individuals. Second, CHIP guidelines released by HCFA assert that states choosing Medicaid expansions will receive federal funds at Medicaid matching rates if the state exceeds its CHIP allotment, whereas states that choose non- Medicaid plans cannot receive federal funding beyond the allotted amount. Lastly, states may want to establish consistent Medicaid eligibility criteria for children of all ages. Connecticut, Massachusetts, and New Jersey all plan to have one Medicaid income threshold for children through age 18. This type of change will simplify administration and outreach efforts, keep children from the same family in the same program, and make it easier to determine eligibility.

As states have more time to develop plans, the number of non-Medicaid programs will grow. The House Commerce Committee recently prepared a guide that suggests states would be better off creating new insurance programs, primarily due to the increased flexibility it affords.6 For example, it is easier to impose cost-sharing requirements at higher income levels under a state plan. Another common argument in favor of non-Medicaid programs is that they are less expensive to the states, although the lower cost often reflects less generous benefit packages.

Ultimately, each state will determine which method of expansion is most appropriate for that state—a Medicaid expansion, a new state program, or both—based on its unique variety of programmatic and political considerations.7 The resulting CHIP programs will likely be even more diverse than their predecessors.


1. The Balanced Budget Act of 1997 contains several children's health initiatives: the State Children's Health Insurance Program (Title XXI of the Social Security Act), provisions to enroll more Medicaid-eligible children, presumptive Medicaid eligibility, creation of pediatric diabetes programs, and restoration of Medicaid benefits for children who lost SSI as a result of the Personal Responsibility and Work Opportunity Reconciliation Act of 1996.

2. Congress initially legislated that states' Medicaid eligibility criteria as of June 1, 1997, would be used to determine CHIP eligibility limits and maintenance-of-effort requirements. Specifically, states with expanded eligibility for children on June 1, 1997, could set income eligibility standards for CHIP up to 50 percentage points higher for the affected age groups. If a state covered children up to age 18 with family incomes up to 185 percent of poverty, that state could set the income limit for CHIP as high as 235 percent of poverty for children up to age 18. In addition, states that reduce Medicaid eligibility may not use CHIP funds to cover children who would have been covered by Medicaid under the rules in effect on June 1, 1997. A legislative amendment changed this date to March 31, 1997, after Tennessee protested be cause it expanded eligibility only a few weeks before the original date (without this amendment, Tennessee would not receive CHIP funds for children covered by this expansion).

3. It should be noted that our categorization of states is meant only to illustrate the variety of coverage offered by states with respect to in come and eligibility criteria. Some people may disagree with our classifications. We do not assume that they are immutable.

4. Sources include the National Conference of State Legislatures' Health Policy Tracking Service; the Bureau of National Affairs Health Care Policy Report; the National Journal's American Health Line; the National Governors' Association; and the Children's Defense Fund.

5. Children's Defense Fund, Progress Report: Implementing the State Children's Health Insurance Program (Washington, D.C., January 30, 1998).

6. House Committee on Commerce, State Children's Health Insurance Program (S-CHIP) Implementation Guide (Washington, D.C., November 1997).

7. For further discussion of these considerations, see Alan Weil, The New Children's Health Insurance Program: Should States Expand Medicaid? (Washington, D.C.: The Urban Institute, October 1997).

Tables & Figures

Table 1
Table 1
Table 1
Table 1

Table 2
Table 2
Table 2
Table 2
Table 2

About the Authors

Brian K. Bruen is a research associate with the Urban Institute's Health Policy Center, where he maintains the Institute's Medicaid data. His research interests include Medicaid and children's health insurance. For the Assessing the New Federalism project, he has provided Medicaid data for case studies and the 50-state database. He is also a co-author of a recent Medicaid databook published by the Kaiser Commission on the Future of Medicaid.

Frank Ullman is a research associate with the Urban Institute's Health Policy Center, where he currently focuses on issues related to children's health insurance. For the Assessing the New Federalism project, he has conducted case studies on health care developments in Mississippi and New Jersey. His recent research has examined the impact of managed health care on infant health.

Topics/Tags: | Children and Youth | Poverty, Assets and Safety Net

Usage and reprints: Most publications may be downloaded free of charge from the web site and may be used and copies made for research, academic, policy or other non-commercial purposes. Proper attribution is required. Posting UI research papers on other websites is permitted subject to prior approval from the Urban Institute—contact publicaffairs@urban.org.

If you are unable to access or print the PDF document please contact us or call the Publications Office at (202) 261-5687.

Disclaimer: The nonpartisan Urban Institute publishes studies, reports, and books on timely topics worthy of public consideration. The views expressed are those of the authors and should not be attributed to the Urban Institute, its trustees, or its funders. Copyright of the written materials contained within the Urban Institute website is owned or controlled by the Urban Institute.

Email this Page