Three Key Things to Know about CHIP

The Children’s Health Insurance Program, commonly known as CHIP, is an important part of the U.S. health care safety net. It provides health coverage for children whose families earn too much to qualify for Medicaid but may still struggle to afford private insurance. Understanding how CHIP works, how it is funded, and the families it serves helps explain its role in expanding access to affordable health care.

CHIP Provides Coverage for About One in Ten Children

Established in 1997, CHIP was created to insure children living in households whose income exceeds Medicaid eligibility limits but is not high enough to make private health insurance easily affordable. The income requirements vary from state to state. For example, eligibility ranges from 190 percent of the federal poverty level (FPL) in Idaho to 405 percent of the FPL in New York.

Across the country, CHIP provides coverage to more than 7 million children as well as roughly 400,000 pregnant women. Since the program was introduced more than two decades ago, it has contributed to a substantial decline in the share of children without health insurance. The uninsured rate among children fell from approximately 14 percent to just 4 percent.

CHIP Receives Funding From Both Federal and State Governments

Like Medicaid, CHIP operates through a partnership between the federal government and individual states. This shared financing structure also gives states considerable flexibility to develop programs that address their particular populations and health care needs.

To encourage states to expand health insurance coverage for children, the federal government provides CHIP matching funds at a rate 15 percentage points higher than the standard Medicaid matching rate. In 2022, total CHIP spending reached approximately $22.3 billion, with the federal government covering about 76 percent of the cost.

States generally have two years to use their allocated federal matching funds. Any remaining funds can then be redirected to states that have already used their available funding or are experiencing increased enrollment.

States Can Structure CHIP in Different Ways

CHIP gives states several options for organizing coverage. A state can expand its Medicaid program to include eligible children, operate a separate CHIP program, or combine both approaches. Most states use a combination of Medicaid and stand-alone CHIP coverage.

States also have some authority to determine which benefits are offered and how premiums and other cost-sharing requirements are structured, provided they remain within federal program rules. This flexibility allows CHIP programs to reflect differences in state needs while maintaining the program's broader goal of providing affordable coverage to children.

CHIP Helps Make Health Insurance More Affordable

Another major function of CHIP is limiting the financial burden placed on participating families. The program establishes restrictions on premiums and other out-of-pocket expenses so that eligible households can obtain coverage without facing excessive costs.

For children enrolled in separate CHIP programs, families may be responsible for premiums, copayments, deductibles, and other charges, but their total cost-sharing is generally limited to 5 percent of household income.

For families earning below 150 percent of the federal poverty level whose children receive CHIP coverage through a state's Medicaid program, premiums are not permitted.

These limits can be particularly valuable for families whose income is too high to qualify for substantial cost-sharing assistance through marketplace insurance plans. CHIP can therefore fill an important gap between Medicaid eligibility and the affordability of private coverage.

CHIP Can Cost Families Less Than Employer Insurance

The financial difference can be substantial. A 2015 study found that CHIP coverage cost families an average of about $158 per child each year, compared with approximately $891 per child for comparable employer-sponsored insurance.

CHIP coverage can also provide broader financial protection than some marketplace plans. CHIP plans generally pay a larger share of covered medical expenses, reducing the amount families must pay themselves.

Dental coverage is another important advantage. CHIP plans are required to include dental benefits, whereas marketplace health insurance plans do not necessarily provide dental coverage as part of the standard medical plan.

Why CHIP Matters for Families

CHIP fills a critical coverage gap for children whose families do not qualify for Medicaid but still face difficulty paying for private health insurance. By combining federal and state funding, giving states flexibility in program design, and limiting families' out-of-pocket expenses, CHIP helps millions of children obtain access to health care.

The program's long-term impact is also reflected in the dramatic reduction in the nation's uninsured child population since CHIP was established. For many families, it serves as an affordable bridge between public Medicaid coverage and private health insurance.